The European leaders last week agreed and sign on some of the important pact related to the fiscal issues where they have decided to control the spending. This signing was exactly after the 20 years when European leaders signed a treaty for the creation of European Union and the Euro currency. This new treaty signed among the European leader was initiated by the German Chancellor Angela Merkel who was able to influence all the current member of the EU other than Britain.

The agreement could look like the victory for Merkel and defeat for the Britain but there are still fear prevailing in the market regarding the sovereign debt of the big member of the Europe Union i.e. Italy and Spain. These countries are literally not able to grow their economy as the mounting debt is creating the problem for the issuances of bonds as they are required to pay very high interest rates. So how far does European Union uses its financial power to help these countries to overcome their problem is still needed to be seen. At the same time, the agreement among the member states also agreed to raise $270 billion in order to assist indebted European governments and also ready to move up the date for the European rescue fund.

The most striking thing of the agreement among the European leader is that they seem to be more contained on the long term renovation of the rules and regulation which is governing the Union. Although, the need of the hour is to look at the series of the debt crisis among it’s member which needed to be addressed in the short run. The main theme of this treaty is to reduce the spending by its member countries which again can back fire the region in form of recession. The region as a whole is struggling for the economic growth and spending cuts means there are more worries waiting ahead for the region.

This new fiscal pact might ensure that there won’t be another euro crisis but the question again arises whether or not current crisis could be addressed by this new agreement. Most importantly developing the trust in the financial market is needed for which Europe and European Central bank need to stand behind the debt exposed nations. The positive thing about this agreement can be taken in form of increase in the size of the bailout funds but is still regarded inadequate when compared with the size of the debt that some countries in the Europe possess. All together we can be optimistic after the willingness of the member states to get out of this rough patch and move towards the stable financial environment which would be very important for the global financial stability.