Markets perk up as EU proposes budget coordination

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Markets perk up as EU proposes budget coordination

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The world’s financial markets seemed to again be warming to the European Union’s rescue package to stop Greece’s debt crisis spilling over into other economies.

European stock markets closed higher on Wednesday as investors focused on what countries were doing to improve their finances; Spain’s plans to cut its deficit boosted sentiment.

The government bond markets also stabilised, with Germany, and more importantly Portugal, staging successful bond auctions on Wednesday.

Prompted by the Greek crisis Brussels is pushing for closer and earlier coordination of budget policy in the EU.

It wants governments to submit their draft budgets to Brussels for scrutiny and review by other member states before they are adopted by national parliaments.

The European Commission President Jose Manuel Barroso said sanctions are needed to reinforce fiscal discipline in the European Union.

Barroso said countries must have an incentive to stick to the rules: “Without sanctions, it will not be enough for credibility. So we insist on that word, it is important for member states to respect the stability and growth pact to have this kind of incentives, because, if not, it will not be considered credible.”

The euro slipped slightly against the dollar as new figures showing the euro zone economy got off to a weak start this year with paltry first quarter growth in the two largest economies, Germany and France, which will make cutting deficits harder.