Austerity Reigns Over Euro Zone as Crisis Deepens

01-Jan (New York Times) — Europe’s leaders braced their nations for a turbulent year, with their beleaguered economies facing a threat on two fronts: widening deficits that force more borrowing but increasing austerity measures that put growth further out of reach.

French President Nicolas Sarkozy will meet on Jan. 9 with German Chancellor Angela Merkel to discuss a new fiscal treaty intended to impose stringent budget requirements on European Union nations.

Saying that Europe was facing its “harshest test in decades,” Chancellor Angela Merkel of Germany warned on New Year’s Eve that “next year will no doubt be more difficult than 2011” — a marked change in tone from a year ago, when she praised Germans for “mastering the crisis as no other nation.”

Her blunt message was echoed in Italy, France and Greece, the epicenter of the debt crisis, where Prime Minister Lucas Papademos asked for resolve in seeing reforms through, “so that the sacrifices we have made up to now won’t be in vain.”

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