EU austerity versus growth

One can almost compare the Eurozone crisis to a never-ending TV soap; you come back to reading up on it after months, and it seems like the story is where you left it.
Once more, the protagonist of the story is Greece, and once more, the dilemma it is dealing with is austerity and bailout. The climax - you guessed it - are protests by the Greek populace, this time, labour unions to be precise.
Yet, their fury aside, had the parliament in Athens not approved €13.5 billion worth of tax hikes and spending cuts on Sunday - including cuts in wages and severance packages - Greece will not have been receiving €31.5 billion from the IMF and EU that will save it from default and a potential exit from the eurozone.
Greece is not alone. The matter of austerity and decelerating growth has several countries in the Euro zone knitting their brows. The IMF argued in a recent study about how persistent austerity measures are contributing towards recessionary pressures in the 17-nation bloc.
But the European Commission in its own technical report countered this stance of the IMF, contending that panic in sovereign debt markets was the real cause for the deteriorating economic conditions of the euro zone countries. It further claimed that austerity measures, in fact, were responsible for restoring some confidence in these economies and maintain private investment.
Unsurprisingly, the European Commissions argument comes at the heels of many euro zone countries missing their targeted budget deficits, and which, therefore, will have to resort to means for reducing the same (read: further austerity).
The European Commission may not be all wrong either. In an article published in the Forbes last week, it was highlighted that ever since ECB Chief Mario Draghi had started a programme enabling nations to request a bailout on meeting certain conditions, effects on the bloc have been positive.
"Peripheral debt yields fell dramatically while European stock markets surged. ETFs for German, Spanish, and Italian equities are up more than 23 percent since late June, while Greek stocks have surged more than 50 percent in that time," said Agustino Fontevecchia, Forbes staff, regarding the aftereffects of Draghis announcement.
So even though the IMF may not be too pleased about the austerity cuts and their recessionary impact, one has to realise that this is a critical time for the euro zone where structural changes have to be made. Without these, markets may tend to believe that the euro zone is mired by the fiscal slack of not paying heed to the necessity of bringing their budgetary deficits within acceptable limits, leading to loss of confidence.
The medicine may be bitter, but it is a medicine that has to be taken nonetheless. Otherwise the EU economic situation will likely keep moving in circles as it has for the past several months.