News of European leaders agreeing on a permanent rescue fund is indeed welcome, but it must come with strict policing of individual states’ economies.

The current mechanism that has allowed emergency loans to Greece and Ireland (and possibly Portugal very soon) runs out in 2012. While the agreement still has to be ratified by individual member states, the news of agreement will surely help the confidence of the jittery commercial markets.

The agreement proposes to write new text into existing treaties which will allow for the setup of a permanent fund in 2013. Another measure of good news is the European Central Bank’s willingness to act as a guarantor to indebted countries, in a sense, by buying up government bonds.

The ECB has already announced its intention to double its capital to €10.8bn by the end of 2012 in order to allow it to buy up distressed bonds. Germany, in the meantime, has been accused of being un-European in leading an ‘alliance’ of Northern countries regarded as being fiscally prudent. Germany does not want to see short- or medium-term fixes (which have already proven to be costly). Malta, being another fiscally prudent country, should follow suit. But while these agreements are positive, Europe must make sure that it does not allow itself to be perceived as an emergency cash cow. The union must continue to strive to balance the books and make sure that each economy reins in its budget deficit to acceptable levels which are within the parameters of the Maastricht treaty – a deficit not higher than 3% of GDP and public debt which is not higher than 60% of GDP. These benchmarks, set down in 1995 and agreed on once again earlier this year, map the way to sustainable growth.

When the crisis first flared up, the major point which was stressed by European Central Bank President Jean Claude Trichet was that individual states must be monitored by the European Commission to make sure that there was no repeat of the blatant cooking of books as took place in Greece – the firestarter.

In addition, Mr Trichet said that the Commission should also have the power to rein in countries where economies were growing unsustainably, such as what happened in Ireland. And this is where the much respected Mr Trichet must put his foot down. We cannot have a eurozone where an attitude of “there’s a safety net, don’t worry about it” attitude prevails.

Europe’s focus should continue to be fiscal consolidation. In every avenue of life, it is always good to have a fallback plan, or a plan ‘B’. But in reality, the best form of action is prevention rather than cure.

In other words, it will all be so much simpler if eurozone nations pledge to never drag us in the fiscal mess which we saw in 2008 and 2009 by ensuring that finances are sustainable and robust.

We will perhaps look back on these turbulent times as the biggest test that a unified Europe has ever passed. But a financial crisis is not something that comes and goes over a few months. It is over a year later now, and we are still feeling the repercussions.

As Denis Waitley once put it, “Expect the best, plan for the worst, and prepare to be surprised.”