EU proposes €200 billion economic stimulus plan

"Exceptional times call for exceptional measures," said European Commission President Jose Manuel Barroso.

eu flag biz 88 (photo credit: )
eu flag biz 88
(photo credit: )
The European Commission urged EU governments Wednesday to jointly combat the economic slowdown with €200 billion in spending and tax cuts to boost growth and consumer and business confidence. If fully enacted, its two-year "European Economic Recovery Plan" would see the 27 EU governments spend 1.5 percent of the bloc's gross domestic product to halt the slowdown that has already pushed some European nations into recession. Of the €200b. spending plan, €170b. - 1.2% of the EU's GDP - would come from national governments and include outright tax breaks, credit guarantees for ailing industries and soft loans to exploit new green technologies. The remainder would be financed from the EU budget and the European Investment Bank. The latter would boost lending for regional development projects by €15b. "Exceptional times call for exceptional measures," said European Commission President Jose Manuel Barroso. Germany, Europe's largest economy, welcomed the plan as "appropriate." Government spokesman Thomas Steg said Berlin would insist that as public spending rises the European Commission must cut governments some slack over the spending rules that underpin the stability of the euro. Barroso promised the European Commission would do so in the years ahead. The EU leaders are to discuss the proposals at a December 11-12 summit in Brussels. The spending plan's price tag is much larger than the €130b. the EU executive had been discussing in recent weeks. Barroso told reporters it was "realistic," adding that national plans unveiled to date - notably Germany's €32b. outlay - were too modest. "The situation will require from member states a much bigger offer than they hope to get away with," Barroso told a news conference. "We may even need more" than €200b. to keep the EU economy from derailing. The EU plan comes a day after the Paris-based Organization for Economic Cooperation and Development said the financial crisis would likely push the world's developed countries into their worst recession since the early 1980s. The Paris-based group said economic output would likely shrink by 0.45 in 2009 for the 30 market democracies that make up its membership, against the 1.4% growth prediction for 2008.