ECOFIN:EU Fin Mins May Fall Short Of EUR200 Billion Stimulus Call
Sunday November 30th, 2008 / 17h36
By Paul Hannon and Gabriele Parussini Of DOW JONES NEWSWIRES LONDON -(Dow Jones)- European Union governments continue to unveil fiscal stimulus packages designed to limit the depth and duration of the economic recession, but may fall short of the EUR200 billion in coordinated support urged by European Commission President Jose Barroso. At a two-day meeting starting Monday in Brussels, finance ministers from the bloc's 27 members will discuss European Commission President Jose-Manuel Barroso's call to member states to earmark about 1.5% of their collective gross domestic product to boost their economies. Barroso's proposal calls for the E.U. national governments to contribute EUR170 billion, with the remaining EUR30 billion provided by the commission and the European Investment bank, the E.U.'s long-term lending agency. The Polish government Sunday became the latest to unveil a stimulus package, pledging to provide EUR24 billion over the next two years in investment spending and liquidity support for the nation's banks. "It is a stabilization and development program, because Poland is in the situation of a country that is still developing," said Polish Prime Minister Donald Tusk. "Happily, the consequences of the global crisis for Poland are not so grave." The government said it now expects the economy to grow by 3.7% next year, having previously forecast growth of 4.8%. The Organization for Economic Cooperation and Development, or OECD, last week said it expects the Polish economy to grow by 3.0% next year. French President Nicolas Sarkozy has said his government will present a sizable stimulus plan in the coming weeks. The U.K. government last week said it will provide tax cuts and increases in spending worth GBP20 billion over the next year, while the Spanish government Thursday unveiled an EUR11 billion on top of the EUR40 billion it has already injected into its collapsing economy this year. "There is a high level of consensus on the need to intensify stimulus efforts," Prime Minister Jose Luis Rodriguez Zapatero said. Crucially, that consensus isn't shared by Germany, Europe's largest economy. Its government isn't planning to offer new measures above a EUR32 billion national scheme it has already announced. The government's opposition to the Barroso stimulus appears to be hardening, with Minister of Finance Peer Steinbrueck questioning whether further increases in state spending can tame the recession. "I think it's not candid to give the impression that we can fight this recession with state cash," he told Der Spiegel magazine in an interview published Saturday. "The Germans don't have to commit to every European proposal whose capability to support the economy is questionable. Just because others are topping each other with billion-(euro)-sums on a daily basis, I don't have to participate in that." Well into 2008, European politicians insisted the currency area would be relatively unaffected by the credit crunch, which they saw as chiefly a U.S. problem. However, the euro zone has preceded the U.S. in entering a recession, with its economy contracting by 0.2% in both the second and third quarters. So far, the response of European governments has been piecemeal, and less substantial than actions taken by their Chinese and U.S. counterparts. Finance ministers meeting Monday and Tuesday may also discuss a coordinated effort to prop up the continent's ailing auto industry, after officials from several member states called earlier this month for pan-European aid for a sector that employs about 10% of the work force in some of the zone's most important economies, including France and Germany. The commission supports a bloc-wide approach to avoid distortions to competition. Competition Commissioner Neelie Kroes said she wants to make sure that national measures taken by car-producing countries don't put some car makers at an advantage. Other measures proposed by Barroso to boost competitiveness are costless and therefore less controversial. They include, for example, reducing the cost of filing a patent by 75%, promising to pay small businesses for government services within a month of invoice, and guaranteeing that any E.U. citizens can start a business in less than three days. In order to take effect, the Commission's proposal must be adopted by the E.U. national governments at a meeting of the European Council Dec. 11. -By Paul Hannon and Gabriele Parussini; Dow Jones Newswires; +44 20 7842 9491; paul.hannon@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=fFWui2UANxLvafhqnQjU%2Bg%3D%3D. You can use this link on the day this article is published and the following day.
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