No go for Eurozone stimulus

The Straits Times
Dec 2, 2008 | 9:13 AM
No go for Eurozone stimulus

BRUSSELS - FINANCE ministers from the 15 countries sharing the euro failed on Monday to commit to a proposed 200-billion-euro (S$305.7 billion) economic stimulus target while agreeing they need a joint anti-recession package.

Downplaying the overall target, Luxembourg Finance Minister Jean-Claude Juncker said that the eurozone otherwise supported proposed European Commission plans to ward off recession.

'I wouldn't overemphasise the figures, what is important is that everyone agrees with the general direction proposed by the commission,' said Mr Juncker after chairing a meeting with his eurozone counterparts.

'Everyone agrees that we need a strong fiscal response.' With the spectre of recession looming large, the European Commission called last Wednesday for a sharp boost to public investment and social spending across Europe while giving embattled consumers a range of tax breaks

The overall package, drawn from a smorgasbord of national and EU programmes, is supposed to be worth a total of about 200 billion euros or 1.5 per cent of the 27-nation European Union's gross domestic product.

With many EU countries due to present stimulus plans in the coming days and weeks, Mr Juncker said that it was premature to speak of an overall EU target as proposed by the commission.

'We have got to wait until all the national plans come in before we can get a figure,' said Mr Juncker, who is also Luxembourg's premier.

The European Commission aims to secure backing for the package from EU heads of state and government when they meet in Brussels at a December 11-12 summit.

After eurozone finance ministers' lukewarm reaction to the plan on Monday, their counterparts from the full 27-nation EU get their chance to have their say at a meeting on Tuesday.

While a consensus has emerged on the need to coordinate economic stimulus across Europe, countries such as Germany refuse to contribute more than what they consider is necessary to get their national economies moving and no more.

German Finance Minister Peer Steinbrueck, who has criticised the commission proposals as 'ineffective populist measures', insisted that each EU country should be able to tailor its response to the crisis without having plans imposed from Brussels.

'We shouldn't copy what all other countries are doing, but we must coordinate among us,' he said as he arrived for the talks in Brussels.

Germany, one of the few EU countries heading into the current downturn with strong public finances, has resisted pressure to contribute more than other countries to the economic stimulus effort.

Instead Berlin has stuck to its plans to support the German economy - Europe's largest - with a package worth 31 billion euros over two years.

Dutch Finance Minister Wouter Bos said that how much money countries commit to reviving growth should be up to them and those that have managed their budgets prudently should not be asked to do more than those that have not.

'I don't think that a consequence of the commission proposal should be that the countries that have behaved well over the past years are now obliged to do more,' he said.

Some economists also have their doubts about the EU plan, noting that 130 billion euros would come from national plans in Germany, France, Britain and Italy and the rest from EU funding.

Many EU countries still have not announced all of the measures they plan to boost their economies, making it even more difficult to add up an overall EU fiscal stimulus figure. -- AFP