EU leaders rebuff pump-priming pressure at summit

EU leaders rebuffed mounting calls for a big new injection of taxpayer money into their ailing economies on Thursday, tentatively agreeing only to a limited hike in energy investments.

Despite US and increasing domestic pressure to do more to tackle the worst global slump in decades, leaders insisted at the first day of a two-day summit on waiting to see the results of existing measures.

With an estimated 4.5 million jobs in Europe under threat this year, public anger is beginning to bubble over, with a million French civil servants on strike Thursday in protest the government's handling of the crisis.

Washington has also pressed its European allies in the run-up to the Group of 20 major economies meeting in London next month to play a bigger role in reviving global demand by doing more to prop up their own faltering economies.

"We all agree that we are going to be prudent in our fiscal stimulus, while awaiting the results of the first package of stimulus measures," Czech Prime Minister Mirek Topolanek said after chairing a first day of talks.

He said that fellow leaders had made "expressions of not being dictated to by the United States or by those who want more fiscal stimulus."

The 27-nation European Union has already committed to economic stimulus measures in 2009 and 2010 worth 400 billion euros 546 billion dollars, equivalent to 3.3 percent of the bloc's gross domestic product.

The figure is made up mostly of national stimulus measures and automatic increases in social spending, such as unemployment benefits, which kick in when the economy weakens.

Swedish Prime Minister Frederik Reinfeldt said "we have already done a lot" to revive economic activity and many governments had no room to do more given the strained state of their public finances.

"A huge number of member states are now in excessive deficits, that creates problems now and for the future," Reinfeldt said.

Highlighting the depth of the recession in Europe, the International Monetary Fund estimated that the 16 nations using the euro would see their combined economy shrink 3.2 percent this year, much more than previously expected.

While not signalling out Europe specifically, the IMF warned that responses to the crisis were still in "an early stage" and that "measures are still needed to restore financial stability."

Even though they ruled out ambitious new economic recovery plans, the leaders reached an agreement in principle for a package of investments in energy and Internet infrastructure projects worth up to five billion euros.

European nations have been wrangling for months over what projects should benefit from the funds, which are the main EU-financed component of the bloc's 400 billion euro economic recovery plan.

"The member states have agreed on a concrete list of projects, most of this funding will be for energy interconnections," European Commission chief Jose Manuel Barroso said.

The European Commission sought agreement from leaders to double a credit line for struggling non-eurozone members to 50 billion euros, after already doubling it to 25 billion euros in December.

"If we feel we want to give a signal of great support we could agree to double the ceiling to 50 billion euros," Barroso said. "I hope that tomorrow this will be approved unanimously."

"We are roughly in agreement on almost doubling the facility," Luxembourg Prime Minister Jean-Claude Juncker said.





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