EU leaders reject economic plans, new cash likely

Thursday, March 19, 2009 at 9:22 PM Posted by Beijing News


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

While against sweeping new economic stimulus measures, the leaders were close after the first day of a two-day summit to agreeing to double loans available for struggling eastern European countries to 50 billion euros.

An agreement was also within reach to contribute 75 billion dollars to boosting the International Monetary Fund's capacity to lend to troubled countries, according to officials

With an estimated 4.5 million European jobs under threat this year, public anger that more is not being done to revive the economy is beginning to bubble over with over a million French workers taking to the streets on Thursday.

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.

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 European Commission also 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," European Commission chief Jose Manuel Barroso said. "I hope that tomorrow this will be approved unanimously."

The existing 25-billion-euro credit line is getting rapidly depleted after Hungary and Latvia drew nearly 10 billion euros from it and others starting with Romania likely to follow soon.

"We are roughly in agreement on almost doubling the facility," Luxembourg Prime Minister Jean-Claude Juncker said, with similarly positive comments emanating from the German and French camps.

"We didn't yet decide but there was a very strong willingness to increase the resources of IMF," Finnish Prime Minister Matti Vanhanen said. "Tomorrow I hope we can make a decision."







Part of Compania Church is reflected in a mirror in Quito, Ecuador, on March 15. REUTERS/Guillermo Granja

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