European Commission proposes euro200B economic plan

In a two-year European Economic Recovery Plan, made public Wednesday, it calls on the 27 EU governments to spend more to boost growth and confidence among consumers and businesses.

The economic stimulus would come from national budgets and funding from the EU‘s own funds.

BRUSSELS, Belgium (AP) — The European Commission wants EU governments to jointly combat the growing economic slowdown with a wide range of measures "big enough and bold enough" — costing about euro130 billion ($166.54 billion) — to boost growth and confidence among consumers and businesses.

"Only through a significant stimulus package can Europe counter the expected downward trend in demand," said the Commission report, a copy of which was obtained by The Associated Press.

It said that just as in recent weeks when EU governments acted jointly to shore up credit and restore some market confidence, they should act together again on fiscal measures.

The economic stimulus report comes a day after the Paris-based Organization for Economic Cooperation and Development said the financial crisis will likely push the world‘s developed countries into their worst recession since the early 1980s.

The European Commission echoed the OECD conclusion that now is the time for significant fiscal rescue measures — including tax cuts — provided they were timely, targeted, temporary and coordinated.

While the need for drastic measures has not escaped EU governments, significant differences between them have emerged in recent days.

In Paris, Merkel and Sarkozy suggested while lowering VAT taxes might be "the answer for some countries" they would not opt for losing government revenue that way.

Merkel said she was gauging the effect of a recently announced euro32 billion German economic rescue plan before deciding on new steps.

The EU economic stimulus report said:

• A rise of euro15 billion in regional economic lending by the European Investment Bank is bound to attract private financing

• The EU will be "flexible" in judging public spending. It now limits budget deficits in euro zone nations to 3 percent of GDP. That ceiling stays but the European Commission will impose less strict deadlines for governments to return to fall back into line. The eurozone‘s sound finances rules "will be applied judiciously," the report said.

• Governments must consider extending jobless benefits, cutting VAT and labor taxes and provide guarantees for loan subsidies to offset higher risk premiums.

• Economic reforms must be enacted across the EU to make European economies more competitive through retraining programs, slashing red tape and financial aid for research and development projects

• Europe "needs to accelerate" the shift to greener economies and step up investments in non-polluting sectors and technologies and invest seriously in better energy distribution networks.

The report said the financial crisis and subsequent credit squeeze must not scare Europe away from pushing ahead with ambitious climate change targets.

Apart from creating a cleaner environment, it said, measurs such as slashing greenhouse gas emissions and promoting clean and renewable energy offer "new economic opportunities ... and create jobs."



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