Summit to haggle over size of EU recovery plan[fr][de] 

The summit, which opens today in Brussels, is set to discuss a proposed European Commission package worth 200 billion euro, representing about 1.5% of the EU's GDP (EurActiv 27/11/08).

But the Union's major economic powerhouses have so far shown little appetite for achieving the 1.5% objective. Germany in particular has long resisted calls to increase spending, insisting that the country's existing €32 billion fiscal stimulus plan would be enough (EurActiv 3/12/08).

The draft summit conclusions give the 1.5% figure in brackets, indicating that the final size of the package will be negotiated directly between EU leaders.

Meanwhile, a study  by Bruegel, an economic think tank, showed large discrepancies between existing national plans of the 13 largest EU member states. "Based on the current announcements […], the EU-wide direct fiscal boost reaches 0.6 percent of the EU's GDP by end 2009," according to Bruegel: a figure which is "substantially below the target of the 1.5 percent of GDP Commission proposal".

Meanwhile, EU leaders are set to agree on the limited nature of the European recovery plan. "Measures to support demand must aim to produce immediate effects, be of limited duration and be targeted at the sectors most affected (e.g. the automotive industry and the construction sector)," the draft conclusions read.

EU contribution also in the balance

But while national contributions to the plan cause headaches, the Commission's proposed changes to the EU's own budgetary priorities are also facing resistance.

On Wednesday, a day ahead of the EU summit, Brussels proposed to transfer more EU funds away from agricultural spending to support energy and broadband internet infrastructure projects. The proposal would shift EU money from heading two of the budget (preservation and management of natural resources, including direct payments to support the farming sector) to heading 1A (competitiveness, growth and employment).

Presenting the proposal, Dalia Grybauskaitė, the EU's budget commissioner said it was about "creating a more competitive, low-carbon economy, putting a much-needed €5 billion into European energy interconnections and faster internet and helping to boost economic recovery in the EU".

But EU countries are still unclear about how the Commission intends to spend the money. According to diplomatic sources, many countries are unhappy with the vague indications given by the EU executive and want to know which projects the money will be used for, citing the Nabucco or Baltic gas pipeline as examples. Other member states said they would prefer the money to be used for transport infrastructure projects and not just energy and broadband.

But the same diplomats also admitted that the Commission had been clever in proposing to shift spending over two different budgetary years. This means that EU countries will vote on the proposal by qualified majority instead of unanimity, giving the proposals a greater chance of going through. However, the number of countries unhappy with the plans is large enough to constitute a blocking minority.

Meeting on November 30 In Madrid, leaders of the Party of European Socialists (PES) agreed that the ambition to "safeguard employment" and "promote smart green growth" should "determine the size and components of the European economic recovery plan".     

Noting that US President-elect Barack Obama is preparing an ambitious fiscal stimulus and that China has announced a stimulus equivalent to 14% of GDP, Socialist leaders said Europe should be more ambitious. "Europe must pull its weight through its own ambitious economic recovery plan."

ETUC, the European Trade Union Confederation, sent a similar message, calling for "short term emergency action" and "a new Green Deal". John Monks, ETUC's general secretary, said: "The economy is already in the grip of recession and we are facing the prospect of a prolonged economic depression. We can not afford a 'wait and see' attitude, nor another supply-side reform policy that weakens workers' rights and wages. Social recession as well as economic catastrophe would follow this." 

According to ETUC, what is needed "a New Green Deal, fair wages and distributive justice to stop basing growth and jobs on speculation and asset price bubbles".