Amid gloomy economic forecasts, the prolonged credit crunch and an expected fall in consumption and investment, no concrete EU-level action was agreed upon by ministers, who instead preferred to adopt a wait-and-see approach.
French Finance Minister and holder of the rotating EU presidency Christine Lagarde summed up the outcome of the meeting by stating "we will let automatic stabilisers act": economic jargon for postponing direct intervention.
Last week, the European Commission presented ministers with an action plan to avoid recession based on pumping more cash into the European economy while bypassing commercial banks, whose lending activities remain almost frozen for fear of defaults, despite recent public refinancing operations worth €280 billion across the EU (EurActiv 30/10/08). The Brussels executive suggested increasing the capital base of the European Investment Bank (the financial arm of the Union) to allow fresh money to reach EU companies directly.
Ministers simply took note of the plan. Lagarde hinted at increased EIB involvement in key projects, such as the development of cleaner cars, but she refrained from mentioning any additional resource for the bank. Tax cuts, the other possible means of boosting consumption, were also overlooked. "We know the limits of fiscal policy. We experienced in the past unwanted results and we keep them in mind," commented Economics and Finance Commissioner Joaquin Almunia.
Lagarde was keen to give the European Central Bank responsbility to act. "The reduced inflationary pressure has let us hope for a change of interest rates," she said referring to the next ECB board meeting on 6 November, when the bank is expected to reduce rates following the new Federal Reserve's cut last week.
EU divisions ahead of the G20 in Washington
A French paper (EurActiv 03/11/08), which is supposed to provide the basis for a common EU position ahead of the G20 meeting in Washington on 15 November, is complemented by alternative papers and suggestions from other member states, paving the way for an unpredictable revision of the text.
The original commitment to "encouraging an internationally coordinated response to the macroeconomic challenges to come" was dropped, with many member states fearing a dangerous and over-ambitious attempt at global governance of the economy.
The issue of Spanish attendance at the G20 meeting remains open. Madrid wants to be included, with Spanish Commissioner Almunia calling for "adequate representation of Europe" in the new architecture of global economic governance. However, Lagarde again underlined that the G20's composition had been already decided upon, ruling out direct Spanish representation.
Divisions on global targets are mirrored by conflicts over economic governance of the EU itself. Eurogroup President Jean-Claude Juncker clearly rejected the idea of upgrading the monthly meetings of eurozone financial ministers to a sort of economic executive led by heads of state and government. "I don't think it is a good idea to institutionalise a meeting at that higher level, but when necessary, it is not a bad idea to convene the heads of the Eurogroup," he said, downsizing suggestions made by French President Nicolas Sarkozy.