EU prepares massive growth plan worth €130 billion

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The 27 EU countries will be asked to give away 1% of their GDP to contribute to a Europe-wide economic stimulus package, including loans for automakers, aimed at helping restart the economy and weather the effects of the recession, it emerged yesterday.

Speaking on German television on Wednesday (19 November), Michael Glos, the German economy minister, said the package would involve contributions by member states of about 1% of their Gross Domestic Product (GDP). 

“Overall, it’s about €130 billion that are to be deployed,” Glos said, an amount superior to the EU’s annual budget, which is about €110 billion. “Everyone is to fulfil the 1% target,” he added. For Germany, “that means €25 billion,” a spokeswoman for the German economy ministry told AFP.

Details of the plan, to be unveiled by the European Commission next Wednesday (26 November), were unclear at this stage. “It is too early to speculate about the size or detail of the recommendations,” said Commission spokesman Johannes Laitenberger in response to questions from the press. “There is no political decision so far on the figure,” he added.

A decision on the precise nature and amount of the package will be taken by EU heads of states and government during a summit in Brussels on 11-12 December.

Speaking in the European Parliament on Wednesday (19 November), Commission President José Manuel Barroso said the EU recovery plan needed to be “timely, targeted and temporary”. He said the plan should include “measures to help adapt some sectors of our economies to fight against climate change” so that the fight was not perceived as running counter to economic growth.

Addressing the assembly, Jean-Pierre Jouyet, French state secretary for European affairs, said the European Investment Bank (EIB) would be asked to contribute to the stimulus package.

Flexibility with budget rules

On fiscal matters, Jouyet made clear that any flexibility in EU budget rules should be used to reverse the economic downturn. Already, the multi-billion euro bail-out plans adopted to rescue the ailing banking sectors in Ireland, Germany, and several other EU member states, are likely to send annual budget deficits soaring well above the 3% GDP ceiling specified in the Stability and Growth Pact.

“We also need to ensure the single market functions well and that the flexibility in state aid rules can be used to the full so member states can help support threatened sectors,” Jouyet added. 

Loans to the car sector

The French secretary of state specifically mentioned the car sector as an industry that would benefit from the EU-wide stimulus plan. “Targeted and temporary measures to support European producers might be useful, in part to increase technological and ecological performance,” he said.

The announcements come after the 27 EU leaders gave their support to a France-inspired plan to support Europe’s ailing automobile industry last month, instructing the Commission to come up with proposals to support all European industries before the year’s end (EURACTIV 17/10/08).

Günter Verheugen, the EU enterprise and industry commissioner, mentioned the possibility of tax incentives for less polluting vehicles, support for research and development and incentives for training and skills improvement. 

“You don’t want to give people tax incentives to buy any old car, you want to increase demand for environment-friendly cars,” Verheugen told the European Parliament in Strasbourg. He added that the European Investment Bank (EIB) would be best placed to provide such loans.

Speaking earlier last month, Barroso said: “We are open to the possibility of providing support for the development of low-emission cars; high-tech cars that could help the European motor industry maintain its global competitiveness.” 

“We are waiting for a low-interest loan package of €40 billion to help secure sustainable market for newly-developed fuel efficient technologies which are currently too expensive to enter the market,” said Christian Streiff, chief executive of French automaker PSA Peugeot-Citroën and president of the European Automobile Manufacturers’ Association.

Meeting in Brussels on 7 November, EU heads of state and government agreed on the necessity to "look beyond the financial crisis" and take measures to address the worsening economic situation (EURACTIV 7/11/08).

The European Commission was mandated to submit proposals in that direction ahead of the next EU summit on 11-12 December.

Last Friday (14 November), the countries of the 15-member euro zone officially entered a recession, recording a 0.2% decline in Gross Domestic Product (GDP) for two quarters in a row (EURACTIV 14/11/08).

  • 26 Nov. 2008: EU Commission to present economic stimulus package, including loans for the car sector.
  • 11-12 Dec. 2008: EU summit to decide on scope and details of the package.

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