Finance ministers get cold feet over EU stimulus plan

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EU finance ministers have half-heartedly supported the broad terms of a proposed EU plan to fight off the ongoing recession, but removed references to the 200 billion euro figure initially put forward by the European Commission.

The ministers were meeting in Brussels on 2 December to discuss a recovery plan tabled the week before by the European Commission (EURACTIV 27/11/08).

In a statement, the French EU Presidency said: “The ministers adopted a European strategy in the form of a common ‘toolkit’ of Community instruments (resources from the EIB and the EU budget), allowing each member state to take the necessary steps, based on its particular financial and macro-economic situation.”

Ministers approved an increase of the European Investment Bank’s (EIB) capital from around 65 billion to 230 billion euro, in order to fund measures to help car manufacturers to make cleaner vehicles, for example.

However, all references to the overall 200 billion figure were deleted from the Commission’s initial proposal, which also included “smart” investments in ‘green’ jobs.

Furthermore, proposals to lower taxes on labour-intensive local services, such as hairdressers and restaurants, once more failed to win approval. “We agreed to disagree,” said French Finance Minister Christine Lagarde, who chaired the meeting.

In view of continued disagreement, ministers decided to refer the matter to the EU’s heads of state and government, who will meet at a summit in Brussels on 11-12 December.

“We agreed that 1.5 percent of gross domestic product was a necessary figure to launch this recovery plan,” Lagarde said, according to Bloomberg.

This figure was however not endorsed by everybody. “Germany is taking on a total of 31 billion euros through two packages – that is, 1.25% of our GDP,” said Peer Steinbrueck, Germany’s finance minister, speaking on Monday (1 December) after a Eurogroup meeting. “That is apparently not being registered by many who are observing us,” he said, according to Reuters. 

Similarly, finance ministers refused to follow in the UK’s footsteps by reducing their VAT rates to the minimum agreed EU threshold of 15%. “We are not obliged to copy what all other countries are doing,” Steinbrueck said. “We need to cooperate, but the way of acting can look different.”

Speaking on Monday, Eurogroup President and Luxembourg Prime Minister Jean-Claude Juncker said: “The 15 member states of the euro area have declared they don’t want to do anything about the standard rate of VAT,” he said, according to Reuters.

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