Economic Policy : Commission Proposes 200 Bn Euro Stimulus Plan
The European Commission attempted, on 26 November, to give a European framework to the measures for economic recovery planned or announced by the governments of member states. Totalling the national plans, the European Investment Bank's (EIB) increased loans and own funds, it announced an overall package 200 billion (1.5% of the EU's GDP), whose details will likely be scrupulously analysed by the markets.
The bulk of the package will come from national budgets, up to 170 billion. This amount will be complemented by 30 billion coming from the EIB (50%) and Structural Funds (50%), some of which will, in reality, simply be released a little earlier (see separate article).
Limited in its methods, the Commission would nonetheless like to play a role of coordinator for national efforts. These will only deliver the full effect if they are part of a coordinated response, warned Commission President Jose Manuel Barroso. Its task will not be easy. The British government did not wait for the EU to adopt its own recovery plan, based on a temporary drop in VAT from 17.5% to 15%, which will put 20 billion into consumers' pockets. Last year, Germany increased its VAT from 16% to 19% and does not plan to backtrack. Berlin has already announced a recovery plan of 32 billion (1.3% of GDP), more focused on companies than consumers. Barroso did not try to cover up these differences. There are cultural differences in terms of propensity for consumption, he said. …