Translated material
Save Europe
The European Commission has prepared a plan for economic recovery in the European Union
The European Commission yesterday approved a package of measures to save the eurozone economy, which is sliding into recession . EU leaders called on representatives of the member countries of a united Europe to hurry up and agree on this recovery plan at the upcoming summit in Brussels in mid-December and begin to implement it.It is expected that the final version of the anti-crisis program (currently a ten-point document) will be presented to the public after its approval. For now, only a portion of the initiatives that will be proposed to EU leaders are known. First of all, the European Commission is ready to allow EU countries to exceed the 3 percent level of possible budget deficit of GDP laid down in the Stability and Growth Pact. As is known, the pact provides for sanctions for such an excess. RIA Novosti sources in the European Union say that “Brussels will take a softer approach to EU members who cannot meet this requirement in the next two years, taking into account exceptional circumstances.”
The head of the European Commission, Jose Manuel Barroso, announced another point of the “recovery plan”, according to which the participating countries will be asked to allocate 200 billion euros (about 1.5% of the EU GDP) to stimulate the EU economy: “170 billion euros will be allocated to EU members, another 30 billion -- from the EU budget."
The draft document also includes recommendations to reduce the administrative burden on business and taxes, including VAT rates for certain sectors of activity, reduce the ECB discount rate, finance infrastructure projects, green technologies in the construction industry and the automotive sector. Mr Barroso called the stimulus package a response to the global financial crisis “exceptional in scope and ambition”: “It is the best way to protect citizens and ensure sustainable economic growth.”
Referring to the worsening situation, the European Commission called on the heads of state of the EU to promptly familiarize themselves with the proposed project and begin work on it. Data from national governments also indicate that the situation is worsening. This week, disappointing forecasts were voiced by German Finance Minister Peer Steinbrück, European Central Bank President Jean-Claude Trichet and representatives of the Bank of England. Mr Steinbrück expects Germany's GDP growth to slow to 0.2% in 2009, down from 1.7% in 2008. The crisis has also adjusted Germany's budget plans for next year: it will apparently include a deficit of 18.5 billion euros (the original expected deficit was 10.5 billion euros). The UK economy went into recession for the first time since 1992 - according to the National Statistics Office, in the third quarter compared to the second, national GDP decreased by 0.5%. The recession will last most of 2009, the Bank of England predicts.
ECB President Jean-Claude Trichet said yesterday that economic growth in the eurozone could "be in negative numbers" in 2009: "The tension has spilled over into the real economy and has significantly slowed growth around the world." At the same time, he did not voice specific forecasts, leaving market participants to wait for the results of the ECB meeting on the issue of the discount rate on December 4, after which new forecasts for the dynamics of GDP and inflation for the next year will be published. Now analysts predict a decline in GDP in 2009 by 0.4-1%.
"Trichet has not yet uttered the word 'recession', but he will most likely have to do so at the upcoming meeting," Royal Bank of Scotland Plc chief economist Jacques Caillou said yesterday, commenting on the ECB chief's remarks yesterday.
The crisis is quite serious, and the 200 billion euros that European Commission President Jose Manuel Barroso is asking for as part of the economic recovery plan will not play a role, experts say. “Against the backdrop of the lifting of sanctions related to overcoming the 3% budget deficit barrier, the costs of the participating states will increase, as the small and medium-sized business segment will be more intensively supported, and spending on infrastructure projects will increase,” notes the head of the analytical department of the Financial Bridge Investment Company. Alexey Serov. “Reducing the tax burden can significantly weaken the budget.” This will lead to active borrowing, and the level of EU debt will increase next year, continues Alexander Apokin, an expert at the Center for Macroeconomic Analysis and Short-Term Forecasting. In his opinion, the EU member states will take an active part in finalizing the project, but will still devote their main efforts to the plan for raising their own economies.