The economic recovery plan that the European Commission will be announcing this Wednesday warrants a few preliminary considerations while we wait for the details.
1. National and Community action. The project has been elaborated by the Commission, in close cooperation with member states. This is logical, given the current stage of European construction. With the level of the Community budget as it currently stands (less than 1% of the EU's Gross Domestic Product), the plan will mainly be funded by national budgets and the idea of European economic government is nothing but a mirage. It is easy to come up with populist solutions by demanding massive amounts of Community funding to proportions the president of the Commission has in fact defined as populist. The countries and people who chose to reject participation in the euro and the governments that did not sufficiently create the conditions for joining the eurozone, or while being part of the zone have not respected the obligatory criteria, must accept the consequences of their decisions. They will, nonetheless, benefit from European support: advance payments from Community instruments (Cohesion Fund, regional programmes) and the European Investment Bank (EIB), which is increasingly and pro-actively underpinning European policies.
2. Coordination of national orientations. Most of the recovery plan therefore comes from the member states but it is essential that the initiatives are coordinated, compatible with the European market as a whole and respect Community rules. Once announcements of national measures began to escalate, Germany, in particular, pointed out this requirement; the economies of member states are now so interconnected that no member state would be able to efficiently act alone. It is therefore, logically, up to the Commission to define the main appropriate orientations because it has an overview and global knowledge of the situation and means available to each member state.
3. European Council to have its say. It will then be up to the European Council, in its 11 December session, to define the EU-level plan based on the Commission's project. It has therefore been agreed that it is at a heads of state and government level that European guidelines on economic recovery will be defined and announced. Permanent contact has also been established (Ms Merkel and Mr Sarkozy met this very Monday). Germany is obviously requesting that its plan that has already been announced, be taken into consideration, which is logical because the economic and financial weight of Germany is fundamental for all and its greater budgetary room for manoeuvre is even envied by other big member states.
Essential guidelines. The main guidelines in the Commission document are not unknown, even if some aspects in the document are still being discussed. The overall amount of financial commitments will be around €130bn and corresponds to approximately 1% of Union Gross Domestic Product. Funding will mainly come out of national coffers (with needs and abilities being taken into account accordingly) but coordination will mean that recovery in one member state will also benefit the others; added to which are European resources available and EIB action, especially for funding small and medium-sized enterprises and cross-border infrastructure (which national projects often ignore).
The Commission will propose the speeding up or early execution of Community spending that has already been programmed: part of the €350bn for the regions and deprived sectors of the population planned for 2007-13 will be used more rapidly. The possibility of a reduced rate of VAT will be raised but will, nevertheless, remain a measure that individual member states can adopt if they see fit. Overshooting the 3% ceiling on budgetary deficits would be limited and temporary, while respecting the rules of the Stability Pact.
Differences over cars. The document is also expected to include a specific plan for the car industry: this is, at least, the intention of Vice President Verheugen. The discussions, however, on the contents of this section are still very sharp-ended; the Presidency of the Council is not yet even in the process of drawing up a draft text. The major car manufacturers are calling for €40bn in reduced interest rate loans. A dual guideline is taking shape: a) focusing support on action in favour of clean vehicles and getting rid of old and highly polluting cars (but concerns still remain); b) concentrating European funding on aid to workers (through the European Social Fund and Globalisation Adjustment Fund), while the simple “breakers' yard bonus” will be terminated.
(F.R./transl.rh)