Brussels, 12/12/2008 (Agence Europe) - Faced with the threat of recession in the eurozone and the EU as a whole, the EU's leaders agreed on Friday 12 December 2008 to the target of spending around 1.5% of EU GDP on economic recovery measures. The exact amount to be spent in each country will depend on the economic circumstances of that country but the overall amount is of the scale desired by the European Commission. The European Council also endorsed the option of using unspent money from the EU budget for economic stimulus initiatives at EU level, going further than EU finance ministers, who argued recently for the current budget heading caps to be respected. The European Council called for respect of the Stability and Growth Pact (SGP), in the medium-term at least.
Economic stimulus measures worth around 1.5% of EU GDP. In the conclusions document, the European Council approved the European Economic Recovery Plan unveiled by the European Commission as a coherent framework for action to be carried out at EU level and for the measures decided by each Member State, taking account of the situation of each country. The Plan will involve measures totalling 'around' 1.5% of European Union GDP (the initial version stipulated 'at least' 1.5%). The European Council says it is confident that the Economic Recovery Plan echoing similar moves in other economies in the world (like the United States) will make a decisive contribution to a rapid return of the European economy to a path towards growth and job creation. The next European Council in March 2009 will assess progress in implementing the recovery plan and may add to it or modify it where required. After the Summit, the French President, Nicolas Sarkozy, said everyone had agreed absolutely on the severity of the crisis and everyone had also agreed on the need for economic stimulus based on the Barroso recovery plan. Welcoming the outcome, Eurogroup chair Jean-Claude Juncker went further, saying it was the first time that the EU had joined up various aspects of domestic policy in a single, coordinated European action programme. He hoped it would prove to be a coordination of common sense that would outlive the crisis rather than a sleight-of-hand coordination.
Priority initiatives at EU level. Action at EU level should total around €30 billion, according to the European Commission (€15.6 bn of which will be provided by the European Investment Bank (EIB) and up to €14.4 billion from the EU budget), for: 1) the EIB increasing its spending by €30 billion in 2009/2010, particularly on SMEs, renewable energy and clean transport (funding for the car industry). The creation of a 'Marguerite' 2020 Fund (a European Fund for energy, climate change and infrastructure) is mentioned. 2) Simplification of procedures and speeding up of implementation of programmes funded by the EU Cohesion Fund, Structural Funds and European Agricultural and Rural Development Fund in order to boost infrastructure and energy efficiency investment. 3) Using unused monies from the EU budget to boost investment and extend high speed internet connections (see below). To this end, however, the Commission still needs to publish a list of tangible projects with a suitable geographic balance. 4) Action funded by the European Globalisation Fund to boost jobs in key sectors of the EU economy, and improving and speeding up procedures. 5) The option of Member States which so desire levying reduced-rate VAT in some areas (the initial draft mentioned labour-intensive services and green products and services). Agreement is still far from being reached on this area and the European Council has simply asked the ECOFIN Council to settle the issue by March 2009. Sarkozy told reporters that the issue had been discussed with the German Chancellor, Angela Merkel, and he was certain that it would be in a constructive state of mind that she would instruct her finance minister to address the matter. Merkel commented that there had not been any agreement, adding that she would be constructive but would also defend German interests. European diplomats say that even if the matter is discussed at the ECOFIN Council in March 2009, there is no certainty that agreement will be reached, explaining that Germany seemed set in its opposition to reduced-rate VAT. 6) A temporary two-year breather before the €500,000 'de minimis' state aid rule comes into force (the level below which aid does not have to be notified to the Commission). Adjustments will be made to the system in order to increase aid to SMEs and other companies. Full implementation of the Small Business Act action plan adopted on 1 December 2008. 7) Making use next year of a provision in EU legislation that can speed up the system for awarding public contracts from 87 days to 30 days. 8) Making significant inroads in cutting red tape for companies.
Go-ahead for deployment of unused Community budget credits. The European Council agreed to a review of the financial perspective in order to find the €5 billion needed in 2009 and 2010 to improve energy interconnections and broadband infrastructure (see EUROPE 9801). The Commission, however, will have to present a list of “detailed projects” on these initiatives, in consultation with member states, said Sarkozy, satisfied of the necessary budgetary flexibility. In its conclusions, the European Council called on the Council, the Parliament and the Commission to take the necessary decisions to adapt, as quickly as possible, the European budgetary framework, fully respecting the current financial perspective and inter-institutional agreement procedures. This form of words opens the way for the adoption of the Commission's proposal for the review of the financial perspective, but the timetable is tight. If €3.5 billion be taken from unspent money from the agricultural budget in 2008, decisions will have to be taken before the end of this year. Plans will have to be brought forward as soon as possible, a Commission spokesman said, acknowledging that “the financial mechanisms will be sorted out later”.
In addition to the €5 billion envelope (€3.5 billion in 2008 and €1.5billion in 2009) the Community contribution to recovery in 2009 also comprises: - €6.3 billion under the social and cohesion policies in the form of swifter payment of advances; - €2.1 billion in credits redeployed from budget lines for “green” cars, most energy-using buildings, the “factories of the future” and high speed internet; - €500 million in funding for trans-European transport network projects; - and €500 million for various other projects.
Increased and coordinated effort required from member states. As expected, the conclusions set out some guidelines for action by member states: - measures to support demand may be focused on the most affected sectors (motors cars and construction); - depending on national situations, they may comprise an increase in public spending, judicious reductions in the tax burden, reductions in social costs, support for certain types of business or direct aid to households most at risk; - and they have to be accompanied by efforts to bring about the Lisbon Strategy structural reforms (focused on increased financing of investment and infrastructure, improving business competitiveness, greater support for SMEs, boosting employment and promoting R&D, innovation and education/training).
Flexibility of SGP and competition rules. The Stability and Growth Pact remains the “cornerstone” of the EU budgetary framework, the conclusions say. They note that consolidation of long-term public finances remains the rule. Aware that national recovery will mean temporary deficits, the Council repeated that it was fully committed to sustainable public finances, and called on member states to return, as quickly as possible, to the medium-term budgetary objectives, in line with the Pact and as the recovery progresses. “The Pact remains in force” said Sarkozy, stating that the European Council had agreed that “it should apply again as soon as the crisis is over”. He said that, “For exceptional circumstances, an exceptional response was required”. The same was true for competition rules, the application of which by the Commission must also respond to the need for swift and flexible action, the conclusions say. (A.B./transl.fl/rt)