Mixed response to EU economic recovery package

The European parliament’s four main political groups have welcomed the commission’s €200bn economic recovery plan, but have warned that it may not be ambitious enough.

PES President Poul Nyrup Rasmussen, responding to the package unveiled by commission president José Manuel Barroso on Wednesday in Brussels said the Portuguese commission chief had obviously taken note of Socialist concerns on kick-starting Europe’s economies.

“The commission has listened to us and is going in the right direction. The recovery plan mirrors the proposals made by PES leaders as early as 2005 and most recently earlier this month,” said the Danish MEP.

Barroso outlined a temporary fiscal stimulus of €200bn or 1.5 per cent of EU GDP, with around €170bn of that total expected to come from national budgets and around €30bn expected to come from the EU and European investment bank budgets.

“We are saying to EU member states, here is a toolbox that you can make use of, within the Lisbon strategy and the stability and growth pact, there are measures that we can take together using the leverage effect of community measures,” said Barroso.

“If this response is speedily and comprehensively implemented we can turn the crisis into an opportunity.”

However Rasmussen said that the commission’s plan has two major flaws.

“The first is that 1.5 per cent of GDP in two years is almost certainly not enough to keep down unemployment. Our calculations show that you need at least one per cent of GDP every year for three years to keep unemployment at current levels.”

“The second is that Angela Merkel and other conservative leaders such as Silvio Berlusconi may well water down the plan and refuse to make the necessary national investments.”

The German chancellor had warned, earlier on Wednesday, that member states should not get into a “race” over the size of their recovery packages.

“We should not get into a race for billions,” she said.

However Rasmussen said he was concerned that the size of the EU package and the speed of implementation could pale in comparison to the recovery plans being discussed by the incoming US administration which reportedly could be as much as 0bn.

“There is a real possibility that Europe will be left behind by the scale and speed of the new US Administration’s stimulus and reform packages even if the commission’s plan is accepted and implemented in full.”

Barroso called on EU leaders to swiftly approve and implement the recovery plan at their December 11-12 summit in Brussels.

“The European plan is a timely, temporary, targeted and coordinated plan for recovery, combining strategic incentives and supplementary expenditure brought forward from national and EU budgets,” said the commission president.

“Coordinated European action can and will make an impact that national action alone cannot have. Coordinated European action can and will make a difference. Business as usual is not an option.”

Rasmussen reiterated the statement put out by PES leaders earlier this month, that EU member states “must act simultaneously to take full advantage of our economic interdependence.”

“Therefore, we need coordinated investments across Europe’s member states, making sure our recovery plans are an integrated part of common efforts for smart, green growth and jobs and meeting Europe’s climate and energy goals.”

The parliament’s Greens/EFA group welcomed the commission president’s attempts to green the recovery package by driving the EU towards a “low carbon and energy efficient economy”, but said the plan did not match the ambition of the environmental relaunch the Greens had been calling for.

In a joint statement, the group’s co-presidents Daniel Cohn-Bendit and Monica Frassoni said, “the commission is at last waking up and starting to tackle the major hangover of the financial and economic crisis.”

“President Barroso finally accepts that business as usual is not an option. But he still fails to fully acknowledge where the hangover came from and accept his part of the blame in the excesses and deregulation that caused the current mess.

"[However] given the constraints, [the recovery plan] is at least a step in the right direction. We welcome increased financing through the European Investment Bank and new programmes that support a shift towards promoting eco-innovation, for example for energy-efficient buildings.

“There is no guarantee the plan will work while the EU "coordination" is in reality a juggling act of member states who continue to diverge with varying individual responses. If the EU had more of a competence in this area, it could enforce more coordination,” the two leaders added.

“We are however pleased that the commission sees the stability and growth pact as a flexible framework – not a straitjacket – so that urgently needed funds can be made available.”

But the two co-leaders said they had concerns over a €5bn green cars proposal aimed at encouraging Europe’s automobile industry to develop more environmentally-friendly cars.

“The commission's plan envisages at least €5bn in EIB soft loans for eco-innovation for cars. While automakers are lobbying hard for softer fines for non-compliance, the EU must take great care not to gift a carrot and drop the stick. Strict controls must be put in place to ensure this money does not become a subsidy in disguise.”

“The recovery proposal is still a mix of new and old recipes. So while we broadly welcome the plan, we emphasise that the proof will be in the pudding.”

EPP-ED group leader in the parliament, Joseph Daul accepted the commission’s plans saying that he welcomed “the priority given to coordinated action between the European institutions and the member states.”

“As the economy, together with social cohesion, are our main priorities, our political family will do its utmost to make sure that this coordination is implemented in reality.”

“For my group, the priority must be to protect Europe 's citizens from the worst effects of the financial crisis. Sacrifices cannot be avoided but, together with President Sarkozy and Chancellor Angela Merkel, our group believes that governments have to head off a recessionary spiral. Only by joint action can we hope to succeed.”

“We must also ensure the stability of the financial system. Bank rescue plans established by member states must be implemented quickly and consistently with the highest level of transparency. Banks should not forget that when rescuing them our primary aim is to protect European citizens and SMEs, which must be able to access finance on reasonable terms for their projects.”

"We also welcome the fact that the commission has based its response on the priorities of the Lisbon Strategy for growth and jobs. We have always considered that the reform agenda of the Lisbon Strategy represents the best guarantee to preserve the social market economy.”

ALDE group leader Graham Watson said Wednesday’s proposals, “contrast with the G20 conclusions in Washington which relegated sustainability to a penultimate sub-point in the penultimate point.”

“The commission package has demonstrated a greater awareness of the advantages of green investment and green growth. Europe should prioritise sustainable economic growth as the means to recover from the current recession.”

Watson warned against what he called “unnecessary subsidies for industry.”

 "The European commission must be careful not to allow the temptation to return to the past to detract from current efforts to implement the Lisbon Strategy. If we want European industry to thrive we need to find ways of boosting green industrial products and consumer spending power as priority.”

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