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Eurozone ministers dress down Brussels recovery plan
9:04 AM
Finance ministers from the euro area have agreed it's too early to say how much public money EU member states should pump into the economy to fight recession, with Germany voicing the fiercest criticism of the European Commission's €200 billion recovery plan.
Less than two weeks before all the European leaders gather in Brussels to pronounce on the financial stimulus package, ministers from 15 countries sharing the euro failed to give the plan their blessing on Monday (1 December). The commission suggested last week that the EU should invest €200 billion in various sectors via a range of measures, from VAT cuts and cheap loans for businesses to social policy measures to help the most vulnerable citizens.
While some €30 billion is to be drawn from the common EU budget and the European Investment Bank, national governments are called on to pony up the remaining €170 billion - depending on their economic situation and resources.
But while the eurozone ministers - meeting on the eve of a gathering of all the EU's finance chiefs - agreed on the general philosophy of the package, they did not back the suggested figures.
"Everyone agrees that we need a strong fiscal response," Eurogoup chief Jean-Claude Juncker, Luxembourg's premier and finance minister, told journalists after the evening debate.
"We have the assurance that all national plans that will be presented would comply with the qualitative indications mentioned by the commission," he added, while admitting: "We have got to wait until all the national plans come in before we can get a figure."
Critics in Berlin
German finance minister Peer Steinbruck was particularly sceptical of the commission's proposal, echoing previous remarks by government ministers in Berlin, including Chancellor Angela Merkel, who had said that too much cheap money in the economy could spark a new crisis in less than a decade.
"We must not copy one another. We have to co-ordinate. The modus operandi can vary. European co-ordination is a way to do it, but a variation is possible," Mr Steinbruck said when he arrived at the meeting on Monday.
His Dutch colleague, finance minister Wouter Bos, stressed the need for the eurozone to return to budgetary discipline as soon as the conditions allow - otherwise the common currency could suffer more due to looming public deficits and debts.
"We need to do something and that needs to be substantive, and I do not mind it being substantive as long as it is temporary, as long as all countries after having taken these measures return to their path of reaching objectives."
Several EU countries, including the biggest European economy, Germany, have announced that they will not be able to reach their previous goal of getting rid of budgetary deficits by the end of this decade.
Ireland is expected to see its public deficit jump to 6.5 percent next year, with the commission preparing disciplinary procedures against Dublin to force the four-million-strong country to balance its public finances.
Although some member states - such as France, currently at the helm of the 27-strong bloc - pointed out the agreement among EU leaders to relax budgetary rules during the current financial crisis, Brussels maintains it should be only under the rubric of flexibility manoeuvres allowed by the 2003 reform of the EU's pact for stability and growth.
Under the rules which underpin the euro, member states can maintain a deficit over three percent of GDP for up to a year in the case of extraordinary circumstances, but they must still hew as close to the target as possible even as they exceed it.
The European Commission on Monday asked the eurozone finance ministers to present their budgetary plans for the next year by then end of December. The commission will repeat the call on Tuesday when facing all finance ministers from across the EU.
On 19 January, the commission will publish an updated economic forecast and analysis of national programmes. After which point, Brussels intends to proceed with all necessary disciplinary measures against member states breaking the rules on sound finances.
