The European Union called on member states to help the bloc avoid a deep recession by mobilising E200 billion in extra spending and tax cuts.

“Exceptional times call for exceptional measures,” said the head of the EU’s executive, European Commission chief Jose Manuel Barroso. According to Barroso, the bulk of the money – E170 billion – should come from national governments, with the remaining e30 billion being made available by the European Commission and the Luxembourg-based European Investment Bank (EIB).

By combining national initiatives and EU funds, the European Economic Recovery Plan should amount to about 1.5 per cent of the bloc’s gross domestic product.

The EU plan aims to boost demand, save jobs and help restore confidence in the aftermath of the global credit crunch, which analysts say has pushed the world’s biggest economic bloc into a prolonged downturn, with unemployment predicted to rise by 2.7 million over the next two years. The commission says governments should coordinate their responses in order to swiftly stimulate demand and boost consumer confidence, safeguard the most vulnerable members of society and help transform the EU into a low-carbon economy.

It is consequently predicted that extra spending and tax cuts will inevitably lead to higher budget deficits, and therefore officials in Brussels say the strict rules governing the EU’s Stability and Growth Pact will be applied ‘judiciously’.

Economic and Monetary Affairs Commissioner Joaquin Almunia, explained that his office would apply ‘flexibility’ when deciding whether to sanction countries that exceed the three percent of GDP upper limit by only a few decimal points. I form part of the economic and monetary affairs committee and have discussed these proposals recently with other MEP collegues. We are convinced that this stimulus will aide our economies, and help us get through what looks like a storm.

At the same time, Barroso and Almunia rejected calls for the pact to be changed, saying any such move risked undermining confidence in the EU’s common currency, the euro. According to the plan, governments are encouraged to improve their countries’ competitiveness by lowering labour taxes and boost private consumption through temporary cuts in value added tax (VAT). Meanwhile, the EIB is to mobilise E30 billion in loans for small- and medium-sized companies and the commission is to spend E5 billion on linking national energy grids and promoting broadband communication networks.

One may point out how the commission’s proposed plan highlights the need for significant investment to support industry, infrastructure as well as energy, arguing that measures such as these would support the economies short and longer-term growth. This government’s plans for 2009 include significant investments in infrastructural capital projects. These projects are bound to create demand and jobs in the short term while ensuring the country’s longer-term needs. Also parallel to the commission’s proposals are education and training. These pillars have had their capital votes expanded significantly to ensure the availability of human resources – a move that ensures the best use of the wealth our measures are intended to generate.

The commission’s proposed plan emphasised the need to increase families’ disposable income, something which the budget presented in November also addressed through a e46 million plan including various reductions in income tax for a third year in a row, tax breaks to all mothers returning to work after childbirth, an energy benefit to low income families and the full cost of living increase to pensioners.

The Commission says that the European Central Bank has scope to lower interest rates. This has already occurred, affecting us directly. Whoever has a loan will see the base rate decrease and ultimately leave more money in one’s pocket.

Nonetheless, Europe is still putting forward a green agenda. At least E5 billion from the EIB, EU and governments will be allocated for private-public partnerships developing green technologies in the car industry. We can see how the budget presented locally last month is consistent with these European principles, that we managed to ensure that green principles were still upheld, even during this economic turmoil.

As Barroso told us, these are exceptional times. Thankfully, we are part of the European Union, with a strong currency in our pocket. Being a member state, we have the added benefits of forming part of a conscious effort to stimulate economies together. And that is what we need, an exceptional union in exceptional times.

David Casa is a Nationalist MEP

www.davidcasa.eu

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