EU leaders reject more stimulus plan

(Agencies)
Updated: 2009-03-20 11:11

BRUSSELS -- European Union nations on Thursday rejected in unison new spending projects to boost their recession-hit economies, standing firm against massive street protests demanding subsidies and US suggestions to stoke growth with more aid.

Despite a million people marching in France and more bad company news hitting Europe's industrial engine in Germany, EU leaders at a summit in Brussels said now was not the time to throw more money at the crisis - at least not until the effects of a first package of euro200 billion set in.

European Commission President Jose Manuel Barroso gestures during a press conference ahead of the EU spring summit in Brussels, Belgium, March 19, 2009. [Xinhua]

"We are unanimous in our views and we all agreed we are going to be prudent," said the summit host, Czech Prime Minister Mirek Topolanek.

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European Commission President Jose Manuel Barroso claims that the bloc is spending 3.3 percent of gross domestic product this year and next year on efforts to improve the economy and sagging employment.

That includes unemployment benefits and job programs - the trusted cornerstones of Europe's vaunted welfare state. Barroso says those are making the difference in Europe, while less regulated economies like the United States have to spend much to start weaving a tighter social safety net.

The cautious European approach on government spending stood in contrast to the announcement Wednesday that the US Federal Reserve will launch a bold $1.2 trillion effort to increase the amount of money in the economy by lowering rates on mortgages and other consumer debt.

Czech Prime Minister Mirek Topolanek, whose country is holding the European Union (EU) rotating presidency, addresses a press conference ahead of the EU spring summit in Brussels, capital of Belgium, March 19, 2009. [Xinhua]

Topolanek said that around the summit table as the 27 leaders discussed outside pressure "we heard expressions like 'not being dictated to by the United States' or by those who want more fiscal stimulus."

German Chancellor Angela Merkel and French President Nicolas Sarkozy argue that excessive public debt threatens global stability and countries must move swiftly to pay off debt when they can.

Despite taking no immediate action, the EU leaders sought to prepare themselves in case of bad news later this year.

Barroso said he expects EU nations to double a bailout fund for member states in trouble to euro50 billion ($68 billion). Hungary and Latvia have already received euro9.6 billion from the fund, which raises money by selling bonds.

Germany opposes a much higher threshold for the emergency fund, arguing it would tempt countries into seeking bailouts when there is no real need. Many member states from central Europe that joined only five years ago are scared, however, that their currencies could plummet further and rating agencies downgrade them - making it more expensive for them to borrow money.

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