The European Union is coordinating a £200 billion ($259 billion) stimulus proposal for the 27- nation economy and said more may be needed to limit the impact of the global financial crisis.
The package, to which individual countries will contribute £170 billion, is equivalent to 1.5 per cent of the 27-nation EU’s gross domestic product. “We may even need more,” European Commission President Jose Barroso said in unveiling the proposal in Brussels today, adding that the plan was an “exceptional response” to an “exceptional crisis.”
Wednesday’s proposal is the latest in a series of measures to counter the impact of a worldwide financial turmoil that has shut down access to funding, roiled stock markets and sent household and corporate confidence into a tailspin. The EU wants to coordinate measures among member countries to boost growth after the economy slipped into a recession in the third quarter.
Europe’s largest nations already have begun taking steps to reignite company investment and kick-start household spending and those measures are included under today’s proposal. Germany this month announced a £50 billion package for its economy, while France is planning actions to help its auto industry. In the UK, the government cut its value-added tax to spur consumer spending.
“A lot of this is not new,” said Jonathan Loynes, chief European economist at Capital Economics Ltd in London. “It simply doesn’t look big enough. These measures don’t look bold enough to prevent the economy contracting quite sharply next year.”
The remaining £30 billion of the package will come from the EU budget, primarily accelerated payments already budgeted, and from the European Investment Bank, which will boost lending in Europe next year by £15 billion. The measures incorporate £5 billion for the development of more environmentally friendly cars.