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Page last updated at 20:04 GMT, Wednesday, 26 November 2008

Europe announces 200bn euro plan

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Europe announces 200bn euro plan

The European Commission has unveiled an economic recovery plan worth 200bn euros (170bn) which it hopes will save millions of European jobs.

The EC expects member states to contribute 170bn euros while the European Union will give 30bn euros.

The plan is aimed at boosting consumer confidence and stimulating spending.

Some of the money will be used for job training, improving energy links and broadband access, and developing less polluting cars.

The Commission's proposals include at least five billion euros to help the car industry develop green technologies and a total of 2.2 bn to improve the energy efficiency of homes and factories.

It said aid to small and medium sized businesses over the next two years would be increased from 10 to 30 billion euros.

It also wants to ensure easier access to 1.8bn euros worth of EU funding for job training.

Recession fears

Commission president Jose Manuel Barroso said the plan was "timely, temporary and targeted".

Mr Barroso said it was important that EU members acted together in a period of "exceptional crisis".

"It's the best way to restore citizens' confidence and counter fears of a long and deep recession," he added.

I expect this package to receive strong support
Jose Manuel Barroso, European Commisison president

The European Commission president said the bigger part of the package would be implemented in 2009, while some measures would continue into 2010.

The EU commission now has to persuade its 27 members to start pumping the money into their own economies, the BBC's Europe business reporter Ben Shore says.

Many, like the UK and Germany, will argue they have already done their bit with initiatives announced in the past few weeks, he adds.

The German government, for example, said it was operating under the assumption that its existing economic package was enough as it was already putting 50bn euros back into the economy, more than Commission's target of 1.2% of GDP.

"With that, we are fulfilling the European Commission's plans. We're even over-fulfilling them in a way," government's spokesman Thomas Steg said.

German chancellor Angela Merkel had earlier expressed concern about getting "into the race for billions" by unveiling huge stimulus packages.

"We should walk a measured path and keep to the middle ground, which is made-to-measure for the situation in Germany," she told the Bundestag, the lower house of parliament.


Mr Barroso said that the plans already unveiled by member states were part of the Commission's recovery plan.

Some measures already announced by national governments
Germany: package of measures set to generate 50bn euros in investment and contracts
France: 19bn euro injection into key industries
Spain: 40bn euro fiscal stimulus package, including 6bn euros in tax cuts
Italy: 80bn euro stimulus package, but a large part of the money has been already received
UK: 20bn (23.6bn euro) fiscal stimulus plan, including cut in VAT

He also pointed out that not every country had to commit to the 1.2% target.

"We have different points of departure. So we picked an average effort of 1.2%," he said.

However, responding to concerns that an agreement would be hard to reach, the Commission president said he had been in touch with member states about the package and a consensus was emerging.

"I expect this package to receive strong support", he said.

Some European governments praised the Commission's plan saying that it offered a common platform to tackle the economic crisis.

"The plan sets the basis for the recovery of growth and employment," the Spanish government said in a statement.

UK Prime Minister Gordon Brown said he regarded the proposal as "a good plan and an acknowledgement that there is widespread consensus around the world, including in Europe, of the need for a fiscal stimulus".

France and Germany's leaders also called on the EU to ease its fiscal rules to allow nations to spend more to boost their economies.

The requirement to hold public deficits below 3% of GDP in individual EU countries should be eased, France's Nicolas Sarkozy and Germany's Angela Merkel said in a joint newspaper article.

But Mr Barroso said the Commission was not planning to revise EU budget rules.

"We are not going to introduce greater flexibility. The stability pact already has flexibility in it," he said.

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