- Title: VARIOUS: Europe acts to tackle financial crisis
- Date: 30th October 2008
- Summary: (EU) BRUSSELS, BELGIUM (OCTOBER 29, 2008) (REUTERS) EXTERIOR EUROPEAN COMMISSION EU FLAGS
- Embargoed: 14th November 2008 12:00
- Keywords:
- Topics: European Union,Economic News
- Reuters ID: LVACRNREC62WBAHKH0VJQYVJPJ6W
- Story Text: The European Commission wants to increase the bloc's crisis fund to 25 billion euros (31.87 billion US dollars), promote innovative investment and balance out job cuts, as part of a package to cushion economies teetering on the brink of recession.
The European Commission held a special meeting in Brussels on Wednesday (October 29) devoted to thrashing out a package to help economies in trouble, safeguard jobs and help the jobless get back to work.
"We will bring forward on 26 November a comprehensive European Union recovery plan based on the European framework that we have approved today. And that comprehensive European Union recovery plan will come with targeted, short term actions to add to the medium term reform agenda under the Lisbon strategy for growth and jobs," European Commission President Jose Manuel Barroso said.
BusinessEurope, which represents 20 million European companies, expects European economies to stand close to stagnation for 2009 and forecast one million job losses because of the economic crisis, with manufacturing particularly badly hit.
Competition from China, India and other emerging markets is also putting pressure on EU economies even though many of them are also feeling the repercussions of the 'credit crunch'.
But Barroso said the Commission wanted to see innovative funding, investments in energy efficiency, industries that create new jobs and lower taxation on ecological goods to boost consumption.
The financial crisis has plunged the EU to the brink of recession, saw Iceland face bankruptcy and Hungary beg for a massive injection of international aid to stabilise its financial markets.
Some industries, including car makers and steel producers, are already seeing a fall in sales and profits and slashing jobs.
After years of strong growth, luxury goods sales are expected to fall globally by one percent in the fourth quarter of 2008, and may drop by up to seven percent next year, according to a study by consulting firm Bain and Co., which was released this month.
U.S. sales of Porsche cars fell by 58 percent in September compared with September 2007, while overall car sales declined by 22 percent, according to figures from Autodata.
EU targets to cut CO2 emissions by 2020 worry car makers who are pressing for softening of the terms of the EU proposal or even subsidies to help them produce greener cars.
As a first measure to help countries teetering on the brink of recession, Barroso said the Commission will propose increasing the bloc's crisis funds to 25 billion euros (31.87 billion US dollars).
Crisis-hit Hungary is to receive 6.5 billion euros from the fund but the Commission stands ready to bail out other countries in need.
"The community is to provide a loan of 6.5 billion euros to Hungary out of the community medium term assistance facility established under Article 119 of the treaty in conjunction with IMF assistance and World Bank assistance. This will shortly be finalised in cooperation with the Hungarian authorities. We also stand ready to provide substantial medium term financial assistance to other member states experiencing balance of payments pressures or serious financial stability risks," Barroso said.
The EU's medium-term funding facility has 12 billion euros and French President Nicolas Sarkozy called on Tuesday (October 28) for an increase to at least 20 billion euros as EU states face slowing economies amid the worst financial market turmoil in 80 years.
The money is not new, Barroso said, but will be diverted from other uses.
"We have considered the need to increase the ceiling which right now in the regulation of 2002 is up to 12 billion euros. We intend to present to the Council a proposal for increasing this ceiling till 25 billion euros," Joaqim Almunia, Commissioner for Monetary Affairs said.
Barroso said China and the Gulf region could do more to help the International Monetary Fund (IMF) support countries hit by the financial crisis.
"The idea put forward by (British) Prime Minister Gordon Brown, and I completely agree with him, is that China and the others could help more the IMF. Namely there are the possibilities of some funds for support for some economies that countries that have more reserves could put at the disposItion of the IMF," he said.
This is one of the reasons China has been invited to the November 15 summit of world leaders on reforming the global financial system.
Barroso said the EU did not have a magic wand but that it was working on establishing the right framework to cushion the blow of the impending economic crisis as well as providing each member state with its own tools to create jobs.
"The European Union, as such, does not have a miraculous solution.
What we are doing is to provide member states with a framework for their own policies. We do not have all the instruments. We are going to use, to the maximum of our abilities, all the instruments at our disposal," Barroso said.
EU leaders will meet in Brussels on November 7 to prepare for the summit.
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