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 U.S. 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.
“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.
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 U.S.
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.
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.
While the EU leaders rejected major stimulus plans, they agreed on a euro5 billion energy package likely to include gas pipelines and plans to bury climate-damaging carbon, Barroso said.
He did not detail which projects won approval, though a final list was expected at the summit’s close Friday.
Again, Merkel had led opposition, warning of higher budget deficits despite the benefits for Europe’s environmental credibility.
The EU wants to be at the vanguard of U.N.-sponsored global warming talks in Copenhagen later this year.
EU leaders are seeking agreement Friday on how much aid to give to poor nations in exchange for support for a global climate change pact.
Environmental groups say the EU should contribute around euro35 billion ($47 billion) a year by 2020 to poorer nations to help them cut emissions.
On the economy, European governments already resisted a push for more spending from the U.S. at a summit of Group of 20 finance ministers last week, and Thursday’s stand underlined their position going into an April 2 summit of G-20 national leaders in London.
“You cannot solve everything by using taxpayers’ money. The huge deficit of the United States is a problem because it takes away resources for credit markets all over the world,” said Swedish Prime Minister Fredrik Reinfeldt, who will take over the EU presidency in July.
The heavy impact of recession is hitting a growing number of Europeans.
When Sarkozy came to Brussels on Thursday, he had to leave his prime minister behind to deal with a nation hit by a wave of protests and strikes that disrupted transport and schools.
All shared a common demand: more action to counter the recession and unemployment.
More than 1 million people marched in cities and towns around France Thursday, and a few hundred youths showered police with bottles and stones at a big protest in Paris.
Meanwhile, news came that France’s economy is shrinking at its fastest pace in over 30 years.
Still, Premier Francois Fillon told the nation, “We cannot go beyond what we have done. The government has a duty to act responsibly.”
In Germany, companies piled on more bad results Thursday. Chemicals producer Altana AG turned literary Thursday, saying it was “caught in the maelstrom” of the global crisis, with profits in 2008 down 25 percent.
Britain appeared headed toward the worst employment outlook since World War II: The government announced Wednesday that joblessness rose to 6.5 percent in the three months ending in January, with the number of people out of work reaching its highest in a dozen years.
Against that backdrop Europe’s left is calling for more action.
“There is a broad agreement that we must do more than is in the package now,” said Poul Nyrup Rasmussen, the leader of the European Socialists.
“If we don’t do more we risk having 25 million unemployed people at the beginning of next year.”
About 18 million people are believed to be unemployed in the EU today, about 7.6 percent of the overall working population. – AFP
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