EU summit to assess economic stimulus plan, coordinate position for G20 meeting

BRUSSELS. March19. KAZINFORM The two-day summit of the European Union starting on Thursday will mainly assess the effect of the current economic stimulus plan and prepare for the G20 summit, to be held on April 2 in London.

First of all, the leaders of the 27-nation EU member states will evaluate the efficiency and effect of the 200-billion-euro economic stimulus plan, put forward by the European Commission in November to contain the impact of the global crisis and stimulate the recovery of the economy. The stimulus plan asks EU member states to expand public spending, cut value-added tax, invest in infrastructural construction of the Internet and energy sector to mitigate the impact of the financial crisis, which has put the economy of the euro zone into its first recession since the zone came into being a decade ago, and brought a dire prospect for both the zone and the EU in 2009. A few months have passed, the Europeans have no clear idea about the implementation of the plan and its positive and adverse effects. Besides, under the pressure of the United States, which has urged governments to release new stimulus plans to boost global demand, the Europeans are expected to conduct the assessment of the plan. The summit is expected to reiterate that the EU will not introduce any new stimulus plans before assessing the current one, as over-expansion of the national deficit is not desirable, a viewpoint voiced by EU finance ministers at their last week meeting. Following hours of bargaining, the finance ministers paved a smooth way for the summit to approve the tax cut issue as they agreed that member states can make their own decision on whether or how much to cut VAT in labor-intensive service sectors. But EU foreign ministers were not so lucky. They failed on Monday to agree to use five billion euros in the bloc's unspent budget to boost economy. As part of an economic stimulus package, the European Commission, the EU's executive arm, proposed in November that the bloc should spend five billion euros in "unused" EU funds on infrastructure to improve Internet access and energy connections between member states. But negotiations in the past months have been deadlocked due to differences among EU governments on where the money should come from and which projects in which countries should be financed. As EU foreign ministers did not break the deadlock, the issue is left for the summit to handle. "If we fail to find an agreement this week, then the credibility of everybody would be put into question. I do not think we can afford this," said Czech Deputy Prime Minister Alexander Vondra, whose country holds the EU rotating presidency. "I urged my colleagues to act in the spirit of responsibility and solidarity, which are two important principles of the EU," Vondra said. He said that the Czech EU presidency would come up with a new compromise proposal ahead of the summit. Another topic the summit will deal with is to increase funds for medium-term financial assistance, namely crisis fund, for Central and Eastern European EU members hit-hard by the financial crisis. The EU special summit on March 1 failed to find a solution to help these countries out and rejected a proposal by Hungarian Prime Minister Ferenc Gyurcsany of setting up a 190-billion-euro fund to the urgent relief of Central and Eastern countries. With more and more members in Central and Eastern Europe running into financial and economic trouble, there is a call for the EU to have more funds ready to provide emergency aid. EU leaders "should rapidly examine the possibility of increasing the ceiling for the union's support facility for balance-of-payments assistance," according to a draft document to be discussed at the summit. They agreed in December to double the ceiling of the EU's medium-term financial assistance facility to 25 billion euros, designed to help member states outside the euro zone stabilize their economies. Hungary has drawn 6.5 billion euros from the facility and Latvia used 3.1 billion euros so far, while Romania is seeking such help recently. Aside from internal affairs, the summit will coordinate position for the G20 summit, wishing to patch up an coordinated "offer." Representing the 27-nation bloc to attend the London summit, leaders from Germany, Britain, France, to name a few, gathered in Berlin on Feb. 22 to set the tone of the EU position: to enhance financial supervision and management, and reform the existing international financial system. The EU summit is expected to echo the pledges of the Berlin meeting and finalize their "price list" for bargaining at the G20 summit. In addition, EU leaders will discuss lending 75-100 billion U.S. dollars to the International Monetary Fund to boost its lending capacity, and express support to double IMF resources to 500 billion dollars to help countries in balance-of-payments crisis. Analysts here believe that bitter disputes are expected concerning such issues as the 5-billion-Euro fund for the infrastructural construction of the internet and energy sector, aid for the Central and Eastern European member states and lending to the IMF. In view of the EU's tradition, no controversies can be settled without lengthy negotiations. This summit won't be an exception, Kazinform refers to Xinhuanet.