EU LEADERS meet today to discuss how to co-ordinate their response to the financial and economic crisis ahead of the G20 meeting of world powers in early April.
The summit is being held against a backdrop of rising unemployment, fears of social unrest and tension between the EU and US on the best way to tackle the crisis.
EU leaders will try to agree a common position on tricky issues such as reform of the International Monetary Fund (IMF), creating a new regulatory system for the global financial system and dealing with banks’ toxic assets. They will also consider whether to bolster an existing emergency bailout fund for EU states that are not members of the euro zone and on whether to back an EU-funded €5 billion stimulus package.
The European Commission has proposed tapping the EU budget in 2009 and 2010 to create an €5 billion stimulus package aimed principally at building new gas and electricity pipelines across the EU to boost energy security.
But some EU states, particularly Germany, have questioned the merit of some of the energy projects in the package because they are not ready to begin and would not boost the economy now.
Berlin is also reluctant to use funds from the EU budget which, if unused, are returned to net payers such as Germany.
“EU member states are already collectively providing €400 billion stimulus to the economy from national budgets so the extra €5 billion doesn’t really amount to much. So why do it?” questioned one German source.
The commission’s stimulus package is a summit priority for the Government, which would receive more than €100 million to build a new electricity interconnector between Ireland and Britain and extra cash for wind power and broadband projects. Most diplomats expect Germany to agree the package.
“If EU leaders can’t agree on a €5 billion stimulus, it sends a very negative signal about their ability to decide on other, more expensive, crisis measures,” one senior EU politician told The Irish Times.
This week, the US appeared to criticise the EU response to the crisis, with Washington asking EU countries to inject more money into their economies to kickstart global growth.
But France and Germany have signalled they won’t increase spending and the draft conclusions for the two-day EU summit call for a “swift and credible reversal of the fiscal expansion” from EU states to ensure conformity with the Stability and Growth Pact.
European Commission president José Manuel Barroso rejected criticism of the EU’s strategy yesterday, saying the EU is “doing more than anyone in the world”. But there are prominent voices in Europe critical of the slow pace of the EU response to the crisis, including former commission president and architect of the euro currency, Jacques Delors.
In an interview with German magazine Capital, he criticised the unwillingness of euro zone states to co-ordinate their activities and inform each other of new initiatives they are taking.
“I could well imagine that the pressure of the strong on the weak to carry out better policy or leave the monetary union increases,” he warned.
EU leaders are expected to agree a mandate for the union to take to the G20 summit in London in early April to enable it to speak with a “single voice”.
This will set out some basic principles the union wants to see implemented globally, such as ensuring appropriate regulation and supervision of financial markets, restoring credit flows, rejecting protectionism, and a reform and significant recapitalisation of the IMF.
Some smaller member states such as Finland have voiced concern about their exclusion from the G20 process, but leaders are likely to agree on the broad thrust of a common EU position.