Not just limiting the damage

Public investments, both at the national and EU level; coordinated measures to support the real economy; and the “flexible” application of the Stability Pact: the EU is choosing the path of planned intervention to limit the damage of the recession, but at the same time it is considering the possibility of reinforcing some strategic sectors (research and infrastructures) and “re-launching efforts to tackle climate change”.Help for the real economy. The President of the Commission José Manuel Barroso, in announcing the action plan to tackle the economic crisis “consequent on the economic crisis” in Brussels on 26 November”, underlined that these were extraordinary measures, “coordinated” between the EU and member states, on which the major onus for the interventions will fall. Their aim is to “restore trust to citizens”, support businesses and revive consumer demand. The figures announced by Barroso are higher than those previously announced: a total of 200 billion euros, in other words 1.5% of the gross domestic product of the 27 member states. Of these funds, 170 billion comprise the commitments of individual States, while 30 billion will come from the EU budget and the European Investment Bank. The head of the Executive spoke of “an unprecedented response to an unprecedented crisis”, inviting member countries “rapidly to apply the EU plan”. The Commission further considers that the measures adopted at the national level must respond to the specific needs of States and therefore “need not be identical”. Maastricht “flexible”. European Commissioner Joaquin Almunia commented on the rules defined at Maastricht to maintain national accounts “virtuous” and explained that the Stability Pact “is not being put on hold”, but temporarily applied with “greater flexibility”. In other words, it will be possible to exceed the limit of 3% in the deficit/GDP relation, but only temporarily (namely for one year), by only a few decimal points, and by establishing with Brussels a plan for the return to the Maastricht parameters. On the other hand, Barroso himself made a point of underlining that “there’s no credible euro without a credible Stability Pact”. Again on the monetary level, the Commission has invited the European Central Bank in Frankfurt to reduce its interest rates, so as to make access to credit easier, and immediately obtained an expression of “willingness” on the part of ECB President Jean-Claude Trichet.The next stages. The Commission’s plan conforms to the guidelines announced on 29 October and to the policy lines decided at the EU level during the European Council in mid-October, the meeting of Ecofin in early November and the G20 summit in Washington on 15 November. The measures identified should now pass to the scrutiny of the EU’s financial ministers, who will meet on 2 December, before obtaining final approval by the Council of heads of state and of government on 11-12 December. In describing the Commission’s strategy, Barroso and Almunia maintained that what they were proposing was a “concrete plan of action”, “on a huge scale”, with a series of measures aimed at “promoting business, research and innovation, also in the automobile and building sectors”, which are held to be those most at risk at the present time. “The recovery plan is aimed – again according to the Executive – at reviving the efforts made to tackle climate change, while creating the indispensable jobs at the same time, for example through investments in energy-efficient buildings and technologies”. “This exceptional period requires exceptional measures – insisted Barroso -. The jobs and well-being of our citizens are at stake”.“If we don’t intervene now…”. Good intentions are not lacking: what’s now needed is to ensure they be put into practice with determination and without creating budgetary imbalances. The possible measures indicated by the Commission include the reduction of interest rates, lower tax burdens on lower incomes, reduction of tax on consumer goods, investments in “clean” technologies (for example less polluting cars), infrastructures, and the development of broad band. Barroso then tried to deflect possible criticisms of the plan by those sectors of public opinion hostile to “State aid” and the massive intervention of governments and the EU in the economy. “This financial support is needed now”, but it is also “targeted and temporary” and “will help revive our economy in the context of the Stability and Growth Pact”. “If Europe implements this plan with determination, we will be able to resume the path of growth and repay State loans in the short term. If we fail to intervene now, on the other hand, a vicious recessive circle could be triggered with the reduction of purchasing power and fiscal revenue, the growth of unemployment and further deterioration of budget deficits”.