European Union leaders on Thursday insisted they were spending enough to dig out of the recession, with the EU presidency saying an additional stimulus package "is a deadly idea."
European Union leaders on Thursday insisted they were spending enough to dig out of the recession, with the EU presidency saying an additional stimulus package "is a deadly idea."
The comment from Czech Prime Minister Mirek Topolanek, who is hosting a two-day EU summit, came in the wake of the announcement Wednesday that the U.S. Federal Reserve will launch a bold $1.2 trillion effort to lower rates on mortgages and other consumer debt.
While that is aimed at increasing the amount of money in the economy, not the amount of government spending, it underlines the contrast between the European stance and a more aggressive U.S. approach.
European governments resisted a push for more spending from the U.S. at a summit of Group of 20 finance ministers last week, and Thursday's remarks underlined their position ahead of an April 2 summit of G-20 national leaders in London.
The EU has already agreed on euro200 billion ($270 billion) government spending package over two years, but labor and socialist leaders and even Nobel laureate Paul Krugman claim a lot more is needed to weather the storm.
German Chancellor Angela Merkel also remained at the forefront opposing any more deficit spending. "We have already made our contribution," she said.
Merkel and French President Nicolas Sarkozy warned in a joint letter of the dangers of spending too much, saying excessive public debt threatens global stability and countries must move swiftly to pay off debt when they can.
Germany is worried about being viewed as Europe's paymaster in an election year when politicians are trying to prove themselves prudent masters of the EU's largest economy.
EU officials say the priority should be implementing the plans that have already been agreed and setting out reforms to financial markets that could restore confidence and get banks lending again.
Instead, Martin Schulz, leader of the socialists in the European Parliament wants to raise subsidies across the EU to 4 percent of economic output. While some nations have met that target, most are still well below the mark.
So far, EU unemployment — 7.6 percent in January — has not risen as quickly as the U.S. because it is harder and more expensive for companies to shed staff. But business groups expect 4.5 million jobs to disappear this year — and many of these people may not find work again in Europe's rigid labor market.
The first day of the summit will center on a fight over euro5 billion ($6.8 billion) for new power grids and green energy and who should pay for the package. The European Commission wants to spend freely on project that will decrease the environmental burden on the continent.
The EU wants to be at the vanguard of U.N.-sponsored climate change talks in Copenhagen later this year but here too there is waffling.
Czech presidency officials said EU leaders were not expected to agree on specific aid figures they were willing to give poor nations in exchange for support of a global climate change pact.
The EU presidency said it would wait for the United States to present its climate change plans.
Environmental groups argue the EU is losing its credibility in fighting climate change by failing to agree on how much money it will give to developing countries. They say the EU should contribute around euro35 billion ($47 billion) a year by 2020 to poorer nations to help them cut emissions.
