Main focus of Wednesday, November 26, 2008

Together against the crisis

EU Commission President José Manuel Barroso has presented a European economic plan. In it he recommends that national packages should lower taxes and raise state expenditures. The European press anticipates reactions to the plan.

Trouw - Netherlands

Strong incentives are what is needed to combat the downturn, writes the Dutch daily Trouw, but adds that such a plan also entails risks: "For when a government starts using money to boost the economy public debt increases. And it is the European Commission that has the task of ensuring that countries adhere to the Stability Pact for the euro. ... Many countries will quickly transgress that limit next year. That's why flexibility is now the magic word in Brussels. ... In practice the member states will be given enough time to rebalance their deficits. This plan could work out well if the recession doesn't go on for too long. If the economy starts growing again in a year's time, the deficits can be reduced. But if the measures are not very effective the problems will accumulate. Then the member states will pay the penalty for their high deficits for years to come." (26/11/2008)

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Világgazdaság - Hungary

The business paper Világgazdaság writes: "There is no talk whatsoever of setting up a 'European fund'. Instead, the target of 130 billion euros represents the sum of the measures being taken in all the individual member states to counter the crisis. ... What is striking about this is the fine balance between the possibilities and instruments the community has at its disposal and those the individual EU members have at theirs. ... As we are all aware, the weak point in the EU's economic policy is that plans that are worked out on an EU level can ultimately only be implemented on a national level - with varying results. The current package reflects another attempt by the EU Commission to make the most of its restricted room for manoeuvre. ... But psychology also plays a role: The goal here is to somehow reverse the negative spiral in which the global economy is caught today. And it sometimes takes sensational announcements to achieve this." (26/11/2008)

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La Repubblica - Italy

The Italian daily La Repubblica has little hope that the rescue package will be successful. "The Brussels plan has not provided us with a magic formula for mastering the crisis. It simply stipulates that each country spend one percent of its gross domestic product on dealing with the crisis and names several possibilities for how the money should be spent, such as tax cuts, investments in infrastructure and increasing public spending. Officially ... each state has been given a free hand to deal with the crisis according to its particular circumstances. But in reality the suspension of the Maastricht Stability Pact rules and the total freedom governments have been given to act as they see fit regarding the level of their budget deficit is merely a thinly concealed 'it's every man for himself' manoeuvre." (26/11/2008)

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Süddeutsche Zeitung - Germany

The Süddeutsche Zeitung writes that Barroso's package will meet with little approval: "Even before Barroso has officially presented his plan all the countries of the EU are doing exactly what they judge best, regardless of the European programme. Many countries including Germany, France and the UK brought out their own national economic packages long ago, effectively rendering obsolete Barroso's proclaimed wish of coordinating national economic aid from Brussels. This is a bitter defeat for the Commission President, and yet this already difficult situation could take a drastic turn for the worse if Barroso really does recommend what his financial advisors have written into the package: a massive reduction in taxes. This proposal is cavalier in the extreme. ... There is no proof that in times of crisis lower taxes stimulate consumers to buy more. The only sure thing is that the state will earn less money." (26/11/2008)

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Evenimentul Zilei - Romania

The daily Evenimentul Zilei writes: "The level of enthusiasm varies. ... Germany is already in the midst of a recession and could argue that different countries are in different situations at the moment. ... The EU Commission, on the other hand, wants to boost consumption and has recommended cutting VAT on certain products. The UK has already announced a tax cut (and at the same time an income tax increase of up to 45 percent for the wealthy). The other major economies of the EU don't want to follow suit. France has pointed out that prices are already falling so that there's no need to cut VAT. Germany recently increased VAT to balance its budget. Budget stability was one of the prerequisites Berlin insisted on when the euro was introduced. But if you want the economy to start growing again you have to change the rules." (26/11/2008)

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