EU Planning Giant Stimulus Package

http://www.spiegel.de/international/europe/0,1518,591494,00.html

With European Union economies in freefall, the EU is planning a major stimulus package. A source has told SPIEGEL ONLINE that it will amount to a massive €130 billion. Germany, though, isn't likely to approve. With a number of European Union economies in freefall as a result of the global financial crisis, the EU is now planning an enormous stimulus package. A source familiar with efforts to develop the plan told SPIEGEL ONLINE that the European Commission under Commission President José Manuel Barroso is considering making the package worth up to 1 percent of the 27-member bloc's output. The Commission's plan calls for EU money to be pumped into the package. But to reach the targeted total of €130 billion, member-states will also have to cough up additional funds. According to the source, the European Commission would like to finalize the plan on Nov. 26 before the European Council considers the package on Dec. 10. Economic stimulus in the European Union has become necessary as a number of major economies in the bloc have either slid into recession or slowed drastically. Germany last Thursday announced a third quarter slide of 0.5 percent following 0.4 percent shrinkage in the second quarter. The British economy has likewise been suffering as has the French. The economy of the euro common currency zone -- made up of the 15 EU countries that use the euro -- officially entered recession last Friday. Nevertheless, the scale of the Commission's stimulus package idea is likely to meet with some skepticism in Berlin. So far, Chancellor Angela Merkel's government has been resistant to the idea of Europe-wide stimulus measures. Even Berlin's plan to boost the German economy was modest relative to those passed elsewhere. The European Commission, though, is not nearly as sanguine about the economy. Furthermore, the Commission's plan would counteract the risk that stimulus packages in individual EU countries could prove ineffectual. Given the inter-linked nature of the European economy, a tax cut in Germany aimed at improving consumption may not necessarily benefit German companies. Shoppers could just as easily use their newfound spending power on imported products. But were the EU as a whole to take steps, the chances of a noticeable economic improvement would be greater.