EU Summit Focuses on Economic Stimulus

19 March 2009

European Union leaders are in Brussels for a two-day meeting amid heavy pressure to pump more money into their economies to fight the global financial crisis. The Europeans will seek a united front two weeks before a key meeting of the top 20 world economies in London.

French President Nicolas Sarkozy, left, shares a word with German Chancellor Angela Merkel, center, and European Commission President Jose Manuel Barroso during an EU summit in Brussels, 19 March 2009
French President Nicolas Sarkozy, left, shares a word with German Chancellor Angela Merkel, center, and EC President Jose Manuel Barroso during EU summit in Brussels, 19 March 2009
The Brussels summit is the latest in a series of talks about how to tackle the economic downturn that has hard hit the 27-nation European Union, along with the rest of the world. At a meeting of top world finance ministers outside London last weekend, the United States and Europe sought to present a common stance in dealing with the most severe crisis in decades.

As British Chancellor Alistair Darling told reporters there, each country must feel free to establish their own policies.

"We are not, in anything we said today, prescribing what individual countries have to do," Darling said. "They have to make their own choice and it follows from that, of course, that central banks in different countries have different objectives, different terms of reference. And we would not seek to disturb that."

But behind the talk of unity, there is strong pressure from the United States, in particular, for Europeans to do more. The EU is spending about 3.3 percent of its gross domestic product on economic stimulus measures. But critics like American Nobel economics laureate Paul Krugman say that is not enough.

Krugman, who was visiting Brussels this week, also faults the deficit cap, known as the stability pact, for EU members using the euro currency.

"These are unusual times," Krugman said. "These are times when virtue is vice and prudence is folly. This is a time when deficits are what we need, not a problem. The stability pact is way off. Think of the United States, I think the U.S. is doing the right thing, maybe not even enough of it, and we are looking for a deficit of 12 to 13 percent of GDP. That is the right thing to do. The stability pact really needs to be put on ice for now."

Ordinary Europeans are also critical of their government's economic recovery plans. That was evident Thursday in France, when hundreds of thousands of French took to the streets in protest.

But a number of European countries, including France and Germany, say they have spent enough, for now.

The EU summit will also be dominated over divisions about how to spend $7 billion in infrastructure projects, and how much money should be made available for eastern European members of the bloc, which have been among those worst hit by the financial crisis.