EU planning €200 billion stimulus

The European Commission today called upon member countries to pool their resources for a €200 billion (£170 billion) rescue plan for the 27-member European Union, which is caught in the spiral of a financial and economic crisis.

The EC move follows a new economic stimulus plan announced by the UK that aims to fund the a rescue effort through massive borrowings.

At €200 billion (£170 billion), the new fiscal stimulus package will be worth around 1.5 per cent of Europe's gross domestic product (GDP). The figure has been agreed to by the European Commission after weeks of negotiations with the 27-member states.

Under the plan, EU countries will be contributing 1.2 per cent of GDP while the remaining 0.3 per cent will be found from EU sources such as the European Investment Bank.

EU countries would also be given freedom to increase their budget deficit beyond 3 per cent to provide the fiscal stimulus, Joachim Almunia, the EU economic commissioner, said.

Announcing the EU recovery plan, European Commission president Jose Manuel Barroso said: "I think I can say that our plan is big and bold while remaining strategic and sustainable.''

But, he said, "It is necessary to act in a co-ordinated fashion but that does not mean a uniform fashion, so the measures that member states are taking should not be identical but they should be coordinated."

The stimulus plan would also look for investments in key industries to spur economic growth, he said.

The European Investment Bank would make €15.6 billion available for investment in ecological technologies, Barroso said, adding, the investment in ecology would be increased depending on the response to the stimulus.

"We know that the situation is serious but it is not with pessimism that we will solve the problem. But we have a duty to show that we can solve the problem if we act in a coordinated manner," he said.