EU should launch two-yr budgetary stimulus campaign to face crisis

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BRUSSELS, Nov 26 (AFP): EU governments should launch a "significant" two-year stimulus campaign to jolt their embattled economies out of recession, according to draft proposals the European Commission is to unveil today.
"Only through a significant stimulus package can Europe counter the expected downward trend in demand, with its negative knock-on effects on investments and employment," said the draft document.
"Therefore, the commission proposes that member states agree a coordinated budgetary stimulus package which should be timely, targeted and temporary, to be implemented immediately," it said.
The draft proposals did not say how much the stimulus package could be worth, but commission chief Jose Manuel Barroso has said it should be at least one percent of EU output, which would amount to about 130 billion euros (170 billion dollars).
"One per cent is a level which would allow us to react" to the crisis, the chairman of the Eurogroup of finance ministers Jean-Claude Juncker told a news conference in Luxembourg, where he is also premier.
The European Union's executive arm recommended in particular hiking public spending, which it said would have a stronger impact on the economy in the shorter term than cutting taxes.
However, it said that cutting taxes on goods and services, as Britain proposed to do Monday, could provide a quick boost to flagging consumer demand.
It also recommended lower labour taxes for low-wage earners as a way to protect the most vulnerable parts of society and state guarantees and soft loans to help boost credit conditions.