The European Recovery Plan and EPHA contribution

On 26 November 2008, the Commission published details of its proposed recovery plan to address the impacts of the current financial and economic crisis.

The plan states that EU countries should spend billions of euros to kick-start their economies, saying it would tolerate higher budget deficits under strict conditions and for a limited period of time. The plan proposes a fiscal stimulus of around 1.5% of EU GDP, or €200 billion, higher than the €130 billion that had been floated earlier. Most of the money will be drawn from national budgets, with EU countries asked to contribute €170 billion or 1.2% of the EU’s GDP. The rest - around €30 billion or 0.3% of GDP - would come from the EU’s own budget and the European Investment Bank (EIB).

EU countries are invited to draw from a "toolbox" that includes measures already adopted by some governments. Some countries have already announced fiscal stimulus plans, including Germany and the UK, that will be taken into account in the EU plan, he added. Measures listed in the EU’s ’toolbox’ include:

Increased support for the unemployed and the poorest households, which have been hit hardest by the economic slowdown;

Funding large infrastructure projects such as energy networks and broadband internet;

Temporary VAT cuts across the whole economy, similar to the one adopted in the UK, and;

Lowering taxes on labour, in particular VAT on ’labour-intensive’ sectors such as hairdressers and restaurants, a proposal which has been on the table for some time.

The objective is to drive a coordinated EU response to the economic crisis, that builds on the unprecedented level of coordination shown in response to the financial market crisis. The priority is to treat the symptoms of the economic crisis and protect jobs and purchasing power in the short-term while also investing in Europe’s long-term economic health and in boosting the fight against climate change.

Background

Meeting in Brussels on 7 November, the Heads of State and Governments of the EU Member States recognised the need to "look beyond the financial crisis" and stressed the importance of taking measures to address the worsening economic situation.

The European Commission was mandated to submit proposals in that direction ahead of the next EU summit on 11-12 December.

On 14 November, the countries of the 15-member euro zone officially entered a recession, recording a 0.2% decline in Gross Domestic Product (GDP) for the second quarter in a row

EPHA action

EPHA participated in the Social Platform contribution to the Recovery Plan. This call puts forward concrete actions that the EU can take to mitigate the impact of the crisis on vulnerable people.

On October 15, the Social Platform issued a press release outlining three proposals to address the human impact of the financial crisis:

Tighten financial regulation;
Guarantee that public money is used properly;
Sign a social progress declaration.

In its response, the EU Social Affairs Commissioner stated that he shares our view that measures to address the financial crisis cannot be taken at the expense of social policy and the more vulnerable sectors of our population. However, he did indicate that access to credit at a reasonable interest rate for those poorer families would be difficult to guarantee, given that subprimes are perceived as a root cause of the current crisis.