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javno100 BRUSSELS
JANUARY 20 2009 11:20h
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Some other ministers commented publicly to reporters on the need to avoid digging ever-deeper into debt.
The European Union is striving to mobilise 200 billion euros ($260 billion) of public cash to blunt recession, way short of the $800-billion-plus being prepared by Barack Obama, whose inauguration as U.S. president comes later in the day.
As he prepared to chair talks with colleagues from the 27 EU countries in Brussels, Czech Finance Minister Miroslav Kalousek said ministers needed to demonstrate that they still had an eye on the longer-term goal of balanced state finances.
"Public aid must be transparent and we must voice a pledge to go back to consolidating public deficits as soon as possible," Kalousek, whose country has just assumed the rotating EU presidency, said as he entered the so-called Ecofin talks.
"The Ecofin must send a signal that public deficits must be consolidated as soon as possible."
Whether he or any others would insist on the need to publish some form of joint declaration to that effect remained unclear, however, according to one official.
That official, speaking on condition of anonymity, said all ministers agreed on the need for fiscal consolidation but felt setting timetables for spending cutbacks was not feasible right now because no one knew how long the recession would last.
Overnight, several ministers from EU countries that use the euro nonetheless voiced their commitment to limiting the extent to which they ran up new debts in public spending programmes meant to limit the damage of the downturn.
Jean-Claude Juncker, who had chaired talks among euro zone finance ministers on Monday, said the buildup of more government debts was a worry for all, the United States first and foremost.
"The Americans must take great care that they do not get too much in debt," Juncker said. "That is my biggest concern, along with others in Europe," he told German radio Deutschlandfunk on Tuesday, hours before Obama's inauguration ceremony.
He said it was important that the United States did not sink into protectionism and it would be wrong if the U.S. government gave long-term aid to its auto industry without similar moves in Europe, where France is leading a push for aid to carmakers.
WAR ON DEBT
Some other ministers commented publicly to reporters on the need to avoid digging ever-deeper into debt.
They had to do so perhaps, after warnings from credit rating agencies about the debts of Greece, Spain, Ireland and Portugal.
After the euro zone meeting on Monday, Juncker told a news conference that governments were aware of the concerns those ratings announcements had sparked in bond markets and that they were watching the situation closely.
European Economic Affairs Commissioner Joaquin Almunia told the same news conference the markets and credit rating agencies would take a more positive view of the situation had they been at the ministers' talks and heard the extent of the commitment to stable public finances in the medium and longer term.
The euro lost ground to the dollar on Monday after Spain, following Greece, became the second euro zone country in a week to see its credit rating cut by agency Standard & Poor's, stoking fears of more downgrades.
The cut in Spain's rating to "AA+" from "AAA", a level Spain had held since late 2004, sent the euro to a session low against the dollar as investor attention turned to the risk of Portugal and Ireland suffering the same fate after S&P warnings too.
HARD TIMES
Tuesday's talks came a day after the European Commission forecast the 16-country euro zone's first full recession this year since its establishment 10 years ago.
Germany, after initial hesitation, has announced additional government plans to spend 50 billion euros this year and next in an attempt to boost demand and limit recession. France has unveiled plans for 26 billion euros in stimulus.
The European Commission, the European Union's executive arm, is urging the 27-nation EU as a whole to come up with 200 billion euros, or 1.5 percent of gross domestic product, a goal Juncker said they were on line to meet.
The Commission said it expected gross domestic product in the euro zone to fall 1.9 percent in 2009, and grow by only 0.4 percent in 2010, after an expansion of 0.9 percent for 2008.
It forecast that 11 euro zone countries would be in recession in 2009, against two in 2008.
It also predicted what amounts to a rise of 25 percent or so in unemployment over this year and next, or a jobless rate of 10.2 percent, compared to 7.8 percent in November 2008, the last date for which official data are available.
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