EU: Stop recession, spend more

Brussels, Belgium - The European Commission wants EU governments to jointly combat the growing economic slowdown with a wide range of measures "big enough and bold enough" _ costing about 130 billion ($166.54 billion) _ to boost growth and confidence among consumers and businesses.

In a two-year European Economic Recovery Plan, to be made public later Wednesday, it calls on the 27 EU governments to spend billions of euros to halt the accelerating economic slowdown that has pushed some European nations into recession.

"Only through a significant stimulus package can Europe counter the expected downward trend in demand," said the Commission report, a copy of which was obtained by The Associated Press.

The measures would cost about €130, although the figure is only a preliminary estimate, EU officials said.

It said that just as in recent weeks when EU governments acted jointly to shore up credit and restore some market confidence, they should act together again on fiscal measures.

"Now EU member states should again take advantage of the strengths of the EU: effective coordination (and) the benefits of scale offered by the euro and the largest single market in the world."

The economic stimulus report comes a day after the Paris-based Organization for Economic Cooperation and Development said the financial crisis will likely push the world's developed countries into their worst recession since the early 1980s.

The Paris-based OECD said economic output will likely shrink by 0.4 percent in 2009 for the 30 market democracies that make up its membership, against the 1.4%n growth prediction for 2008.

The European Commission echoed the OECD conclusion that now is the time for significant fiscal rescue measures - including tax cuts - provided they were timely, targeted, temporary and coordinated.

On November 14, the zone of 15 EU nations that share the euro as their currency officially entered a recession, recording a 0.2% drop in economic output for two successive quarters.

While the need for drastic measures has not escaped EU governments, significant differences between them have emerged in recent days.

On Monday, German Chancellor Angela Merkel and French President Nicolas Sarkozy rejected a coordinated cut in value-added taxes as Britain announced it was cutting its own to 15% from 17.5%. British Chancellor of the Exchequer Alistair Darling also announced tax increases for the wealthiest Britons.

In Paris, Merkel and Sarkozy suggested while lowering VAT taxes might be "the answer for some countries" they would not opt for losing government revenue that way.

Merkel said she was gauging the effect of a recently announced €32bn German economic rescue plan before deciding on new steps.

- AP