Special Report:Global Financial Crisis
BRUSSELS, Dec. 1 (Xinhua) -- Finance ministers from the eurozone countries agreed on Monday to coordinate their national fiscal stimulus measures to battle the first recession in their combined economy.
"We all agree that monetary policy can not provide an adequate response to the crisis so we need to provide a strong fiscal response," Luxembourg Prime Minister Jean-Claude Juncker told reporters after chairing a monthly eurogroup meeting of eurozone finance ministers in Brussels.
"We think the measures we should take should be temporary, timely and coordinated," he added.
Juncker said the eurozone finance ministers all backed the stimulus package proposed by the European Commission last week in general.
"We all considered that in general the commission proposals are in the right direction," he said. "All national plans so far comply with the qualitative aspects put forward by the commission. We have assurance all future plans will comply with qualitative indications mentioned by the Commission."
As the combined economy of the 15 European Union (EU) nations that use the euro officially entered a recession in the third quarter, EU member states have committed billions of euros to shore up their individual economies, but all the stimulus plans were carried out at national levels.
In a bid to forge a coordinated EU response to the economic crisis, the commission unveiled on Wednesday a significant stimulus package worth 200 billion euros (252 billion U.S. dollars).
The sum amounts to 1.5 percent of the EU's gross domestic product (GDP), with 1.2 percent coming from national measures by EU governments and the rest from EU funding, which was higher than the 130 billion euros (164 billion dollars) previously suggested by the commission.
As European Commission President Jose Manuel Barroso put it, the plan does not mean EU countries should react in a uniform fashion, but provides a framework to coordinate national measures of different member states.
Under the plan, EU member states are encouraged to raise public spending, lower taxes and cut interest rates to boost their economies and those short-term measures should be taken in line with long-term structural reforms.
But the eurozone finance ministers did not specify how much they should spend.
Germany has been resisting a call for it to increase its spending to save the largest economy in the euro zone.
"Germany is taking on a total of 31 billion euros through two packages, that is, 1.25 percent of our GDP," said German Finance Minister Peer Steinbrueck. "That is apparently not being registered by many who are observing us. Furthermore, we are not obliged to copy what all other countries are doing."
While some EU member states including France and Spain were eager to see the EU loosen its budget deficit rules so as to let them spend more on fiscal stimulus measures, Dutch Finance Minister Wouter Bos insisted on strict application of the rules which require EU member states to keep their deficit under 3 percent of their national GDP.
More public spending and lower taxes, effective short-term measures to boost economy, usually push up budget deficit.
"These kinds of fiscal impulses should be temporary, timely, targeted and coordinated," said EU Economic and Monetary Affairs Commissioner Joaquin Almunia. "Temporary, because we need to preserve the credibility of our medium-term strategy to have consolidated public finances and to preserve the sustainability of our finances over the long term."
Juncker said no eurozone finance minister had asked for suspension of the EU budget rules, which also allow EU member states to temporarily breach the 3-percent ceiling to a limited extent in exceptional circumstances.
Almunia said temporary means any EU country should bring its budget deficit back to below 3 percent in a maximum period of one year and the deficit should be only a few decimals, not many, above the ceiling.
The eurozone finance ministers also ruled out the possibility of following the suit of Britain by reducing value-added tax (VAT)to boost their economies.
"The 15 member states of the euro area have declared they do not want to do anything about the standard rate of VAT," Juncker said. "The standard rate of VAT will not be reduced in the euro area."
Britain, which stays outside the euro zone, decided last Monday to cut VAT from 17.5 percent to 15 percent until the end of 2009 in an effort to accelerate sluggish consumption. The commission also suggested VAT cut in its EU-wide stimulus package.
The eurozone finance ministers will be joined by their counterparts from other EU countries on Tuesday to continue discussion of the commission's plan and try to find a coordinated response to the economic crisis.
