EU finance ministers wrestle with recession
European Union finance ministers Tuesday gave
British plans to insure toxic assets a lukewarm reception at talks in Brussels designed to organize a collective response to the bloc's recession and
malfunctioning credit markets, dpa reported.
"(British Chancellor Alistair) Darling briefed us about the contents of this package, which has lots of interesting ideas," said Czech Finance Minister Miroslav Kalousek, who chaired the meeting as holder of the EU presidency.
But responding to the credit crisis "in a coordinated fashion does not mean that all countries will choose the same instruments," he said.
The centrepiece of Darling's plan, launched soon after Royal Bank of Scotland (RBS) announced possibly the biggest losses in British corporate history, involves a massive insurance scheme to protect banks from so-called toxic assets.
By capping banks' potential losses, the government hopes to encourage them to restart lending to businesses and consumers.
But Kalousek said one of the main difficulties involved in assessing the plan was that it would likely "take time for such instruments to take effect".
German Finance Minister Peer Steinbrueck also expressed "scepticism" at the plan, which Britain has hailed as a model for Europe.
But it elicited a more favourable response from European Economic and Monetary Affairs Commissioner Joaquin Almunia.
"The measures announced by the UK government are very interesting. There are aspects that deserve further and immediate discussions," he said, adding that the European Commission would soon be providing guidance to EU member states on how to dispose of bad assets.
There was, however, no disagreement on the fact that European financial markets have yet to fully recover from the global credit crisis, which reached its apex with the collapse of US investment giant Lehman Brothers in September.
"The situation now is clearly better than two or three months ago. But we all agree that the functioning of credit flows is not adequate. This is a matter of priority," Almunia said.
As Steinbrueck said prior to Tuesday's talks, "clearly, the necessary trust has not been restored."
Shortage of credit is one of the underlying causes of the deep and prolonged recession which Europe faces this year.
On Monday, the European Commission issued fresh economic forecasts predicting a 1.8 per cent drop in the EU's gross domestic product (GDP) in 2009. GDP in the 16-member eurozone, which excludes many fast-growing countries from Eastern Europe, is set to shrink by 1.9 per cent.
Discussions in Brussels focussed on the implementation of the various economic recovery plans that have so far been put together by national governments.
Officials in Brussels say 18 such plans, totalling some 190 billion euros (250 billion dollars) over the next two years, have so far been submitted to the European Commission.
By far the biggest stimulus package - 82 billion euros spread over 2009-10 - belongs to Germany, the bloc's largest economy.
At their meeting, ministers agreed on the need to accompany such temporary measures with structural reforms designed to improve Europe's long-term competitiveness.
Furthermore, ministers vowed to stick to the EU's strict competition and state aid rules.
And while acknowledging that their budget deficits would likely breach EU rules as a result of increased public sector spending during the downturn, ministers said they remained "fully committed to sound and sustainable public finances."
Spain and Greece have already had their credit ratings cut over the worrying state of their public finances, with experts predicting Portugal and Ireland may soon suffer similar downgradings.
Finally, ministers formalized a 3.1 billion-euro (4.1 billion- dollar) loan to Latvia designed to help the Baltic country cope with the global credit crunch.
The EU loan, which had already been approved in principle by EU governments, is part of a 7.5 billion-euro balance of payments support package which includes assistance from the International Monetary Fund, the World Bank and individual countries such as Denmark, Norway and the Czech Republic.