European Union leaders rejected US pressure to inject more cash into their economies to combat the global recession on Thursday, despite a US pledge to pump more money into its own recovery effort. The 27-nation blocs leaders were likely instead to propose boosting the International Monetary Funds firepower to tackle the crisis during a two-day summit at which they hoped to agree their stance before the G20 leading economies meet on April 2.
"We are doing enough," Czech Prime Minister Mirek Topolanek, whose country holds the EU presidency, told reporters. "Some of us have not quite yet implemented our national recovery plans, so we dont know their impact. It does not make sense to introduce new packages." The US central bank on Wednesday vowed to pump an extra $1 trillion into the US economy to battle the recession and Washington has led calls for Europe to top up stimulus packages that have failed to reverse the downturn.
But the EU is struggling to agree the details of existing plans to revive the economy through infrastructure projects, and are mostly are putting faith in generous welfare states. Some leaders fear social unrest - French President Nicolas Sarkozy was attending the summit on a day of mass protests over his handling of a crisis which could push Europes unemployment rate towards 10 percent this year
Others are wary of piling up huge deficits that could exacerbate problems. "That is also knocking on the door of higher interest rates, taking higher taxes to be able to cover these deficits. So theres no easy solution to this," said Swedish Prime Minister Fredrik Reinfeldt.
Chancellor Angela Merkel said Germany would oppose Europe-wide projects that did not focus on immediate needs - a reference to an existing, modest plan to spend 5 billion euros ($6.75 billion) of EU money on infrastructure projects. "It is not time to look at more growth measures. I disagree with this idea completely. The existing measures must work, they must be allowed to develop," she told the Bundestag lower house of parliament before heading to Brussels.
The EU wants to present a united position at the Group of 20 meeting in London next month at which leading and emerging economic powers aim to show they have a plan to put the world economy back on track. Britain is sympathetic to US calls for more effort, but will underline the need for tighter financial supervision.
This is echoed by France, Germany and others who say the credit crunch stems from the United States. A likely outcome is a joint EU call for a doubling of IMF funds to $500 billion, a pledge for a European contribution of up to $100 billion and a demand for IMF reform designed to bring countries such as China more on board.
Draft summit conclusions showed leaders would be ready to bail out some EU member states - notably the poorer former communist newcomers - on a case-by-case basis. They would also be ready to consider topping up a 25 billion euro emergency fund already used to help Hungary and Latvia.
The drafts omit any reference to new fiscal stimulus, putting the onus on implementing existing recovery schemes based on measures ranging from tax cuts to infrastructure spending, and allowing welfare payments to kick in. The EU puts the size of its effort to combat recession at anything between 3.3 and 4 percent of its output, including welfare spending.
President Barack Obama plans to devote 5.5 percent of US output to recovery efforts. "You cannot compare the EU to the US," said Dutch Prime Minister Jan Peter Balkenende. "We have very sound security networks where people who lose their jobs are looked after. The US has enormous debts."
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