22nd Feb 2020

EU set for bruising G20 encounter with US

  • Eurozone ministers are against speeding up the rules for joining the single currency (Photo: European Community)

A new policy divide appears to be opening up between the EU and the US over the extent stimulus spending programmes should be used to combat the current global recession.

Speaking late on Monday evening following a three hour meeting of eurozone finance ministers, the group's president, Jean-Claude Juncker, signalled that the recent US call for a global spending boost in 2009 was in direct contrast to what eurozone finance ministers considered appropriate.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or join as a group

"The 16 euro area ministers agreed that recent American appeals insisting that the Europeans make an additional budgetary effort to combat the effects of the crisis was not to our liking," said Mr Juncker, evincing European government concerns that rising public debt is fuelling market concern over a possible sovereign default.

"We would not want to give the impression that we were considering implementing further recovery packages. Europe and the eurogroup have done what they needed to do."

Instead, member states intend to take a wait-and-see approach in 2009 before possibly embarking on further spending programmes in 2010 if necessary.

Mr Juncker's comments come a day after Barack Obama's top economic advisor, Larry Summers, told the Financial Times that the correct response to fight the recession was a co-ordinated global spending initiative.

"There's no place that should be reducing its contribution to global demand right now," he said. "The right macro-economic focus for the G20 is on global demand and the world needs more global demand."

The striking divergence between governments either side of the Atlantic is likely to mean heated debate when the two sides meet on 14 March for a meeting of G20 finance ministers and on 2 April at the G20 leaders summit.

The gloom continues

Both Mr Juncker and economy commissioner Joaquin Almunia, who also attended the euro group meeting, were pessimistic about the immediate economic forecast.

"There is no obvious indication that gives us any reason to believe that the situation is turning around," said Mr Juncker. "All the forecasts that we have available are extremely gloomy so this is a deep recession that we are going through."

For his part, Mr Almunia said that external demand from the United States and Japan had weakened considerably, meaning any recovery will take longer than previously anticipated.

Initial estimates provided by Eurostat last week indicate a fall in GDP for the euro area of 1.5 percent in the last quarter of 2008 compared to the preceding quarter, brought on by falling world trade volumes and a decline in domestic demand.

Euro group offers little prospect of accelerated entry

Despite the lack of good news coming from the eurozone these days, a number of central and eastern EU states, whose currencies have been buffeted by the economic downturn, have made calls in recent weeks for accelerated access to the monetary union.

But euro group finance ministers signalled their unwillingness to bend current accession stipulations that include a budget deficit below three per cent of national GDP and a stable currency exchange rate relative to the euro for two years prior to accession.

"There is no question of reducing the rules for joining nor is there any question of reducing ERM-II from two years to one year," said Mr Juncker.

Romania is keen to join the euro area in 2014 but the extent of the state's financial difficulties were made apparent on Monday when the IMF announced representatives would fly to Bucharest in the coming days to discuss a possible joint funding package together with the EU.

"Once we have received the letter from the Romanian authorities asking us to negotiate the use of the balance of payments facility we will start these conversations together with the IMF," said Mr Almunia after the eurogroup meeting.

He added that any talks with the new Latvian government to renegotiate the terms of its EU/IMF loan would result in "difficult negotiations".

No breakthrough at EU budget summit

EU leaders failed to reach agreement on the EU's long-term budget, as richer states and poorer 'cohesion countries' locked horns. The impasse continues over how to fund the Brexit gap.

EU leaders struggling to break budget deadlock

Cuts to innovation, space, neighbourhood and other programme-spending push down the latest budget proposal on the table of EU leaders. Rebates could stay on, to win the support of the net-payers for a deal.

Unhappy EU leaders begin budget haggle

EU leaders arriving at the Brussels summit criticised the budget proposal of EU Council president Charles Michel, as richer member states insisted holding onto their rebates, while poorer countries wanted to avoid deep cuts to their subsidies.

News in Brief

  1. Bulgarian PM investigated over 'money laundering'
  2. Greenpeace breaks into French nuclear plant
  3. Germany increases police presence after shootings
  4. NGO: US and EU 'watering-down' tax reform prior to G20
  5. Iran: parliamentary elections, conservatives likely to win
  6. Belgian CEOs raise alarm on political crisis
  7. Germans voice anger on rise of far-right terrorism
  8. EU leaders' budget summit drags on overnight

Vietnam sent champagne to MEPs ahead of trade vote

A trade deal with Vietnam sailed through the European Parliament's international trade committee and after its embassy sent MEPs bottles of Moet & Chandon Imperial champagne over Christmas.


Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Stakeholders' Highlights

  1. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  2. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  3. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  4. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  5. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  6. Nordic Council of MinistersNordic Climate Action Weeks in December

Latest News

  1. No breakthrough at EU budget summit
  2. EU leaders struggling to break budget deadlock
  3. German ex-commissioner Oettinger lands Orban job
  4. How big is Germany's far-right problem?
  5. Plastic and carbon proposals to help plug Brexit budget gap
  6. Sassoli repeats EU budget rejection warning
  7. Why Miroslav Lajčák is the wrong choice for EU envoy
  8. Unhappy EU leaders begin budget haggle

Join EUobserver

Support quality EU news

Join us