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FACTBOX - Europe’s fiscal stimulus plans to tackle crisis

  European leaders are due to plan their next moves to bring economies back from a precipice in a two-day summit from Thursday.


The European Union summit in Brussels on December 11 and 12 will study European Commission proposals to give the sagging world economy a sharp boost with a €200 billion ($257 billion) spending plan.


The European Commission approved on November 26 proposals for an EU-wide fiscal stimulus package worth €200 billion. The proposal amounted to 1.5’% of the bloc’s gross domestic product (GDP) and is to be made up of 1.2 percentage points of budget spending and 0.3 percentage point of EU funding. The plan includes €5 billion of extra funding for the European car sector. It also includes a temporary, across-the-board value-added tax (VAT) cut.


Here are some details of how European member states will spend that money:


*France has unveiled a €26 billion stimulus package -- equivalent to 1.3’% of gross domestic product.

*The French economy minister said the plan should create 80,000-110,000 new jobs, making up for the expected disappearance of some 90,000 jobs next year due to the crisis.

*The stimulus plan earmarks €10.5 billion for infrastructure, research and support for local authorities. This includes €4 billion for investment for state-owned rail, energy and postal companies, including a pledge to speed up projects such as a fast train link in western France.


*Germany’s lower house of parliament passed a package of measures worth €31 billion last week, which will generate €50 billion of investment and new contracts over two years.

*A new lending program of up to €15 billion will be introduced for German state-owned development bank Kreditanstalt fuer Wiederaufbau (KfW) to strengthen its lending activities. KfW’s infrastructure program for structurally weak local authorities will be raised by €3 billion.

*Urgent investment in transport will be accelerated via a new program totaling €1 billion in both 2009 and 2010.

*Parliament approved a rise in government net new borrowing in 2009 to €18.5 billion from 10.5 billion.


*Hungary has announced plans for a HUF 1.4 trillion ($6.8 billion), two-year stimulus package to kick-start economic growth. The package does not involve new spending but a regrouping of existing funds to assist businesses.

*HUF 680 billion will be allocated to provide lending guarantees primarily to SMEs and HUF 260 billion will provide liquidity for lending.


*Italy late last month approved a stimulus package to help families and firms hit by the global financial crisis. Prime Minister Silvio Berlusconi said the measures amounted to €80 billion, but economists pointed out the vast majority was a recycling of existing funds.

*The measures included a temporary freeze on regulated energy prices and road tolls, €2.4 billion in tax breaks for poorer families and some marginal easing of the direct and indirect tax burden for companies.


*The government has announced a “liquidity impulse” of about €6 billion, including allowing companies to write down investments earlier than usual.

*Companies will also receive temporary financial support from an unemployment fund to pay employees who will cut their working hours.


*In the last six months, Spain has announced various measures to cushion the impact of the economic slowdown and soaring unemployment including a €38 billion fiscal stimulus package.

*The package includes €6 billion in tax cuts and €4 billion of liquidity to credit-strapped companies and households.  - The government said last week it will spend an extra €11 billion on public works and other stimulus measures to create 300,000 jobs next year. The plan, equivalent to roughly 1’% of Spanish GDP, includes €800 million in aid for the auto sector.


*Swedish Finance Minister Anders Borg said last week the government was planning stimulus measures of less than SEK 15 billion ($1.8 billion) to help cushion the blow of a withering financial crisis.


*The government announced an economic stimulus package worth CHF 890 million ($735 million). It includes government spending of CHF 340 million on flood defense, natural disasters and energy-efficiency projects.

*Spending plans also include up to CHF 1 billion on roads and railways and CHF 550 million as tax breaks to 650 firms for job creation programs.


*Britain announced on November 24 that it would pump £20 billion into the economy which includes tax cuts and £3 billion of capital spending.

*The plan includes a value-added tax or VAT reduction to 15’% from 17.5’%, effective from December 1 until the end of 2009. The plan also extended a system of tax repayments to help businesses which were previously profitable but now making losses. Losses of up to £50,000 could be offset against profits made in the past three years -- benefiting 75,000 businesses. It also included an exemption for companies’ foreign dividends from tax in 2009. (Reuters)