The European Commission (EC) unveiled on Wednesday a significant economic stimulus package worth 200 billion euros (US$260 billion) in a bid to steer the European Union (EU) economy from a deep recession.

"Only through a significant stimulus package can Europe counter the expected downward trend in demand," the Commission said.

The sum amounts to 1.5 percent of the EU's gross domestic product (GDP), with 1.2 percent coming from EU governments and the rest from EU funding, which was higher than the 130 billion euros (US$169 billion) previously suggested by the Commission.

"Exceptional times call for exceptional measures. The jobs and well-being of our citizens are at stake. Europe needs to extend to the real economy its unprecedented coordination over financial markets," said Commission President Jose Manuel Barroso.

He called the recovery plan "big and bold, yet strategic and sustainable."

Barroso said 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.

"Every member state is called upon to take major measures good for its own citizens and good for the rest of Europe," the Commission said.

The package includes extensive action at the national and EU level to help households and industry and concentrate support on the most vulnerable. It also puts forward concrete steps to promote entrepreneurship, research and innovation, including in the auto and construction industries.

Member states will be encouraged to increase spending with a priority on the preservation and creation of jobs while accelerating the transition toward a knowledge-based and low-carbon economy. Education and training, infrastructure, energy efficiency, and clean cars were singled out as top areas for EU and national investments.

EU countries were also given a free hand in reducing taxes to support consumption. The package makes a number of suggestions for tax cuts, including reduced social charges on lower incomes to promote the employability of less skilled workers.

The British government announced Monday that it would cut the country's value-added tax (VAT) on consumer goods from 17.5 percent to 15 percent until the end of 2009. Germany and France, however, have said they were not ready to follow.

The Commission said it was up to member states to decide on the measures or mix of measures they wish to implement in line with their particular situations.

Meanwhile, the Commission emphasized that the measures should be timely, temporary, targeted and coordinated and be conducted within EU fiscal rules.

The EU's stability and growth pact requires member states to keep their budgetary deficit below 3 percent of their national GDP. Higher spending and lower taxes, however, are stepping up pressure on EU governments to control their deficits.

Hours before the Commission unveiled its EU-wide stimulus package, leaders from Germany and France made an untied call for a relaxation of EU rules.

"We are experiencing the worst financial crisis in the last 70 years," French President Nicolas Sarkozy and German Chancellor Angela Merkel wrote in a joint newspaper column for Germany's Frankfurter Allgemeine Zeitung and the French daily Le Figaro on Wednesday.

And given the "exceptional times," countries should not be punished for exceeding the pact's tough fiscal rules, which limit budget deficits to three percent of their GDP, the two leaders said.

EU Economic and Monetary Affairs Commissioner Joaquin Almunia, speaking at the same press conference as Barroso, said the Commission has no intention to change the rules since there is enough flexibility for member states.

The EU's stability and growth pact allows temporary breaches of the 3-percent ceiling under exceptional circumstances.

The Commission also urged member states to combine their short-term stimulus measures with long-term objectives.

The fiscal stimulus is complemented by proposals to speed up structural reforms, in particular by those who most need to act in order to make their economies more competitive and ensure medium-term budgetary continuity.

The Commission said the priority was to treat the symptoms of the economic crisis and protect jobs and purchasing power in the short term. That's while also investing in Europe's long-term economic health.

The package also aims to boost efforts to tackle climate change while simultaneously creating much-needed jobs through, for example, strategic investments in energy-efficient buildings and technologies.

Barroso said he hoped EU leaders could endorse the package at their summit next month.

(Xinhua News Agency November 27, 2008)