In These New Times

A new paradigm for a post-imperial world

Barroso defends EU’s handling of economic crisis

Posted by seumasach on March 11, 2009

Brown’s agenda is obviously floundering and its defeat should be clear at the G20

David Gow


11th March. 2009

The European commission president has hit back at US criticism that the EU is providing an inadequate economic stimulus for global recovery and accused the Obama administration of being averse to greater regulation of the financial sector.

José Manuel Barroso told a group of European journalists last night that the EU’s €200bn (£185bn) package was the most ambitious in European history and the bloc’s focus now was to implement it rather than adding more spending.

He insisted that the EU favoured a global accord on tougher regulation of the entire financial sector, including hedge funds and private equity, and handing greater powers of surveillance and supervision, including sanctions, to worldwide bodies such as the IMF and World Bank – but that others, including the US, were dilatory in their approach.

His comments come as mounting disagreements between the US and EU threaten to derail next month’s G20 summit in London unless they can be resolved at this weekend’s meeting of finance ministers and central bankers.

Europe is even finding it hard to talk to Washington as Barack Obama’s administration is incomplete, but the core of the dispute is Europe’s refusal to increase already overstretched government budgets. Barroso said some EU countries already faced deficits of up to 10% and needed to return to fiscal probity.

The commission president, who attends G20 and other international summits as spokesman for the entire EU, said Europe’s stimulus already amounted to 3.3% of GDP and, with “automatic stabilisers” such as welfare benefits for the unemployed, would be worth 4% by the end of 2010. The US package of $787bn (£570bn) is 5.6% of national output.

“We now have to concentrate on implementation of the package, which is huge by any standards, and we’ll see if more is required,” he said. “I simply believe that it’s not helpful for those who have a responsibility for decision-making to speculate every day about worst-case scenarios.”

Barroso, fighting to win a second five-year term later this year, clearly sided with the Germans and French in his comments by stressing that the US under Obama was playing catch-up with Europe and was only now beginning to invest in social spending, infrastructure and energy.

“We’re not in competition with our American friends and partners; we simply acknowledge there are differences of opinion,” he said. “The Americans are coming our way and [to] our ideas; it’s Europe that led the way out of the crisis under the French presidency last year and it was we who pressed for the first G20 summit last November in Washington.”

Barroso stressed that the EU was also leading the way in dealing with banks’ toxic assets and regulatory issues. “We’re not competing with our American partners but we’re not the ones delaying reflections on this important issue. We’ll do everything to reach a common position with them and others.”

He added: “We can’t ask countries seeking IMF help to increase spending at this stage… Globally, Europe is making a very big contribution to the solution of a problem that started in the US… We accept the principles of global governance but that’s not the case for all our partners.”

The EU wants changes to the governance of the IMF and World Bank to remove US dominance and give a stronger role to China and other emerging economies after what Barroso calls the “first synchronised crisis of globalisation”.

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