On 26 November 2008, the

European Commission The European Commission (EC) is the primary Executive (government), executive arm of the European Union (EU). It operates as a cabinet government, with a number of European Commissioner, members of the Commission (directorial system, informall ...

proposed a European stimulus plan (also referred to as the European Economic Recovery Plan) amounting to 200 billion euros to cope with

Great Recession in Europe The European recession is part of the Great Recession that began in mid-2007. The crisis spread rapidly and affected much of the region, with several countries already in recession as of February 2009, and most others suffering marked economic s ...

and the

2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...

. It aimed at limiting the effects of the

Great Recession The Great Recession was a period of market decline in economies around the world that occurred from late 2007 to mid-2009.

through national economic policies, with measures extended over a period of two years.

Presentation of the plan

The

published a plan on 26 November 2008 responding to the current economic crisis in the 27 member countries of the Union. The plan combined short-term measures to stimulate demand and maintain jobs and longer-term measures to invest in strategic

sectors Sector may refer to: Places * Sector, West Virginia, U.S. Geometry * Circular sector, the portion of a disc enclosed by two radii and a circular arc * Hyperbolic sector, a region enclosed by two radii and a hyperbolic arc * Spherical sector, a ...

, including research and innovation. The aim was to promote growth and ensure sustainable prosperity.''Kick-starting the economy''
European Commission. Accessed 2009-03-21

2009-05-21. The plan included targeted and temporary measures amounting to 200 billion euros, or 1.5% of EU GDP,''The Commission launches a major Recovery Plan for growth and jobs, to boost demand and restore confidence in the European economy''
Europa, 26 November 2008 . Accessed 2009-03-21
Archived
2009-05-21. using both the national budgets of the national governments, the budget of the EU and that of the European Investment Bank. The plan also built on the

Small Business Act for Europe The Small Business Act for Europe ''(SBA)'' is a package of principles put forward by the European Commission in 2008, designed to assist small businesses within the European Union (EU). The package contains ten "guiding principles intended for ad ...

, published earlier in June 2008, which was concerned with supporting the

small business Small businesses are types of corporations, partnerships, or sole proprietorships which have a small number of employees and/or less annual revenue than a regular-sized business or corporation. Businesses are defined as "small" in terms of being ...

sector within the European Union.

Measures

The plan included a broad range of actions at the national level and at EU level to help households and industrial firms (particularly automobile and construction). The measures included: * reflation: the Commission would allow Member States to break the

Stability and Growth Pact The Stability and Growth Pact (SGP) is an agreement, among all the 27 member states of the European Union (EU), to facilitate and maintain the stability of the Economic and Monetary Union of the European Union, Economic and Monetary Union (EMU). ...

for two or three years. * incentives to investment: the plan outlined measures to encourage the fight against climate change and promotes strategic investments in buildings and energy-efficient technologies. * lower rates: the ECB was invited to drop its rates. * tax rebates: lowering taxation on green technology and eco-friendly cars, accompanied by

scrappage program A scrappage program is a government incentive program to promote the replacement of old vehicles with modern vehicles. Scrappage programs generally have the dual aim of stimulating the automobile industry and removing inefficient, more polluting ...

s * social measures: the Commission proposed that governments could temporarily increase

unemployment benefits Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is the proportion of people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work d ...

and their duration, to increase allowances to households, to lower taxes on low incomes, to lower social security contributions paid on low wages by employers, to reduce labour costs paid by employees with low incomes, to provide subsidized loans or credit guarantees for companies, to reduce temporarily the

VAT A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)) is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared wi ...

rate to support consumption. The Commission announced it would adopt by mid-March 2009 a proposal to lower VAT rates for services with high labour-intensiveness (such as catering).''Cutting red tape on VAT''
European Commission. Accessed 2009-03-21

2009-05-21. On implementation, the Commission requested member state leaders meeting at the

European Council The European Council (informally EUCO) is a collegiate body (directorial system) and a symbolic collective head of state, that defines the overall political direction and general priorities of the European Union (EU). It is composed of the he ...

on 11-12 December 2008 to endorse the plan.

National plans

National plans are often close to 1.2 percentage points of GDP, as recommended by the

, and are focused on 2008 and 2009. However, Germany and Spain have announced fiscal stimulus of respectively 3.3% (two plans altogether) and 8.1% of their GDP. The plan announced by the European Commission at the end of November recommended measures to revive the economy but did not specify much the nature of the plans. Some plans are focused on the stimulation of demand (United Kingdom, to a lesser extent Spain, Italy or the second German plan), other plans insist more in incentives to supply (French plan, first German plan ). Measures took on expenditure to improve demand generally include measures to support medium-term growth through increased public spending on infrastructures (road networks and railway) and aids to the housing sector (notably construction and renovation). Several countries have also announced short-term measures to relieve the effects of the crisis on the poorest people (increase in benefits and allowances to households with low incomes and unemployed). However, these aids have often limited effects on the economy, because their amounts are insignificant. Other measures affected national taxation systems. The UK was the only country that opted for a temporary decline in the standard VAT rate, by 2.5 percentage points. In Germany, employer contributions were lowered. Most plans include incentive measures to SMEs and development of

green energy Energy is sustainable if it "meets the needs of the present without compromising the ability of future generations to meet their own needs." Definitions of sustainable energy usually look at its effects on the environment, the economy, and so ...

References

External links

European Commission website
{{DEFAULTSORT:2008 European Union Stimulus Plan Great Recession in Europe European Union economic policy European Union Stimulus Plan, 2008 Policy and political reactions to the Eurozone crisis