EU leaders agree to token spending increase to promote growth
European Council President Herman Van Rompuy told journalists after a working dinner of the 27 European Union heads of state and government that they had approved a growth package proposed last week. The money is to go toward building roads, power plants and other infrastructure that countries with the most stagnant economies need in order to boost production and exports.
The measures include $75 billion specifically earmarked for creating jobs for those under 25, who account for a huge proportion of the unemployed in struggling countries like Spain and Greece. Almost half of Spain's young adults are out of work.
European media and economic analysts had predicted that the two-day summit, which ends Friday, would result in little more than the symbolic increase in spending to promote growth, despite desperate appeals from heavily indebted member nations for moves to cut their borrowing costs.
The European Central Bank holds $875 billion in surplus cash that is earning only about 0.25% interest, and some EU leaders want the bank to buy bonds floated by Italy and Spain at 1% interest, sparing those nations unsustainable debt-servicing costs. Because of market fears over the solvency and stability of the Eurozone, lenders have been demanding 6% and 7% interest on bonds sold by Rome and Madrid.
Indebted EU members also have been pushing the idea of selling "eurobonds" that would be collectively guaranteed by the Eurozone, the bloc of 17 nations that use the euro currency. But German Chancellor Angela Merkel has steadfastly rejected taking on responsibility for the debts piled up elsewhere in the Eurozone.
The spending to promote growth was less than had been proposed a week ago by the leaders of France, Italy, Spain and Germany at a pre-summit meeting in Rome. There, the leaders agreed to discuss setting aside $163 billion -- still a small sum for an economy valued collectively at more than $15 trillion.
-- Carol J. Williams in Los Angeles
Photo: Danish Prime Minister Helle Thorning Schmidt, left, whose country holds the rotating European Union presidency, at a news conference with European Council President Herman Van Rompuy, center, and European Commission President Jose Manuel Barroso in Brussels. Credit: Thierry Roge/European Pressphoto Agency