German Minister: EU Plans Massive Economic Aid Package | Europe| News and current affairs from around the continent | DW | 19.11.2008
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German Minister: EU Plans Massive Economic Aid Package

The European Union is planning to unveil an economic stimulus package worth 130 billion euros, German Economics Minister Michael Glos said Wednesday. All member states will be expected to chip in.

A St. Bernhard dog with a first aid barrel of liquor around his neck that has an EU flag on it

Some fear the package might be too small

Glos told private German TV news channel n-tv that each EU country would be expected to contribute 1 percent of their gross domestic product to the package. He added that this would amount to about 25 billion euros ($31.61 billion) for Germany.

According to news reports, details of the package are supposed to be announced on Nov. 26, with EU leaders possibly approving the plan at their summit on Dec. 10.

Backing Green research

European Union officials were meanwhile also edging towards a plan which will tie any state aid for European carmakers to technological development and the production of environmentally-friendly vehicles.

Following on from the large-scale rescue efforts made by EU member states to help Europe's worst-hit banks, the auto sector has become the second front in the economic battle against the global financial crisis.

But instead of bailing out the auto industry with huge amounts of cash, officials in Brussels want to make sure any aid given to the faltering auto sector is closely targeted and eco-friendly.

"There won't be subsidies, and besides the industry is not asking for subsidies," EU Industry Commissioner Guenter Verheugen said a week ahead of the presentation of an economic re-launch plan in Brussels, which will include measures to help the auto industry.

Verheugen called for the European Investment Bank (EIB) to increase its credit line "for makers of more eco-friendly cars" in a bid to encourage the industry to earn aid through committing to more eco-friendly product ranges.

Verheugen also called for "ecological rigor," speaking of fiscal incentives to increase the demand for "green" vehicles.

Verheugen's statement follows on from a similar plea by the European Automobile Manufacturers' Association (ACEA) in October. The ACEA called for 40 billion euros ($54 billion) in loans, not grants, to develop green technologies.

EIB in favor of investing in green loans, says commissioner

An Audi hybrid engine

The EIB won't just hand out cash -- companies must earn it

The EIB, the EU's lending arm, is in favor of such a move which would promote green technologies, Verheugen added, telling the European parliament in Strasbourg that finance ministers "will take the decisions to introduce the move" at a special meeting in Dec. 2.

On Monday the EIB said it was ready to increase loans to Europe's ailing auto sector as part of a broader financing plan.

"The EIB will propose (to EU finance ministers) an increase of 20-30 percent, and that corresponds to 10 to 15 billion euros," more money for both 2009 and 2010 -- including help to small- and medium-sized businesses -- a spokesman for the Luxembourg-based bank told reporters.

Part of the money would be earmarked to help the transport industry, especially for the development of greener cars, the spokesman said, without giving an amount.

The EIB has handed out an average of two billion euros in loans to the automobile sector in the past three years.

To allow the EIB increase to go ahead, EU nations will have to provide the European Investment Bank with "the necessary resources," said France's European Affairs minister, Jean-Pierre Jouyet, whose country holds the EU's rotating presidency.

The EU has committed to decreasing greenhouse gas emissions by 20 percent by 2020 and such funding could help achieve that, he added.

Verheugen calls Opel strife a "special case"

European Union Commissioner for enterprise Gunter Verheugen

Verheugen is undecided over Opel's state aid claim

Despite his assertions that "green" incentives were the best way forward for helping the auto industry, Verheugen referred to the current crisis at German car manufacturer Opel as a "special case" in Europe.

"Extraordinary circumstances require extraordinary measures," Verheugen said; although he went on to say that he was not fully decided about the proposed multibillion-euro aid package from the German government.

The European Union has strict rules on state-aid for industry, in the interest of maintaining competitiveness across the 27-member bloc.

However, Verheugen said it was "in no-one's interest" that Opel be allowed to fail. Opel would be a competitive firm, he said, were it not for the critical situation of Opel's US parent company, General Motors.

Opel has asked the German government for one billion euros ($1.27 billion) in credit guarantees to tide it over through a potential liquidity crisis that could arise if GM runs out of cash.

According to press reports Opel, which made its first car in 1899 and which GM has owned since 1929, needs up to two billion euros in guarantees.

Germany's Social Democrats (SPD) want state aid to be given to the car industry and have called for any such rescue packages to be used as an incentive to make more environmentally-friendly vehicles.

"Research into environmentally-friendly cars is the future," said SPD representative Matthias Groote. "It's not only ecologically worthwhile, it's economically worthwhile," he said.

SolarWorld bids for Opel factories

An Opel Corsa seen through the company's logo

As Opel awaits its fate, Solar World make an audacious bid

Verheugen's comments came as German solar energy company SolarWorld announced it had prepared an offer for the four German auto factories owned by Opel, worth one billion euros, to create the "first green European car company."

Whatever measures are decided on, rescue action for the auto industry in Europe cannot come fast enough.

Car sales across Europe were down 14.5 per cent in October on the same month in 2007.

The social and financial cost of a bankrupt car industry would be dramatic. The European car industry provides income for some 12 million families and last year generated a combined turnover of 551 billion euros ($700 billion), or about 5 percent of the continent's gross domestic product (GDP).

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