European Commission Proposes €200B Economic Recovery Plan; €5B Green Cars Initiative
26 November 2008
The European Commission presented a €200 billion (US$257 billion) Recovery Plan—equivalent to 1.5% of European GDP—to pull Europe’s economy out of its current crisis. One of the elements of the plan is a €5 billion (US$6.4 billion) “European green cars initiative”.
The plan will use a wide range of policies and instruments. The co-ordinated fiscal stimulus of around €200 billion comprises around €170 billion (1.2% of GDP) from Member States, and around €30 billion (0.3% of GDP) as EU level action within the EU budget and from the European Investment Bank (EIB). The stimulus will stay within the Stability and Growth Pact, while making use of the full flexibility offered by the Pact.
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.
The Recovery Plan can keep millions in work in the short-term. It can turn the crisis into an opportunity to create clean growth and more and better jobs in the future... f Europe acts decisively to implement this Recovery Plan, we can get back on a path of sustainable growth and pay back short-term government borrowing. If we do not act now, we risk a vicious recessionary cycle of falling purchasing power and tax revenues, rising unemployment and ever wider budget deficits.—Commission President José Manuel Barroso
The Recovery Plan includes detailed proposals for partnerships between the public sector—using Community, EIB and national funding—and private sectors to boost clean technologies through support for innovation. In addition to the European green cars initiative, the Plan proposes a European energy-efficient buildings initiative worth €1 billion; and a factories of the future initiative estimated at €1.2 billion.
European Green Cars Initiative. The European green cars initiative would involve research on a broad range of technologies and smart energy infrastructures essential to achieve a breakthrough in the use of renewable and non-polluting energy sources, safety and traffic fluidity.
The partnership would be funded by the Community, the EIB, industry and Member States’ contributions. In this context, the EIB would provide cost-based loans to car producers and suppliers to finance innovation, in particular in technologies improving the safety and the environmental performance of cars, e.g. electric vehicles.
Demand side measures such as a reduction by Member States of their registration and circulation taxes for lower emission cars, as well as efforts to scrap old cars, should be integrated into the initiative. In addition, the Commission will support the development of a procurement network of regional and local authorities to pool demand for clean buses and other vehicles and speed up the implementation of the CARS21 initiative.
Other support for the auto industry. In addition to the general lift expected from the fiscal stimulus (increasing purchasing power, maintaining and increasing lending at affordable rates, and restoring confidence), the Plan includes several specific measures to assist automakers.
Temporary authorization to Member States to subsidize the part of the cost of guarantees for loans to car producers;
Supporting the work of the EIB to provide loans to car companies and their suppliers to finance innovation in clean technologies and better environmental performance;
Giving temporary authorization to Member States to provide subsidized loans for investment in new cars which either anticipate or go beyond new Community environmental standards, before they enter into force;
Revising the rules of the Globalization Adjustment Fund so that it can intervene more rapidly in sectors like cars either to co-finance training and job placements for workers made redundant or to keep skilled workers in the labor market because their skills will be needed once the economy starts to recover.
The Commission is asking Heads of State and Government at the European Council on 11-12 December to endorse the Recovery Plan and show their determination to act together in a closely coordinated way.
European automakers had earlier approached to European Commission (EC) seeking €40 billion in loans to support their shift to lower GHG-emitting vehicles. (Earlier post.) The European Automobile Manufacturers’s Association (ACEA) called the economic recovery plan presented by the European Commission “a welcome first step towards addressing the consequences of the financial crisis”.
Our industry will work with the European Investment Bank and national governments to find pragmatic solutions, using all possible resources available at community and national level. The proposal of today represents a broad range of opportunities that now need to come together in a coherent and coordinated manner. The increased credit facility from the European Investment Bank, to be adopted by the Ecofin council of 2 December, will be a further important step.—Ivan Hodac, Secretary General of ACEA.
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