CLIMATE CHANGE/FINANCE:EU LEADERS will resume efforts to broker a compromise on the EU's climate change package and a €200 billion fiscal stimulus package today at a summit in Brussels.
French president Nicolas Sarkozy appealed for EU unity at the start of the European Council meeting, declaring that "Europe can't make a show of division."
However, tensions between Germany, France and Britain bubbled under the surface following an unprecedented attack by German finance minister Peer Steinbrück against the British economic stimulus package, which prompted the commission to launch its own proposal.
"The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," Mr Steinbrück said in an interview with Newsweek, published yesterday. "The same people who would never touch deficit spending are now tossing around billions . . . The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," he said in an obvious reference to British prime minister Gordon Brown, who has called for all EU states to spend more and cut taxes in an attempt to stave off a long-lasting recession in Europe.
Several other EU states are concerned about the commission's call for all member states to contribute 1.5 per cent of gross domestic product to public spending and tax cuts.
States such as Slovakia and the Netherlands, which have not ruled out cutting spending, have stressed the need for states not to let their budget deficits get out of control.
At the summit, German chancellor Angela Merkel played down German resistance to the stimulus package. "We support the view of the commission that we need to provide 1.5 per cent of GDP for the stimulus package to strengthen the economy," said Dr Merkel, who added that she had "good hopes" we can reach a deal on the climate package.
Talks on the climate package stretched late into the night and are expected to resume today with Italian and German concerns over its impact on heavy industry likely to be resolved with concessions.
The package, which aims to cut greenhouse gas emissions by 20 per cent by 2020 when compared to 2005 levels, will cost member states hundreds of billions of euro between 2012 and 2020.
Under a complicated formula under discussion by EU leaders last night, steel, cement, chemicals, paper and other industries will be sheltered from the added cost of buying permits to emit CO2 under the emissions trading system - the key mechanism that will force industry to reduce emissions.
"This covers about 90 per cent of industry, and I don't see any reason why Germany would not accept this proposal," said German conservative Peter Liese. "I see it as a victory."
However, major problems remain with Poland and a group of states from central Europe, which want more funds to be diverted to countries that cut emissions sharply before 2005.