EUROPEAN LEADERS have signed up to a European Commission plan to inject €200 billion into the floundering economy, amounting to "around" 1.5 per cent of the EU's gross domestic product (GDP).
Despite slightly watering down the text - a draft version circulated on Thursday proposed "at least" 1.5 per cent of GDP - French president Nicolas Sarkozy indicated that there had been unanimous support for the package.
"Everybody agrees that there is a need for economic recovery along the lines of the [European Commission president José Manuel] Barroso plan, around 1.5 per cent of GDP," Mr Sarkozy said yesterday.
The 15 countries sharing the euro sank into recession in November after a second quarter of negative growth.
New figures released yesterday by Eurostat, the EU's statistics office, show that industrial production is down 1.2 per cent in both the euro zone and the wider 27-member European Union.
The commission originally put forward the economic recovery plan on November 26th to deal with the crisis, specifying that the €200 billion would be made up of 1.2 per cent of national GDP, with 0.3 per cent coming from the EU budget.
However, Germany had raised strong objections before the summit, arguing that its recent stimulus package (which it said equated to 1.3 per cent of national GDP) exceeded the amount suggested by the commission.
Mr Sarkozy said German chancellor Angela Merkel had assured him that she would deal with the outcome of the meeting.
"I have full assurances from the chancellor that she will give constructive instructions to her finance minister to tackle this issue," he said.
Also in yesterday's agreement was a reference to "the possibility, for those member states who desire to do so, to apply reduced VAT rates in certain sectors", a policy which Germany opposes.
The country's finance minister, Peer Steinbrück, has been extremely critical of a recent British move to lower VAT rates as a way to boost demand, calling it "crass Keynesianism".
Eurogroup president and prime minister of Luxembourg Jean-Claude Juncker earlier this month ruled out a cut in VAT for any of the countries sharing the single currency.
A final decision on rates is due to be made at the end of March next year at a meeting of EU finance ministers.
The commission also wanted a €5 billion envelope of unspent EU money for 2009 to 2010 to go towards pan-European energy and internet projects, but Sweden and the Netherlands protested against the move during negotiations.
Under the compromise conclusions, the commission will have to present the European Council with a list of "concrete" energy and broadband projects, spread equally across the bloc, before a budgetary decision can be made.
Although the package of measures is likely to lead to an increase in budget deficits and government spending, the EU contends that it is a temporary but necessary move.
"Our objective in the mid-term remains to reduce deficits and debt levels, but in exceptional circumstances you need exceptional measures to end the crisis," Mr Sarkozy said. "During the crisis the necessary measures will be taken."
Meanwhile, Taoiseach Brian Cowen said yesterday the Republic was set to maintain capital investment at "levels far above the historical norm" - which is now 5 per cent of gross national product. The Government has indicated on previous occasions that it has no room for manoeuvre on a fiscal stimulus package, with its budget deficit predicted to reach 6.5 per cent next year.
France has invited EU finance ministers to a meeting in Paris on December 18th but some key players will not attend, officials said.
Mr Steinbrück and Mr Juncker will not take part as they both have prior appointments. They will send deputies, as will UK finance minister Alistair Darling.
European economic and monetary affairs commissioner Joaquín Almunia will travel to Paris for the meeting and Italian minister of the economy Giulio Tremonti will also attend.
"Invitations have been sent and Paris is still waiting to receive confirmation that France's partners will attend," a French economy ministry official said yesterday.
European Central Bank president Jean-Claude Trichet has also been invited, the official added. - (Additional reporting: Reuters)