EU ministers to agree on end of anti-crisis moves

* Industrial aid should end as soon as possible

* Labour market measures to be scrapped from mid-2010

* Credit-boost scheme may be last to go

By Marcin Grajewski

BRUSSELS, March 9 (BestGrowthStock) – European Union finance
ministers will agree next week to phase out aid measures for
banks, industries and the labour market that were introduced to
fight the economic crisis, a draft statement showed on Tuesday.

“If left in place too long these measures could hinder
adjustment processes within and across sectors by distorting
price and cost signals and by introducing wrong incentives,”
said the draft copy of the statement, obtained by Reuters, which
is to be issued after next week’s meeting.

The 27 EU finance ministers meet on March 16 to discuss
Greece’s financial problems and exit strategies from fiscal
stimulus measures worth hundreds of billions of euros that were
agreed in late 2008 to battle the crisis.

Economic analysts and politicians say EU governments need to
strike a fine balance — keeping the aid measures in place long
enough to avoid killing nascent economic revival but ending them
sufficiently early to keep budget deficits under control.

The ministers’ draft statement, which was discussed on
Tuesday by EU countries’ ambassadors, said support measures for
various industrial sectors such as the car industry should be
the first to be extinguished as economic recovery gains pace.

“These should be phased out as quickly as possible given
their relatively large budgetary costs and the risks that the
continuation of supply side measures may hamper efficient
resource allocation and hence distort competition and the
functioning of the internal market,” the draft said.

Support for some long-term objectives, such as green
technologies and research and innovation, will be permitted if
they are compatible with the EU’s state aid rules, it said.


From mid-2010, governments should start scrapping measures
to bolster labour markets that are intended to help companies
avoid dismissing workers.

“These should be gradually withdrawn when the recovery is
secured,” the draft said.

“On the basis of the most recent Commission forecasts on
growth this could begin with a benchmark of mid-2010 for the EU
as a whole, taking into account the historic lag before
employment reacts positively to an upturn in economic activity.”

The European Commission forecast last month that the EU’s
economy will expand by 0.7 percent this year after contracting
by 4.1 percent in 2009. Unemployment is expected to creep up
after reaching 9.9 percent in January.

Measures to encourage banks to give credit to companies may
be the last to go.

“Withdrawal of temporary schemes to ease financing
constraints should depend on the capacity of financial
institutions to supply adequate credit to the credit-worthy
corporate sector,” the draft said.

“Continued careful monitoring is required to prevent the
recovery from being hampered by undue credit supply

Growth Stocks

(Editing by Timothy Heritage)

EU ministers to agree on end of anti-crisis moves