Barroso says EU budget stimulus to be significant

The European Commission's economic stimulus plan will include a significant budgetary expansion for European Union members, the president of the EU's executive arm said on Friday.

Commission President Jose Manuel Barroso also signaled the cash should be spent to boost the competitiveness of the 27-country EU, hit hard by the global economic and financial crisis.

The Commission will present proposals next Wednesday to boost the bloc's economy. Barroso stressed that if the EU acted together, the downturn in Europe could be short and shallow.

"In the plan we will be delivering, we will include the need for a significant budgetary expansion in the EU," he said, adding that the fiscal impulse would be in line with EU budget rules, the Stability and Growth Pact.

The pact sets a limit on budget deficits in the EU at 3 percent of gross domestic product. Several EU states, such as France, Italy, Greece, Portugal, Britain and Ireland, are already close to or above that level.

"Spending to beat the recession must be smart spending," Barroso said. "As well as supporting the economy in the short term, it must reinforce our long-term growth potential."

He said EU governments had to invest in areas critical to competitiveness — infrastructure, research, energy efficiency, education and environmentally clean technologies.

"We must be prepared to move outside our comfort zone. To think the unthinkable. We need a plan which brings all possible policy levers to bear on the situation," he said.

German Economy Minister Michael Glos said this week that the Commission plan envisaged, among other things, a 1 percentage point cut in value-added tax across the EU and that the total value of the stimulus was 130 billion euros ($163 billion).

Barroso said on Thursday he could not confirm or deny the amount since no decision had yet been taken.