Brussels: European leaders are set to back a $264 billion economic stimulus pact and a climate change plan amended to ease its impact on industry and poorer EU states, according to a draft text.
The text, obtained by Reuters before a final review by EU leaders on the second day of a Brussels summit, committed the bloc to reaching a target of cutting greenhouse gas emissions by 20% by 2020, despite concessions.
However diplomats say the final shape of the climate package is still uncertain, and ecology groups fear it could emerge from the talks in a much watered-down version of its original form.
The draft approved the headline goal of an EU-wide programme of measures aimed at wrenching the 27-nation bloc’s economy out of recession, despite some differences between EU member states about how to handle the worst economic downturn in 80 years.
“The plan provides a common framework for the efforts to be made by member states and by the EU with a view to ensuring consistency and maximising effectiveness,” the draft said of measures offering temporary support to the economy, including the auto and construction sectors.
The US Senate’s refusal overnight to back a rescue plan for the auto sector raised the spectre of collapse in the key sector and will have raised concern in European capitals. The crisis continued to eat into the banking sector, origin of the crisis now sweeping the globe. The bank JPMorgan predicted a ‘terrible´ fourth quarter.
Sceptics say the EU plan rests largely on national stimulus plans already announced by individual governments. It includes an extra €30 billion of funding by the EU’s lending arm, the European Investment Bank, to help industry in projects such as green energy over the next two years.
In wording which appeared to reflect the reluctance of countries such as Germany to cut value added tax (VAT), the text noted the possibility of reducing VAT on labour-intensive services only in those states that wished to do so.
It said recent deep rate cuts by the European Central Bank and other central banks were supporting growth and urged commercial banks to pass on those reductions to borrowers.
It also urged EU governments to “return swiftly” to mid-term budgetary targets - a reference to the goal of obtaining balanced budgets or nearly balanced budgets.
The climate discussions took on a special significance, some six weeks before Barack Obama takes over the US presidency holding out the prospect of closer transatlantic co-operation in matters of global warming.
Green groups warned the EU, seen as vital in global talks next year to seek a successor pact to the Kyoto climate change treaty from 2012, could forfeit its credibility if it watered down its own efforts.
According to the draft text, poorer east European nations will be offered two tiers of funding worth billions of euros to win their support for measures to tackle climate change that will ramp up costs for their highly-polluting power sectors.
The nine former communist states are seen as the final blockage to a deal, having already threatened to veto the plan if nothing is done to temper measures aimed at making coal-fired power stations uneconomical and boosting cleaner alternatives.
Their power sectors were also partially exempted from paying for emissions permits under the EU’s flagship emissions trading scheme (ETS) between 2013 and 2020.
However it was not clear whether eastern capitals would back the new proposals in a final planned session of talks on Friday, despite positive noises voiced earlier by Poland and others.
“The prime minister (Donald Tusk) achieved everything he wanted in negotiations on the climate package,” an official told Reuters. “The deal is flexible, allowing for the modernisation of the Polish power sector.”
Italian Prime Minister Silvio Berlusconi, who had threatened to veto a deal without concessions to protect key industries, emerged from the first day of a two-day summit, declaring: “We are heading towards a compromise.We are getting what we want.”
The summit draft confirmed an agreement in principle by leaders on concessions to Ireland enabling Dublin to hold a second referendum by next November on the Lisbon treaty.
The Lisbon Treaty - successor to the defunct EU constitution - aims to give the bloc more weight in the world by creating a long-term president and its own foreign policy supremo and needs to be ratified by all 27 EU states.
Under the agreement, Ireland will be given a guarantee that all EU states will retain the right to one seat on the European Commission, over-riding the planned thinning of the executive’s top hierarchy as set out by the Lisbon Treaty.
Dublin will be offered guarantees that concerns such as military neutrality and national tax policy will not be touched, as long as it commits to ratifying it by November 2009 - paving the way for a new referendum which it is far from sure to win.