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UPDATE 2-US, Asia should match European welfare net - EU

Published 03/18/2009, 12:36 PM
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* EU "doing more" to cushion recession

* Germany reaffirms against euro zone bond

(Adds more quotes, background)

By Mark John and Jan Strupczewski

BRUSSELS, March 18 (Reuters) - The European Union staunchly defended its unwillingness to spend more to escape the slowdown on Wednesday and urged the United States and Asia to match its generous welfare safety nets.

Speaking on the eve of an EU summit at which the bloc will say it wants rapidly to execute existing recovery plans rather than announce new ones, European Commission chief Jose Manuel Barroso rejected U.S. and other criticism that Europe was not doing enough to counter a global downturn.

"We are doing more than anyone in the world on that matter," Barroso told a news conference, referring to efforts to cushion the impact of the recession on citizens.

"Others should increase their effort in that way as well -- that would be a good contribution for the global recovery," he said in reference to the U.S. and Asian economies.

The latest in a line of international gatherings to prepare for April 2's G20 talks, the EU summit on Thursday and Friday will stress the need for tighter regulation to avoid a repeat of the worst financial crisis since the Great Depression.

The 27-nation bloc will offer to contribute to a doubling of International Monetary Fund (IMF) resources to combat the downturn and show willingness to help hard-hit eastern European economies as needed, according to summit drafts.

The EU puts the total size of its fiscal spend to combat recession at anything between 3.3 and 4 percent of its output, short of President Barack Obama's plan to devote 5.5 percent of U.S. output to recovery efforts.

FURTHER MEASURES?

Aside from new outlays on infrastructure and other key sectors, the EU figure includes government spending on unemployment benefit and other welfare programmes which automatically rises when the economy takes a turn for the worse.

Continental European economies have long had a reputation for generous welfare provision -- a fact that free market backers say discourages entrepreneurial risk and hard work. Barroso said the state share of the economy in some EU countries attained 60 percent of their gross domestic product (GDP).

A summit draft this week showed that EU leaders are set to agree that "continuing implementation of agreed recovery measures is crucial", without making any commitment to add more.

However, Barroso echoed other EU officials in saying further measures could be agreed if needed.

"What we need now is not words, but action. We need implementation of the recovery plan," he said. "If member states are in a position to do more, they should do more."

Pressure to cough up more cash has been focused on Germany, Europe's biggest economy, which has entered the crisis with a balanced budget thanks to fiscal tightening in recent years.

It is therefore seen as having more room to move than most other large euro zone economies, which are close to or already above the EU's budget deficit limit of 3 percent of GDP.

But Germany has said it is already spending 4 percent of GDP on stimulus and does not want its deficit to balloon because others had failed to restore their finances in better times.

Separately, Chancellor Angela Merkel reaffirmed she saw no need to help other euro zone states in trouble by issuing a joint euro zone bond, while a senior government official said Berlin could agree to the European Commission's proposed 5-billion euro spending plan on energy and telecoms only if it promotes projects that start soon. (Additional reporting by Kerstin Gehmlich; Editing by Giles Elgood)

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