By IRNA,
Paris : President Nicolas Sarkozy and Chancellor Angela Merkel met on Monday to work out a coordinated response to Europe’s deepening recession.
But when it came to specifics, they agreed only on what they did not want: to follow Britain’s lead and cut the sales tax.
With consumer prices receding in the euro zone, cutting consumer taxes “is not the right answer for France and Germany,” Sarkozy said at a joint news conference with Merkel at the Elysee Palace.
Merkel’s spokesman even ruled out reversing last year’s increase in the sales tax to 19 percent, at least until elections next fall.
The British government on Monday announced a new stimulus program that included plans to temporarily reduce the value-added tax to 15 percent from 17.5 percent for a year.
With the euro zone also in recession, France and Germany are under pressure to do more to stimulate growth on the Continent as well.
The Sarkozy-Merkel talks came two days before the European Commission intends to call for a coordinated, multibillion-euro package of national measures to revive the economy.
The commission is also expected to outline moves to speed payments for euro 6 billion to euro 7 billion, or about $7.7 billion to $9 billion, in European Union subsidies.
The EU rescue package would highlight the role of the European Investment Bank in offering financing for industrial projects.
Europe’s car industry has asked for loans below market rates of about euro 40 billion.
The talks in Paris, part of a regular series of French-German encounters, were the latest effort to find common ground on an economic crisis that has often seen Paris and Berlin take different views.
Sarkozy, as the current president of the European Union, has taken the lead on coordinating a European response to the crisis and at times annoyed neighboring countries by using the crisis to push a traditionally interventionist French agenda for the rest of the bloc, which comprises 27 countries.
Merkel, held back by a quarreling coalition government less than a year before elections, has been accused of dithering and keeping too low a profile at a time when other countries look to Germany, Europe’s biggest economy, for leadership.
More evidence of Germany’s problems was released on Monday: The Ifo index of business confidence, one of the most reliable predictors of economic activity in the euro zone, which comprises 15 countries, fell to its lowest level in 15 years.
Against this dark backdrop, Sarkozy and Merkel sought to paper over their differences. They committed themselves vaguely to take further action if needed, and said that they were both open to the idea of increasing help for European carmakers.
But the tension remained on display.
“On the necessity of taking other measures,” Sarkozy said in a thinly veiled reference to continued German foot-dragging, “France is working on it and Germany is thinking about it.”
French-German rifts are not the only ones dividing Europe as it grapples with the latest fallout from the economic crisis.
Several of the bloc’s large member states have already announced their own fiscal stimulus plans, and the European Commission will call on all nations to contribute, although it is unclear by how much.
Countries including Germany and France want all European countries, whatever their public finances, to spend 1 percent of their gross domestic product to stimulate growth, a figure that would work out roughly to a combined euro 130 billion.
This idea is opposed by countries like Latvia and Hungary, which argue that their financial situation gives them no room to cut taxes or increase spending.
Whether or not all nations are asked to meet the 1 percent target, the commission is expected to say that its budget deficit rules will be applied flexibly.
Member states will be given longer than usual to bring their budgets back into balance because of the exceptional circumstances.
Meanwhile, advance payments of European Commission financing for regional aid projects will be increased, channeling money more quickly to national governments.
Although most of this will be directed to Europe’s newer, formerly Communist countries, older member states are likely to benefit as well.
This is likely to mean that as much as additional euro 7 billion will be made available to governments across the EU in 2009, giving them the chance to jump-start construction projects.
Later, the commission will also allocate more of its annual research budget toward environmental and clean technologies innovation, and encourage more public/private partnerships.
Merkel said Monday that Germany, the EU’s largest contributor, might increase a