EU Summit to Discuss Energy Plan

European Union leaders are hoping at a summit that starts Thursday to agree on a small energy-focused stimulus package they have been arguing over for months.

What they won't be discussing,according to EU diplomats involved in the process,is whether to launch a fresh round of national stimulus packages in response to criticism from the U.S. that Europe isn't doing enough to battle the global recession.

EU officials in Brussels and most of the bloc's 27 governments say they should wait to see how the existing stimulus packages -- amounting to about €200 billion ($260 billion),compared with $787 billion for the U.S. -- work before discussing new ones. This week's two-day meeting is expected to reaffirm that resistance ahead of an economic summit of the Group of 20 nations in London on April 2.

Criticism has come from within the EU,too. Hungary,hit particularly hard by the financial crisis,has asked for a roughly €180 billion fund to be set up to rescue economies in Eastern Europe. That request was quickly rejected.

A draft of the summit's final communiqué says the leaders will ask finance ministers to examine whether an existing €25 billion fund for troubled economies can expand. EU leaders expanded the facility from €12 billion in December;about €10 billion has been used.

A German government official said the EU had provided money from the facility at short notice to Hungary and Latvia,and would do so again if a country needed funds. But talking about additional funds now would "send the wrong signal" to financial markets,suggesting that more countries in Central and Eastern Europe need aid to finance their economies,the official said.

Instead of upping the ante,EU leaders will spend much of their summit on Thursday and Friday arguing about €5 billion they have already committed to the European Commission,the EU's executive arm.

The commission wants to spend this money,surplus from its roughly €900 billion budget,on energy and technology networks. Some countries have objected to the plan,because they don't agree on the list of projects and want more control over the cash.

The proposed projects include money for so-called interconnector pipelines to link national natural-gas networks. In January,a price dispute between Ukraine and Russia disrupted gas supplies to the EU,leaving some countries without heat or power

to operate factories. Also included in the proposal is money for carbon-capture storage projects,and for the EU's delayed Nabucco project to build a gas pipeline to the Caspian Sea via Turkey.

German Chancellor Angela Merkel will argue at the summit that the commission's €5 billion surplus shouldn't be used to support Nabucco,according to the German official. Germany says the money should go to projects that will use the funds -- and so stimulate the EU economy -- immediately. Nabucco's construction is scheduled to start in 2011. Germany also says Nabucco's problem isn't financing,but finding sufficient gas to fill the pipeline.

Critics say the EU's squabbling over relatively small sums reveals a serious failure in coordination.

"Member States have to date not even managed to agree on the release of €5 billion of EU budget money in response to the crisis -- i.e. about 0.05% of the EU's GDP. We will need a considerably improved level of coordination on economic recovery measures ... if they are to have the desired effect," said Arnaldo Abruzzini,secretary-general of pan-European business lobby Eurochambres,in a statement.

Economists critical of the EU response to the financial crisis so far also argue that the European Central Bank hasn't gone far enough to loosen monetary policy.

ECB President Jean-Claude Trichet told a news conference that the ECB is studying possible "unconventional" policies.

Source:WSJ