Worst of the economic crisis is over, says EU chief

Published on Tuesday 7 September 2010 17:57

THE head of the European Union has claimed that the worst of the economic crisis is over and the recovery is accelerating.

• Osborne: Defiant Picture: Getty

Speaking in Strasbourg, European Commission President Jose Manuel Barroso said that the 27-country bloc had come through the economic crisis strongly but risks remained and he called for major changes.

It came as Chancellor George Osborne made it clear at the meeting of leading finance ministers that the UK would not surrender any of the rebate negotiated by Margaret Thatcher in the 1980s, despite further calls from France.

Yesterday a Government spokesman hinted at a tough line to come by insisting the rebate remained "a matter of fairness" - compensating the UK for a relatively high EU membership contribution compared with the relatively low level of EU agriculture grants and subsidies Britain gets back from Brussels.

Mr Osborne's defiance came before Mr Barroso insisted in his speech that structural reforms needed to be speeded up and the EU had to raise new funds for infrastructure.

That prompted Mr Barroso to use the address to carp at the UK Government pre-empting the budget review by second-guessing what might be proposed.

The EU leadership wants to avoid another crisis in the euro zone similar to the one in Greece which almost brought down the currency,

Mr Barroso gave few details on the funding initiative but said it would involve the establishment of EU "project bonds" issued in conjunction with the European Investment Bank.

"Over the last year, the economic and financial crisis has put our union before one of its greatest challenges ever. Our interdependence was highlighted and our solidarity was tested like never before," Mr Barroso said in the 40-minute address.

"As I look back at how we have reacted, I believe that we have withstood the test . . . My message to each and every European is that you can trust the European Union to do what it takes to secure your future."

Mr Barroso, delivering an annual speech to the parliament which is now known as the State of the Union address, said the economic outlook was better than a year ago although the EU has been struggling through a debt crisis.

"The recovery is gathering pace, albeit unevenly within the union. Growth this year will be higher than initially forecast. The unemployment rate, whilst still much too high, has stopped increasing. Clearly, uncertainties and risks remain, not least outside the European Union."

The latest official forecasts predict growth in the EU of one per cent in 2010 and of 0.9 per cent in the 16 countries that use the euro.

European Union nations yesterday agreed to create new financial oversight institutions, hoping to prevent a repeat of the government debt crisis that nearly left Greece bankrupt and brought the European banking system to its knees.

The Union's 27 finance ministers also agreed to give Greece the next chunk of its bailout funds but failed to find common ground on the introduction of a levy on banks or on a new tax on financial trading.