France and Germany not keen on VAT cuts

The French and German leaders have agreed on the need for urgent and coordinated action to lift Europe out of recession, but have not yet revealed detailed concrete measures.

President Nicholas Sarkozy and Chancellor Angela Merkel were meeting in Paris amid deepening economic gloom for the EU.

Sarkozy has been trying to persuade Merkel to back a far-reaching Europe-wide rescue plan.

“We’re agreed on coordination, we agree no the for other measures,” Sarkozy said after their meeting. “France is going to work on it, and Germany will reflect on it. Acting on a general lowering of VAT… France shares the view of Germany that it could work in certain countries — I am thinking of our friends in the UK — What concerns us is falling prices. Should we lower VAT when prices are falling? “

Today’s meeting comes shortly after the Eurozone was confirmed as being in recession.

Merkel said: “It’s obvious that every country has to make an effort in a coordinated way, one that will give a European economic response to this crisis. We have a common market. We have a common growth strategy. It would be fatal if, in a period of no growth, there wasn’t a European response.”

The European Commission will give details on Wednesday of support to be offered to the bloc’s 27 member states. It is thought it could involved a fund of up to 130 billion euros.

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