Economists have greeted the stimulus package put forward by the EU with scepticism.

The plan, aimed at fighting recession, would be financed mainly by individual member states who are being urged to lower VAT to boost consumer spending.

The car industry, which represents a sizeable part of Europe’s economy, is being specifically targetted: “We are also proposing a coordinated action between what is the fiscal stimulus at national level and what we can do through European Union funding. What we have to do for the car industry is to help it transform in a more modern industry, more friendly to the environment” said European Commission President Jose Manuel Barroso.

But many analysts are unimpressed by the plan, saying it is unlikely to do much against recession in the short term: “The EU suggested a temporary cut in VAT to boost consumption, but we already have a consumption kick through the falling oil prices. They have been significantly decreasing since the summer, and that has already significantly stimulated individual households’ the purchasing power.” said Professor Christian Dreger from the economic think-tank DIW in Berlin.

Five billion out of the 200 billion euros proposal would go towards helping the car industry which slumped another 14,5 percent last month, in the sixth consecutive monthly fall.

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