EU proposes stimulus fund

The European Union (EU) has united in pulling together a 200 billion euro (170 billion pounds) rescue package that accounts for 1.5 percent of the gross domestic product, which Commission President Jose Barroso has labelled an exceptional response to the euro zone economic problems.

The measure can been coordinated across the member states so that it can help boost economies and stave off the recession.

Individually, Germany were the first to announce a rescue plan of 50 billion euros, while France has focused on rescuing their car manufacturing industry.

The size of the EU rescue package is important as anything less than 1 percent of GDP would not have been enough.

In order to promote further government spending, the EU will relax its rules on public debt until at least 2010 and budgetary stimulus is expected to last for two years.

Tax measures have been introduced in order to help protect low-income households, in a period where household budgets have been stretched, whilst a cut of sales tax is introduced to increase consumer spending.

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