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Eurozone finance ministers decide to keep VAT unchanged
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09:43, December 02, 2008

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 Eurozone FMs agree to coordinate fiscal stimulus measures
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Eurogroup Chairman Jean-Claude Juncker said here on Monday that 15-nation eurozone finance ministers were not in favor of cutting VAT, value-added tax, as the European Commission proposed to stimulate economic growth.

"The 15 member states of the euro area have declared they don't want to do anything about the standard rate of VAT," Juncker, who is also Luxembourg's prime minister and finance minister, told a press conference after the monthly meeting.

"The standard rate of VAT will not be reduced in the euro area," he added, as the "elasticity (of VAT cut) doesn't guarantee a proper impact on consumption."

"Any measures need to be temporary. To say that VAT will go down then up again shortly afterwards is not the sort of measure that will produce the desired effect," said Juncker.

He said that all ministers welcome the European Commission's economic stimulus plan, unveiled last week.

"We all considered that in general the commission proposals are in the right direction," he said, "All national plans so far comply with the qualitative aspects put forward by the commission."

"We all agree that monetary policy cannot provide an adequate response to the crisis so we need to provide a strong fiscal response," and "the measures we should take should be temporary, timely and coordinated."

We all agree that all states in the euro area will let automatic stabilizers operate this year and in 2009."

The euro-area economy predicted by the International Monetary Fund to contract by 0.5 percent next year because of the lasting impact of the financial crisis.

The commission unveiled a 200-billion-euro economic stimulus plan, which proposes that EU member states to cut VAT, expand public spending and rate cut by central banks to revitalize the bloc's economy, which has entered technically recession in the third quarter of the year.

The eurozone finance ministers will be joined by their other colleagues on Tuesday to continue discussing the plan and try to find a response to the economic recession.

Source: Xinhua

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