EU exec wants budgetary stimulus for two years

BRUSSELS Nov 25 (Reuters) - European Union countries may fiscally stimulate the slowing economy in 2009 and 2010 but should slash the increased budget gaps when the economy picks up, a draft European Commission proposal showed on Tuesday.

The Commission will propose on Wednesday a list of measures that members of the 27-nation bloc can use to boost the economy.

A draft of the package, obtained by Reuters, did not yet specify its size in billions of euros or as a percentage of GDP. Germany said last week the package would be around 1 percent of the bloc's GDP, or 130 billion euros ($167.4 billion).

"Only through a significant stimulus package can Europe counter the expected downward trend in demand, with its negative knock-on effects on investment and employment," the Commission draft said.

"Therefore the Commission proposes that member states agree a coordinated budgetary stimulus package which should be timely, targeted and temporary, to be implemented immediately," it said.

"This budgetary stimulus should be foreseen for a maximum period of two years (2009-2010) following which member states' budgets should commit to reverse the budgetary deterioration and return to the aim set out in the medium-term objectives."

The medium-term objectives for most EU countries are balanced budgets. (Reporting by Marcin Grajewski and Jan Strupczewski, editing by Dale Hudson)