EU executive urges joint action, economy faces stall

By Marcin Grajewski and Huw Jones

BRUSSELS (Reuters) - The European Commission called on Monday for joint European Union action to boost the economy as its data showed the euro zone already in technical recession and that growth would come to a virtual standstill next year.

Euro zone finance ministers should discuss such coordination on Monday evening and again on Tuesday, when the rest of the 27-nation bloc's finance ministers join their monthly talks, Economic and Monetary Affairs Commissioner Joaquin Almunia said.

"We need coordinated action at the EU level to support the economy similar to what we have done for the financial sector," Almunia said, presenting his twice-yearly EU economic forecasts.

"National action is needed and national action is much more efficient when it is coordinated with a common vision and with a common discussion," he said.

Economic growth in the euro currency area will slow to 0.1 percent in 2009 from 1.2 percent expected this year, said the Commission, the EU's executive arm. It forecast 0.9 percent growth for 2010.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs the monthly meetings of the Eurogroup -- finance ministers from the 15-country euro zone and the European Central Bank -- expressed some support for coordinated policy.

"I'm in favor of putting together measures which are targeted at a certain number of sectors and political concerns," Juncker said before the meeting. "This has to be coordinated in the best way possible at the level of the Eurogroup."

But Dutch Finance Minister Wouter Bos rejected the idea of any EU-wide measures and said the main areas of economic policy coordination were the EU budget rules, called the Stability and Growth Pact, and the ECB.

"I don't think there are any EU-wide measures needed. Economic policy is at the core of national policy. We have a strong European Central Bank, which is a perfect instrument of coordination," Bos told reporters.

"We have a pact and that's our main instrument for economic policy coordination. I am not sure there is a need for a lot more coordination," he said.

The Commission encouraged those EU countries which can, to make full use of the flexibility built into the pact's rules to cushion the economic slowdown.

Bos also rejected France's idea of setting up a euro zone economic government as a partner for talks with the ECB -- a role played by the Eurogroup.

"We are not in favor of creating new European structures parallel to those already existing," Bos said.

OUTRIGHT EURO ZONE RECESSION POSSIBLE

The slowdown will boost unemployment to 8.4 percent of the workforce next year from 7.6 percent seen this year and to 8.7 percent in 2010, the Commission said.