The European Union economy has stabilised but remains fragile, EU leaders will declare next week as they call for stimulus measures to stay until recovery is secured, but no longer than 2011, Reuters quoted a draft document as showing. The draft conclusions of the next EU summit also showed the leaders agreed each country should withdraw government support to the banking sector in its own time. But the process should be coordinated and start with rolling back government guarantees for bank borrowing, the draft said. "The economic situation has stabilised and confidence is increasing. Forecasts suggest a weak recovery in 2010, followed by a return to stronger growth in 2011," said the draft, to be endorsed by EU leaders on Dec. 11. "But uncertainties and fragilities remain. Policies in support of the economy should therefore remain in place and only be withdrawn when recovery is fully secured," the draft, obtained by Reuters, said. Governments have been pouring billions of euros into their economies to cushion the worst economic downturn since World War Two, boosting budget gaps to sometimes more than four times the EU limit of 3 percent of gross domestic product. In an effort to retain market and consumer confidence, EU finance ministers set deadlines between 2012 and 2014/15 for half of the 27-nation bloc"s members this week to bring their deficits back below 3 percent. They also agreed that regardless of the deadline, all EU countries should start sharply reducing budget deficits in 2011 at the latest. EU leaders will repeat that message. "Fiscal consolidation should start in 2011 at the latest, earlier in some member states where economic circumstances make this appropriate," the draft said. The leaders will not set deadlines, however, for phasing out government support to the banking system, in line with the conclusions of EU finance ministers on Wednesday this week. "The phasing out of public support measures should be duly coordinated among member states to avoid negative spill-over effects, the timing of exit should take into account a broad range of elements and that phasing out of support should start with government guarantees," the draft said. The leaders will call on the European Parliament to adopt quickly an agreement reached among finance ministers on creating new financial supervisory bodies in the EU so they can start operating in 2010. They will call on financial markets to "immediately implement sound compensation practices".
