The short-term economic policy objective to reinforce aggregate demand by monetary and fiscal policy measures belongs to the first category. The ECB has lowered interest rates and considerably increased money market operations, i.e., the total volume of shortterm loans to banks. In addition, EU countries have agreed to support the economy in 2009 and 2010 by raising fiscal expenditure in the total amount of 1.8% of GDP. However, this is constrained by rapidly expanding deficits and external debts. Therefore it is important that EU Member States make already plans for reducing fiscal deficit in the next years. The European Commission stresses that in the current complicated economic environment the Stability and Growth Pact is still relevant. The longer-term objective in the EU is to achieve fiscal balance or surplus. Second of all, it is extremely important to restore confidence in the financial sector. The minimum rate of guaranteed deposits in the EU was raised to 50,000 euro already in 2008. Thereafter Member States have agreed upon common principles to support the banking system. At the end of 2008 Member States put the main focus on the banks' liabilities side to ensure banks would be able to finance their operations also in a more adverse market situation. To this end many countries have offered collaterals to loans taken by banks, i.e., the state guarantees the repayment of loans taken by banks. In several countries the government has made contributions to banks' capital and acquired holdings in commercial banks.
On the one hand, tougher financing conditions and the drop in property prices have hit hard countries that have been relying on financial services and domestic demand in recent years, mostly Great Britain, Spain and Ireland, but also Estonia. On the other hand, the crisis has not spared  2  BIS Review 89/2009  countries that have been focusing on industrial production exports, primarily Germany, but also Sweden and Finland. Thus, the political choices of the Member States vary as well. Different conditions for countries borrowing from financial markets make up an additional problem in the EU. General distrust in the global financial markets as well as growing fiscal deficits, expanding government debts and insecure growth prospects have caused investors to become more risk-averse. As a result, the spread between the yields of government bods in the EU has notably widened. Some Member States must pay higher interest compared to a couple of years ago when they wish to borrow. This makes it harder to finance state expenditures. Based on the above, the EU's economic policy measures to exit the crisis can be divided into three large categories that were agreed upon in the European Economic Recovery Plan at end-2008. The shorter-term goal is to stop the downturn and to stabilise the economy. In longer term, it is necessary to restore the confidence of enterprises, households and financial markets in the growth potential of the European economy.