The European Commission is to unveil plans on Wednesday for Europe-wide government spending and tax relief.

Commission chief Jose Manuel Barroso said over the weekend that the EU plan would be worth more than one percent of the European Union's gross domestic product (GDP).

'We will make a proposal on Wednesday, but it will certainly not be below that figure,' he told Portuguese television channel SIC. 'I can't give an exact figure because we are still working on the package.'

Britain was to unveil its own initiative on Monday, while more details emerged of a huge stimulus programme planned by incoming US president Barack Obama.

The Brussels-based Bruegel economics think-tank has recommended a coordinated EU budgetary boost worth one percent of GDP, focused on increases in research, development and infrastructure spending and an EU-wide cut in value added tax (Vat).

It said in a recent study that an EU stimulus package worth more than one percent of output would be difficult to coordinate across Europe because of member states widely varying budgetary and economic situations.

However, there is little chance of a coordinated cut in vat rates, which can not go to less than 15 per cent under EU rules, because Germany and France are opposed to the idea, according to German Chancellor Angela Merkel.

'A general cut in vat is the response chosen by some countries but is not the right answer for France and Germany,' Ms Merkel said on Monday after meeting in Paris with French President Nicolas Sarkozy.

Some EU countries are not waiting for the European Commission to draft recovery plans and are already rolling out packages.

The Dutch government announced on Friday it was preparing a six billion euro economic stimulus plan to help the country cope with the global financial crisis.

On Monday, the British government was preparing to announce a cut in value added tax which would be paid for with a tax hike for Britain's highest earners.

Reports suggested that the British package could see a Vat cut from 17.5 per cent to the minimum 15 per cent allowed under EU rules.

Defending his plans, British Prime Minister Gordon Brown said that a failure to take action was 'not an option' and would only increase 'both the length and depth of the recession.'

Mr Brown, who has also taken the lead in fighting the financial crisis, also urged coordinated international action to ward off recession.

With a sharp slowdown taking hold of all the world's main economic powers, governments are scrambling worldwide to stitch together recovery plans.

In the United States, president-elect Barack Obama and his Democratic allies in Congress are preparing plans for a second massive economic stimulus programme that could total as much as 700 billion dollars over the next two years, The Washington Post reported on Monday.

The newspaper said that if approved, the amount would be one of the biggest public spending programmes aimed at propping up the economy since President Franklin D. Roosevelt's New Deal.

In Europe, the commission's package will include plans to step up the allocation of six billion euros in EU funding for poor European regions and red tape would be cut, the Financial Times reported on Monday.

The commission has also said that the European Investment Bank, the EU's financing arm, would feature in its recovery package with plans to ramp up lending to small and mid-sized companies in particular. -- AFP