EU heads of government will meet this week to debate an expensive economic stimulus plan that aims to keep Europe’s automobile industry afloat, while retooling to create new low emission models.

The auto sector is a key plank of a euro 200 billion public spending injection proposed by the European Commission, aimed at reversing the effects of the credit crunch.

Indeed the plan highlights how car fleet buyers have suffered: “Sectors dependent on consumer credit – like the automobile industry – have seen their markets sharply deteriorate in many member states.”

While promoting liquidity in general to counter this, the plan includes a specific euro 5 billion European green cars initiative, aimed at bringing environment-friendly cars to market quickly and at a lower cost.

This investment would come from the Commission, EU member states and the European Investment Bank.

Its target, said the plan, would be promoting “research on a broad range of technologies and smart energy infrastructures essential to renewable and non-polluting energy sources, safety and traffic fluidity.”

The bank would provide cost-based loans to car producers and suppliers to finance green transport innovation.

EU countries would reduce registration and circulation taxes for lower emission cars and encourage the scrapping of old cars.

And the Commission would develop a procurement network of regional and local authorities to pool demand for green vehicles.