Nov 28 2014
European economy needs kick start…
My Socialist and Democrat colleagues in the European parliament have rightly decided that we need a good old dose of Keynesian Economics: they have proposed to set up a new €400 billion fund as part of an investment plan to boost growth and create jobs in Europe.
For the first time, since the Barroso era, growth and flexibility are seriously being taken into account at European Commission level. This new approach could represent the beginning of a revolution for Europe.
What is being proposed is ‘shock therapy’ to boost the European Union (EU) economy. A shock therapy carried out by new money – public and private – to be invested in a new European investment instrument for selected European projects, projects which should not be calculated in the national deficit.
It is being argued that there is no more time for a middle of the road strategy. It is the time for ‘brave and wise’ decisions. It is proposed to have a shock therapy to recover our economy and to save the EU from populisms and disintegration.
Investments in any old project won’t get Europe back on track. What’s important is not only the quantity of the investments but where the money is invested.
The transition towards a sustainable and resource efficient economy is the overriding priority and the best way forward. Investments should be targeted towards energy transition and energy efficiency, towards the digital economy and innovation and towards human capital, thus boosting job creation. The EU should focus on projects which could never flourish without a share of public investment.
The EU is perhaps now facing the risk of a long period of low growth and mass unemployment. We are also confronted with an investment deficit estimated at €300 billion per year. Member states need to recover flexibility in order to be able to invest. Both private and public investment must be revived. Public funds must serve as a leverage to attract private investments. A slight element of subsidy, such as an interest-free loan, could unlock many important projects which otherwise could not afford financing on purely commercial terms. European investments should also cover all EU Member States and be aimed at supporting regions in crisis.”
My colleagues have stressed that they will not support a ‘fake’ investment plan. Fresh money is required. That is why they propose to create a special fund. The initial capital would gradually be provided by EU Member States in order to reach €100 billion within six years. These national contributions should be exempt from the calculation of the public deficit and public debt.
On this basis, the fund could mobilise an additional €300 billion provided by private investors. This public financial capacity of €400 billion could generate a total of €500 billion of public and private investment – an excellent boost for the European economy.