EU investment plan – accelerating with the brakes on
One thing the ETUC has been repeating ad nauseam since the crisis is the need for a European investment plan to drive growth and jobs. Almost everyone seems to have come round to agreeing with us recently including the new President of the European Commission Jean-Claude Juncker. The deal with Socialists in the European Parliament to vote for him as Commission President included the promise of a €300 billion investment plan spread over 3 years (€100bn per year).
So far so good. Mr Juncker has now launched his plan – apparently worth €315 billion when unveiled at the end of November, within a month of taking office in Brussels. The ETUC demanded investment and we now have an investment plan. Thank you Mr Juncker! It’s a welcome move. But I am not getting too excited because unfortunately it is neither of the substance nor the size required.
Substance? It is based on ‘seed money’ of €21 billion from EU funds and the European Investment Bank. Chickenfeed is how one trade unionist described the €21 billion public ‘seed’ money. The idea that it can be multiplied by 15 by private investment to reach €315 billion is barely credible. I called it relying on a miracle, others talk about magic, smoke and mirrors, wishful thinking, or more worryingly ‘complex financial instruments’.
Size? Even if €315 billion investment did result from a €21 billion ‘seed’ it would, at best, cover 40% of the annual investment shortfall since the crisis. So I am not holding my breath on it having a major impact on jobs and growth.
The ETUC’s plan – 2% of GDP, worth some €250 billion per year, over 10 years – is much more ambitious.
What further undermines trade unionists’ confidence in the Juncker investment plan is that Mr Juncker insists that it must go hand in hand with ‘fiscal consolidation’ (Government-speak for cuts and austerity) and ‘structural reforms’ (almost invariably Government speak for attacking wages, working conditions and collective bargaining).
It is like accelerating with the brakes on.
‘Fiscal consolidation’ and ‘structural reforms’ have resulted in many workers losing their jobs or earning less, others forced into precarious contracts, and yet others suffering cuts in pensions or benefits. The result is that most people have less money to spend on goods and services. This depresses the economy. The Government earns less in tax, and so needs yet more ‘fiscal consolidation’. It’s a sad story which has been repeated the length and breadth of Europe.
In this stony ground a small investment ‘seed’ is unlikely to flourish.
Imagine if people got a pay rise instead of wage and benefit cuts, or a secure and decent contract instead of a zero hour contract. They would spend more. This would drive growth and create jobs. And earn the Government more tax revenue which would help ‘fiscal consolidation’.
You have taken one small but important step with investment Mr Juncker. I will urge Governments to top up the investments. But you need to help your investments along by easing off damaging fiscal consolidation and harmful structural reforms.