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Invest, yes – but not Juncker-style

30 November 2014

Invest, yes – but not Juncker-style

For years, the SP has been demanding an end to budgetary fetishism and a commitment instead to investment. Friend and foe now admit that we were right, that the current period of stagnating growth and mass unemployment is a direct consequence of wrongheaded policies that have eyes only for budgetary deficits. Even new European Commission president Jean-Claude acknowledges that something must be done. His plans for a ‘European Investment Fund’ don’t measure up, however. They lead indeed to more power for this same Commission. A clever move, with the European Parliament again cheering them on, but this is decidedly not what the electorate in general wanted to see in May, when it voted against Brussels’ meddling.

Photo LendingMemo.com (CC BY 2.0)

In one of the European election debates I went one-to-one with Sophie In’t Veld, number one candidate of the centrist party D66. She hammered away, as is always the case with D66, at the need to strictly enforce the 3% norm for budget deficits. I confronted her with the argument that there is a difference between state consumption (money that you spend once) and state investments (money that you put into projects which themselves produce a return of money).I noted that this distinction was one I had to employ during my studies of economics in all macro-economic models with which we were working. This proved unable to persuade D66, just as is the case with all of the Europhiles in Brussels.

These same Europhiles have in the meantime destroyed the European economy. Growth has been stagnating for years and that is a direct consequence of the fact that throughout Europe governments have been forced to cut spending to an idiotic degree. The distinction between consumption and investment has not been made: every penny that the government has spent was immediately suspect, even if it went on building roads, houses or schools.

So a number of crucial years would be lost and at the same time we have to cope with sky-high unemployment and grinding poverty. The budget fetishists are to thank for this. You might think that the European Commission and the Europhile parties would retreat into a corner in shame, but nothing could be further from the truth. Just as was the case at the highpoint of the eurocrisis, they now see a chance to transfer still more powers to Brussels.

This is how this works: Juncker this week proposed establishing a European Investment Fund of €315 billion. He himself has no additional money, but hopes that by mobilising available money in the form of guarantees, more will eventually become available. The Centre for Policy Studies (CPS), an influential European thinktank, has made mincemeat of the entire plan<(http://www.ceps.eu/node/9839)>. The CPS looked firstly at the EU’s total investments per year: these amount to €2,600 billion. Investments in infrastructure total €260 billion. Juncker wants with his plan to stimulate only investments in infrastructure, and all for €100 billion per year. That would work only if there really were new investments to be found, the problem being that for such investment long-term planning is needed (compare Environmental Impact Assessments), so this is never going to work. Chances are therefore that the money will leak away, spent on things that were already planned or which do not correspond to a country’s needs.

There are, however, even more obstacles in the way of Juncker’s plan. Member states can submit plans, and the Netherlands has presented forty of them, such as investments in roads and offshore windparks. The decision as to whether these plans are honoured the Commission entrusts to a group of ‘independent experts’. We have experience of such, and practice demonstrates that this independence is extremely disappointing, as for the most part the experts represent, directly or indirectly, the interests of major corporations. In addition the Commission imposes conditions. Only countries which have carried out ‘reforms’ have any chance. If, for example, France wants money from the fund, the labour market will have to be ‘reformed’, or conditions of employment will have to be eroded.

The winners are obviously the big companies which indirectly, by supplying ‘independent experts’, get to participate in decisions, and the European Commission which gains yet more power over member states’ policies. The political establishment always finds all of this excellent and for the umpteenth time supports the transfer of powers to Brussels, while the voters in the European elections wanted precisely the opposite. With this, the democratic deficit only increases.

Things could be different. Juncker says that investments made by the member states should not be counted in calculating budget deficits. The 3% norm is thus no longer sacred. Excellent, but this should apply across the board to all state investments. We could then consign budget fetishism to its grave, which would create the space for the SP’s plans, such as the establishment of a National Investment Bank which could at last give smaller firms the finance they so badly need. Then we could in addition work on the national level on housing, roads and windmills free of interference from Brussels. That’s precisely what the voters wanted: an active Dutch government which isn’t kept on Brussels’ lead. A government which says ‘3%? Over my dead body!’

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