Last-chance Commission: Why Juncker promised investments of €300 billion?

Jean-Claude Juncker is a ‘product’ of the 2008-2010 and still ongoing financial crisis in the Western economic volume. So is his Commission Presidency and he has a deep understanding of that. Juncker, as a President of Eurogroup had to face consecutive crises with Greece, Ireland, Portugal, Spain and Italy. What followed the financial meltdown is high unemployment and today’s anaemic economic situation. In the political field the repercussions of the crisis has turned a fast increasing part of the EU population against their traditional political parties and has heightened the mistrust towards Brussels. It’s not only unemployment though. The fast growing inequality in the distribution of incomes that has driven even fully employed workers to poverty has also perplexed large parts of voters. Nigel Farage’s UKIP party in Britain and Marine Le Pen’s National Party in France are products of the same crisis that brought Jean-Claude Juncker in the helm of the European Commission. That’s why the EU felt it needed a strong leadership by a galvanised central European politician. The Barroso Commission proved to be of a low political key and its President José Manuel, coming from a weak peripheral country, couldn’t managed to transcend the executive character of his office and didn’t reach the political strategy space as for example Jacques Delors did in the 1980s. Berlin and Paris kept ruling Brussels during the past ten years. Jean-Claude Junker’s office is to operate between those borders. A quite political Commission Actually there are already strong signs that the new Commission President is to try hard to reorient the ship. The Luxembourgish Politician has used two tracers to show his intentions; one, referring to the past and the other pointing to the future. His remark that his is the “Last-chance Commission” is a quite powerful message, clarifying that the EU has reached a perilous point in its history. It’s not a small thing to state that the EU faces an existential problem. Only days later after Juncker said that, new developments fully justified this eschatological remark. The British Prime Minister David Cameron, an unfortunate and inept politician, said that London won’t pay its extra dues to the EU budget of £1.7 billion, that has resulted from new estimates (upgrade) of UK’s GDP. EU member states pay the bulk of their contribution to the Union budget according to their income. For months now Cameron is at roof tops criticising the function of the EU in order to placate voters and arrest the fast advancement of UKIP. Regrettably for Cameron and the London political establishment, Farage’s success comes from much deeper developments in the British socioeconomic structures, favouring a fast rising incomes inequality, following parallel developments in the US. Growing inequality… The crucial question is if Juncker will be able to arrest similar developments in mainland Europe. The appearance of the Alternative for Germany (AfD) party is a strong indication that Euroscepticism is rising fast in mainland Europe too. In Germany loyalty to the European ideal had always been a structural part of the ideological base of its entire political spectrum. With the appearance of AfD this is not like that anymore. …and discontent Not to say anything about Hungary’s Prime Minister Viktor Orbán who is now openly and utterly defying Brussels, flirting with Vladimir Putin and denying transfers of natural gas to Ukraine. Surprisingly enough even Marine Le Pen has developed close contacts with Putin rebuffing the Brussels-Washington strategy in Ukraine and thus expressing utter mistrust of French to the EU superstructure. The same Euroscepticism reigns in Italy with Beppe Grillo, but in a lighter south European manner. What about the widespread anti-Troika (the EU-ECB-IMF watchdog of government accounts) feelings in Greece, Portugal, Spain and Ireland? All that said, Juncker is right in saying that his is the Commission of “Last Chance”. Let’s now pass to his ‘tracer’ for the future of the EU. Here comes the promise of €300bn in new investments during the next three years. This is a huge amount of money, big enough to pose and solve a multitude of problems. The first question that arises is if it will come from new sources or from a redistribution of money already set aside in the EU budgets. If this will be the case, then Juncker’s plan would have no positive effect whatsoever. The reassurances that the soundness of the EU financial accounts will be observed, is an indication that it will be just a reshuffling of existing credit lines. Europe needs additional investments Juncker explained that a large part of that amount will come from the private sector. The public outlays will act as catalyst. Still it could be a hell lot of money. In any case it has to be additional resources, if the plan is to have any noticeable impact in reducing unemployment. The new Commission President clarified that it will be new spending to be found by stretching the rules of the reinforced Stability and Growth Pact; but is Germany ready to accept it? This Pact is a new EU Treaty (Economic Governance) setting a ceiling for public borrowing at 3% of GDP. This limit however has already been exhausted or surpassed in many EU countries, with the shining exception of Germany. And the question that naturally arises is if Berlin appears prepared to borrow more, in order to finance growth in Germany but also in other EU countries too. Seemingly the answer to this question is to determine if Juncker’s “Last Chance Commission” will be able to reverse the nasty European climate. If growth and jobs start emerging, then the warm up of the political frost towards Brussels and the main stream parties will follow for sure, and Farage and Le Pen will return to the margins of European politics where they belonged for many years. In any case Juncker will not be alone. Mario Draghi, the President of the European Central Bank stands for the same objectives and he may even ponder of buying government bonds in order to support growth and fight deflation in many member states. It looks as if those two men can together bend the resistance of the Germans. The first signs towards this direction are by now present.