Jean-Claude Juncker, President of the EC, and several Members of the College of the EC participated in the EP plenary session which focused on the presentation of the creation of a new EU strategic investment plan. He looks here too confident. Will he make the ship turn? (EC Audiovisual Services (26/11/2014)
Jean Claude Junker, the president of the European Commission (EC), announced details of his 315 billion euros promising investment plan two days ago in Strasbourg. This three year project will use money from EU institutions in order to create a fund that will motivate investors to bring back their money in Europe and increase growth and job opportunities.
Investments in Europe are still sluggish
According to the EC’s estimations, it is shown that the investment climate in Europe has weakened compared to the pre-crisis figures. In particular, 2013 total EU investments have decreased by 430 billion euros in comparison to 2007. This causes problems to the real economy by not allowing it to revive.
But why people are not investing in the EU as they did in the past? Investors have lost their confidence in the EU. The main reasons are the huge debt levels of many EU countries and the economic and political underdevelopments.
Junker’s plan
The president of the Commission has come with a plan to face the problem of low investments. Junker’s sayings were the following: “Europe needs a kick-start and today the Commission is supplying the jump cables.” This “kick” will be given by the creation of an EU Investment Fund that will be provided with 315 billion euros in the following three years in order to tackle this issue.
More specifically, this project will consist of 16 billion euros invested by the EU budget and 5 billion euros by the European Investment Bank (EIB). These 21 billion euros will be leveraged in order to end up to the amount of 315 billion euros till 2017. Furthermore, EC is estimating that these investments will create approximately one million jobs.
Will this plan work?
This proposal has yet to be approved by the EU leaders in December’s summit. Will the European leaders support it? The German government and particularly Chancellor Angela Merkel is in favour of it which shows a first positive sign. Gianni Pittella, the group leader of S&D and Syed Kamall, the group leader of ECR showed positive attitude towards the plan but expressed the need for more details.
However, Dimitrios Papadimoulis, representing the GUE/NGL group and Patrick O’Flynn from the EFDD group stated that this project will not help the EU economy. Especially, the former said that: “the package you (Junker) presented is just empty words. €16bn comes from the EU budget and €5bn from the EIB. There is not one Euro of fresh money in there, and you promised that you are going to create some kind of leverage effect multiplying funds by 15. In these times of stagnation and recession in the Eurozone, there is no economist in the world that would believe this”.
Productive or not, this plan will be judged by its outcome (if implemented) and by the results it will have on the real economy. One is for sure though; the money that investors should “throw” in the real market is plenty, making the success of this project difficult.
Will the EC and EIB convince investors to come back to the Old Continent or the European institutions will fail the EU citizens?
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This Junker investment plan would have very low effects in Italy and also in other weak countries if simultaneously we do not shocks some well identified factors in these economies . This must be strictly coordinated with a more powerful EU new economic legislation and governance .
These are the steps to follow :
a) we need to give spending and /or saving power to lower middle and lower up class through houshold basic cost reductions (taxes, energy, health, education etc.)
b) break the monopoly in the market for energy, insurance, banking and trade unions from one side and cut waste, inefficiency and corruption in government, Public Administration and political parties from the other side .
To go back to competitive development we dont need incentives in various sectors of industry .. we need to make Public Administratione and Business work in a transparent, efficient , meritocratic and competitive way through a strict respect of law . The money for incentives should be used to lower taxes.
To give substance to these measures individual countries are no longer able to act alone as the financial variables are all interconnected in the world. As we said before it is useless a program of investment if simultaneously across countries (no exceptions) are not taken concerted maneuvers with international organizations (UN, World Bank, IMF, etc … )to REGULATE international finance and STOP Tax evasion, CLOSE Tax Havens ( all tax Havens .. ) and ensuring TRASPARENCY and MERITOCRACY.
We need to work on this two-pronged strategy otherwise the EU government attempts will only attempts and weak countries will slip more and more below