“We must change the course of macroeconomic policies proposed so far, which have been pro-cyclical since the entry into force of the euro,” Hoang Ngoc said, explaining EU countries have lowered taxes in times of growth rather than creating a nest egg for hard times, and now that they are in recession they practice austerity.
Surely, fiscal discipline is important, stressed the French MEP, who is also chair of the Next Left Economic Circle, an initiative of the Foundation for Progressive Studies (FEPS). But countries should not fail to combine it with a plan for recovery: “We must distinguish operating budgets, which must be balanced, and public investment budgets, which prepare for the future and have an impact on growth: these must be funded by good debt,” he said.
According to the MEP, the “good” golden rule, if any, would be to exclude investment expenditures from the calculation of public deficits. That will allow member states to borrow at discretion to invest in innovation, industry, research and infrastructure. Spending should be reduced instead in operating budgets.
This is all the more necessary as the perspective to increase the EU budget, which is a real budget for investment, is pretty grim, said the MEP.
Hoang Ngoc also stressed that the Treaties should be modified to turn the European Central Bank into a lender of last resort.
“To prevent new speculative attacks, the ECB should be authorized to shelter sovereign debt. For now, it buys securities on the secondary market and massively finances at low rates private banks to redeem sovereign debt on the primary market, at some risk of moral hazard,” he said, adding that needs urgent change.
Responding to the question on whether the proposal by British Prime Minister David Cameron and other 11 EU leaders to stick to a liberal agenda for growth, opening the services sector and establishing a genuine internal market for energy, was enough to pull Europe out of stagnation, he responded economic choices have to be political choices.
“The UK has always considered that the extension of free trade area, which is what the the EU has become, was the best shield against political Europe that the country never wanted,” he said.
Instead, it is necessary to strengthen European institutions and adopt real political instruments. These, however, cannot be reduced to the mere introduction in member states’ constitutions of neo-liberal principles of economic policy, whose application would be controlled by the Court of Justice, he added.
Liêm Hoang Ngoc was speaking to EurActiv's Managing editor, Daniela Vincenti
To read the interview in full, please click here.