French President François Hollande proposed a Keynesian-style investment plan for Europe, which includes investments of €1.2 trillion to renew economic growth. EURACTIV France reports.
Hollande handed Herman van Rompuy France’s detailed plan for the next Commission on Tuesday (24 June). The document outlines the French government’s priorities for the next executive, including a focus on economic growth, energy and security.
“It was important to respond after the European elections. We couldn’t just do nothing,” said the French government.
The French Socialists’ ambitious plan comes a month after the National Front won in the European elections with 25% of votes, far ahead of the Socialists’ 14.7%.
€1.2tn, or ten Marshall Plans
François Hollande says that Europe should cough up €1.2tn to invest into the European economy. This amount is comparable to US President Franklin Delano Roosevelt’s Great Depression-busting New Deal in 1933, and is almost ten times larger than the Marshall Plan that rebuilt Europe 70 years ago. In comparison, the Marshall Plan is equivalent to €140 billion today.
The major European investment plan requires investing 2% of European GDP in five important areas: “large infrastructures especially in the areas of energy, transport and digital”, research and development, energy efficiency, training and qualification of young people, and health.
According to the French government, the dilapidated state of public finances across numerous European countries is not a cause for concern, because economic growth will reinstate tax collection and stabilise public finances.
The plan proposes alternative sources of finance, such as the Stability and Growth Pact. This requires relaxing EU budgetary constraints.
“The EIB (European Investment Bank) must not take risks in case it is has to take over from private investments” said the French Presidency, and evoked “project bonds”. Project bonds are bond issues that are allocated to a project, co-financed by the European Investment Bank, and guaranteed by funds in order to reduce risks.
However, EIB projects are struggling to get off the ground, even though dozens of projects are in the pipeline.
Creating European debt
France wants to give the Eurozone greater financial competences. François Hollande has advocated for this for some time. This means creating pan-European debt instead of national debt. The European Stability Mechanism already created European debt in order to finance Ireland’s rescue package. Hollande’s plan works the same way, but instead of paying off debts, it would provide greater investment. The objective is to share risks at a European level, and ensure low interest rates for borrowing money.
The French government claims that its project is backed by other European socialist governments, which met in Paris on 21 June. Although the left has rallied behind Hollande’s ambitious plans, the European right will be harder to convince, especially in Germany. A German diplomat told EURACTIV that he refused to comment before the European Council.
The almost utopian investment plan proposed by France will play an important role in ongoing negotiations over the make-up of the next EU Commission. Although it has little chance of being accepted as is, the plan is part of a bigger political strategy in which Italy and France are trying to pull European conservatives away from austerity, and push them towards greater economic growth and jobs.
“A new and different political side has emerged. Herman van Rompuy realised this at the meeting in Luxembourg, which went well,” said a source close to the French government. Ministers for European Affairs will meet on Tuesday 24 June in Strasbourg to prepare for Friday’s European Council.
"The French President defends a plan to put the European Union back on the right track for the next five years. In the build up to the decisive deadline, I support, along with the majority of the French parliament, this ambition and this project" said Elisabeth Guigou, MEP and president of the foreign affairs committee in the French National Assembly. She is also candidate to become France's next European Commissioner.
The Party of European Socialist campaigned against austerity in the European elections.
The European People's Party won the European elections, but must now form a majority with the Social democrats. One of the Socialists’ demands before forming a coalition is to reduce the budgetary constraints of the Stability and Growth Pact.
- Invitation letter by President Herman Van Rompuy to the European Council on 26 and 27 June