Commission calls for ‘third industrial revolution’

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Following  the election of French socialist President François Hollande, the European Commission has tacked firmly towards the growth agenda and called for a new industrial revolution for Europe.

After an anti-austerity backlash by voters in Greece and France on Sunday (6 May), European Council President Herman Van Rompuy called yesterday (8 May) an informal summit of EU leaders for May 23 to discuss the growth agenda.

The informal dinner on May 23 will lay the ground for another meeting on June 28-29 when leaders are to take formal decisions on their growth and budget consolidation strategy.

After an anti-austerity backlash by voters in Greece and France on Sunday (6 May), European Council President Herman Van Rompuy called yesterday (8 May) an informal summit of EU leaders for May 23 to discuss the growth agenda.

The informal dinner on May 23 will lay the ground for another meeting on June 28-29 when leaders are to take formal decisions on their growth and budget consolidation strategy.

"The debate of consolidation versus growth is a false debate," EU Economic and Monetary Affairs Commissioner Olli Rehn told a news briefing. "In the current economic situation of low growth and high debt there is no choice – we need to pursue both simultaneously."

Commission paper will be discussed at informal summit

Commission President José Manuel Barroso said that each of the member states would bring their own plans for growth to the informal meeting, but also pledged that the Commission would prepare an over-arching paper on the issue for discussion at the meeting.

The precise room for manoeuvre in any growth plan is uncertain. The Commission is proposing to boost the capital of the European Investment Bank – which finances infrastructure projects in Europe – by €10 billion. This would increase the EIB's lending capacity by €60 billion and have a total investment impact, together with private financing it would attract, of €180 billion, according to Commission calculations.

Revolution following steam power and carbon

The Commission also wants to front-load spending on infrastructure in the European Union's budget and to use project bonds – EU debt issued to finance specific projects.

Neither of the plans is new, but they have been given fresh momentum by the victory in presidential elections in France of Socialist FrançoisHollande, who campaigned to shift focus from austerity to growth.

Meanwhile, singing from the same hymn sheet, Industry and Entrepreneurship Commissioner Antonio Tajani, told a committee in the European Parliament yesterday that austerity was not enough, saying he would guide Europe towards a ‘third industrial revolution’. Tajani said that following the industrial revolutions stimulated by steam power and carbon, a new push was required.

A conference in Brussels on industrial policy will be staged by the Commissioner on 29 May, which will form the basis of a re-launch of Europe’s industrial policy, Tajani told members of the Industry and Research Committee of the Parliament. He said that the automobile sector, raw materials and space sectors would be key to this new push.

The election of a socialist in the eurozone's second largest economy is seen by many as a potential game-changer for the European Union.

With François Hollande, France is expected to push harder for growth-enhancing measures alongside fiscal discipline as a way to tackle the eurozone's ongoing debt crisis.

For Germany, which has been the main driver behind the austerity consensus in Europe, Hollande will certainly prove a more difficult partner than his predecessor Nicolas Sarkozy.

Policymakers and economists – particularly among the socialists – claim the eurozone has been too focused on fiscal consolidation, which hurts economic growth, making debt sustainability even harder and threatening to start a vicious circle of austerity and shrinking output.

  • 23rd May: Informal dinner and summit to discuss growth
  • 29th May: Conference on industrial policy in Europe
  • 28th-29th June: Summit of Heads of state and government in Brussels

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