The European Commission’s €315 billion investment plan to spur growth could create more than 2.1 million net new jobs, lowering the bloc’s jobless rate by 1% by 2018, said the International Labour Organization (ILO) based on a report published yesterday (28 January).
But if the three-year plan, announced by Commission chief Jean-Claude Juncker in November, fails to attract and leverage private investment, it would create just 400,000 new jobs, barely making a dent in the EU’s 23 million unemployed, it said.
“If the plan is well-designed, by contrast, the number could reach 2.1 million new jobs by 2018. This would enable a reduction in the unemployment in the European Union by 0.9%, almost 1 percent lower unemployment rate by 2018. It’s a significant number,” Raymond Torres, director of the ILO’s research department, told a news briefing.
“The Juncker plan is potentially an important way to stimulate the real economy directly in complement to the monetary injections that have been announced by the European Central Bank,” he added, referring to the massive bond-buying programme announced last week.
But investors being asked to stump up most of the cash have said Europe needs to come up with more government money and more details if its grand plan to boost growth via new infrastructure projects is to get off the ground.
The plan of loans for infrastructure and small business is meant to include €252 billion in private investment to help bring down current EU-wide employment of some 10 percent, the ILO stated.
“Therefore it is very important to involve projects with large economies of scale, for example energy networks in Europe or green investments, which have a large externality and would not be carried out normally by private investors alone,” Torres explained.
In EU countries with high unemployment rates such Greece, Spain and Italy, many small businesses currently lack proper access to bank credit, he said.
“So it’s very important that the plan includes a strong component of involvement of small enterprises through, for example, credit guarantees, so that full leveraging of funds is done,” he said.
Distribution is key, and funds should not be diverted away from countries and sectors that are most in need, the ILO stated.
The European Investment Bank has invested more in Austria, a low unemployment country, than in Portugal, said Torres. It has also invested much more outside the EU than in Greece.
“So we hope that in the final plan that will be adopted there will be more consideration to the country allocation of the funds, and in particular that high unemployment countries would receive more,” he added.