Euro Summit approves the developmental investment package
The investment plan of the new Commission President, Jean Claude Juncker, has been given the “green light” by the European Heads of State and Government in the last Euro Summit of the year (18 December).
The so-called “Juncker-package” is based on a proposal to mobilise €315 bn of public and private investments, which aim at stimulating growth and the European labour market within a three-year period (2015-2017).
More specifically, a European Fund for Strategic Investments (EFSI) shall be established in collaboration with the European Investment Bank (EIB), which will be based on a guaranteed €16 bn from the EU budget, along with another €5 bn that the EIB itself has undertaken to provide. This initial capital worth €21 bn is expected to attract fifteen times its size in investments, namely €315 bn.
Despite its general approval of the package, the Euro Summit of the 18th of December essentially refrained from tacking basic problematic aspects accompanying this “developmental” proposal, which lead to differences of opinion among the member-states.
The basic principle underlying this plan is to limit the role of the public sector to the provision of guarantees, rather than its substantial participation through a generous amount of public funds. The member-states of the “rich” North have not yet indicated any willingness to effectively assist the Fund, thus remaining faithful to the doctrine of tight fiscal policy. In order to tackle this challenge -which has been pointed out as the Achilles’ heel by the critics of the plan- the European Commission has proposed that the member-states’ contributions to the Fund should not be counted for in their public debt, thus creating a window of flexibility in relation to the strict rules of the Stability and Growth Pact. This proposal has been welcomed by those countries faced with significant debt and deficit problems (such as France and Italy), although it is striking that the text of the Summit conclusions merely “takes note of” the “favourable position the Commission has indicated towards such capital contributions in the context of the assessment of public finances under the Stability and Growth Pact, necessarily in line with the flexibility that is built into its existing rules”.
Another issue of discord between the “rich” North and South which is going through economic hardship -and which the last Euro Summit avoided tackling in its essence- rests on the criteria through which projects will be selected for funding. German Chancellor Angela Merkel made it clear -in response to a relevant question during a press conference- that she does not wish politics to be involved in the selection process. “The criteria have to be business-related,” she underlined.
As far as the timeline is concerned, the Commission will present a draft law in January 2015, which the legislators of the Union will be asked to endorse by June at the latest, so that new investments can be routed as early as mid-2015.
Nevertheless, the President of the European Parliament, Martin Schulz, expressed his doubts as to whether such a fast-track process will be possible.
Greek government: “Growth is taking on a leading role”
Greek Prime Minister Antonis Samaras characterized the Euro Summit of December as “very important for Greece,” describing the Juncker-package as “an ambitious and readily realizable development plan” and recognizing a “political symbolism” in its ratification. “This initiative is indicative of a turn of Europe towards growth in a period of recession. It marks the transition to a new era for the EU, where growth is taking on a leading role,” he pointed out.
The Greek Prime Minister stressed that within the triangle fiscal consolidation – structural reforms – investments, the third aspect is indispensable in order for Europe to be competitive in the future.
“Moreover, this development marks the added value of the private sector,” he said, arguing that “the private sector is officially invited to participate along private economic criteria, in sectors where it would previously not dare to invest”.
Specifically for Greece, the aim is -according to the Prime Minister- to identify major, mature projects, both public and private. “Greece has been among the first three countries to have sent a list with such projects. It is significant that the funds will not originate from the structural funds or the Cohesion Fund,” he said, pointing out the need to allocate investments “in an evenhanded manner”.
“Nobody wants Greece to exit the Euro”
Greece was not officially included in the agenda of the Euro Summit but, nevertheless, political developments within the country occupied the European leaders. “Everyone is interested in Greece,” said the Prime Minister, whereas journalists addressed relevant questions at the German Chancellor and the French President. Asked about the situation in Greece at the end of the Summit, Angela Merkel expressed her hope that the presidential election has a “successful” outcome and that Greece remains in the path of stability.
Francois Hollande said in response to a similar question: “I am not the one to decide instead of the Greek parliament and the Greek people,” adding that the Greek people will have to decide on what government and Prime Minister they will move ahead with.
Moreover, Hollande mentioned that, despite political uncertainty in Greece today, the situation is by no means comparable to the situation in 2012, given that “significant progress has been made ever since”. “Two-and-a-half years ago, there were several people who questioned whether Greece should remain in the Eurozone, but today no such issue is raised. Nobody wants Greece to exit the Euro,” the French President stressed, while expressing his confidence that “there is no risk of further complications with Greece”.
Referring to the two-month extension period that Greece has been granted, he pointed out that both he and Chancellor Merkel hold that the IMF and the ECB should not pose obstacles to Greece, in order for the Greeks to continue hoping for a better tomorrow. However, they insisted that the EU expects Greece to continue the necessary reforms.