"Europe has the money to kickstart growth"
Comment by Federal Foreign Minister Guido Westerwelle as published in The Times, 23 May 2012.
We don’t need flash-in the-pan stimulus but the EU’s €1 trillion budget must be used to get the continent working
The spectre of debt haunts Europe. Overcoming the economic and financial crisis will take not months, but years — and there are no short cuts.
The real causes of this crisis are huge debts incurred over many years and lack of competitiveness in the crisis countries. Consistent long-term reduction of budget deficits is an indispensable precondition for recovery. That is why the eurozone’s fiscal compact — the treaty agreement to keep deficits under control — must not be renegotiated now.
Budget consolidation is just one pillar holding up strong national economies: the other is growth policy. Responsibility for fostering growth lies first and foremost with member states. They must undertake structural reform to restore the competitiveness needed for new growth.
This includes making social security systems fit for the future, liberalising labour markets, particularly to help young people find work, eradicating moonlighting and black markets, and making education, science and research top priorities.
The countries caught up in the financial maelstrom have already decided on important reforms. We are aware of the difficulties that many people across Europe currently face and have great respect for this.
Given the shrinking economies in some countries and, above all, alarmingly high youth unemployment, the reforms that have now been launched are the only chance to get back on track for sustainable growth. Certainly patience is needed: it will be a while before the reforms take effect, but when they do the economies will be all the more successful. We know this from experience in Poland, the Baltic states and, not least, Germany.
But at a European level, too, we must do more to boost growth. That is why we want to supplement the fiscal compact with a European growth pact for more competitiveness. This should contain six points:
First, the EU budget should be biased towards growth. Anyone who wants new flash-in-the-pan stimulus packages financed by yet more borrowing has learnt absolutely nothing from the crisis. The EU must use its resources better without spending more. There is money available for projects that will bring future benefits.
The EU has been negotiating its budget for 2014-20 in recent months, planning for a budget of €1 trillion over this period. We should concentrate on using this huge sum consistently to promote growth and employment, innovation and competitiveness. At the same time, spending must bemore closely monitored and linked to measurable standards. Every euro spent from the EU’s budget must be shown to have been spent effectively.
Second, unused EU funds must be put into play. About €80 billion from the structural and cohesion funds in the current period have not yet been allocated to any project.
The European Commission and member states must now invest these funds quickly and effectively in achieving new growth through better competitiveness.
Third, access to capital must be improved. Although some countries have embarked on the right course, the banking sector cannot help properly as it is burdened with bad loans. So companies cannot borrow to make sensible investments that would stimulate growth. We can and should use the European Investment Bank to a greater extent and in a more targeted way so that small and medium-sized businesses have better access to loans.
Fourth, infrastructure projects must be promoted. The banking sector’s sluggish “blood supply” is also a problem for larger-scale infrastructure projects in Europe. Our roads and railways, energy and telecommunications networks are among the European economy’s trump cards. They make an important contribution to our standard of living, which can only be secured in a Europe that continues to grow closer together. State-of-the-art infrastructure opens up new prospects for growth by making private sector investment more attractive. We must mobilise private capital for the cross-border expansion of European infrastructure and look at innovative forms of public-private partnership.
Fifth, we must complete the internal market. In the 1980s and 1990s the so-called “four freedoms” — the free flow of goods, capital, services and people — released tremendous forces for growth. Today the expansion of the internal market to cover new spheres again offers great opportunities. That applies to the digital economy and e-commerce. It also applies to the energy sector and will strengthen small and medium-sized companies by cutting red tape and ensuring better access to venture capital. For additional growth we must also strengthen cross-border mobility. Employment opportunities and the prospects of young people must be a clear priority.
Sixth:Finally we want to strengthen free trade. Three quarters of world trade takes place outside the European Union and more than 80 per cent of global growth is now produced outside Europe. The EU must help to make the Doha Round of World Trade Organisation talks a success while concluding more free trade agreements with both new and long- established centres of power on the world stage.
This all shows that you can create growth without incurring new debt. A new growth pact should be adopted as early as next month at the European Council meeting.
We are under no illusions: there is still a long way to go to get out of the crisis. But if we resolutely pursue budget consolidation and reform and use the possibilities open to us creatively — to give impetus for growth in the short term too — then the whole of Europe will emerge stronger and healthier than it was before.
We Europeans must stand together to overcome the crisis. We must show the determination to hold our own as a European cultural community in a globalised world.