Last week the president designate of the European Commission, Jean Claude Juncker, announced at a speech to the European Parliament, a €300 billion investment programme to revive the European economy, create jobs to tackle the unemployment problem (which has reached maximum levels ever registered in some countries), and stimulate growth over the next three years.
The money should come from existing resources, the European Investment Bank and the private sector and will be channelled mainly into the energy sector, the transport sector and the ICT sector.
He also stated this investment programme should be achieved without changing the EU’s strict rules on budget deficits and debt reduction.
In fact, he considers this investment programme to be the third pillar of the strategy “to get Europeans back to work”; the other two pillars being the structural reforms and cutting back public debt.
The EU does need to reinvent itself by laying once more the foundations of a social market economy, which has in fact proved itself to be superior both to the Soviet system and to the capitalist system
The contention of Juncker is that the European private sector has the necessary funds to invest, but so far it has been reluctant to do so. So the objective is to provide a kick-start by setting aside €8 billion, to provide for €21 billion of capital, that could help trigger as much as €300 billion of private investments.
In last week’s contribution, I drew a parallel between this address of Juncker and the address made by Pope Francis at the same venue and on the same day. Both underlined the urgent need to recognise the problems which the current economic situation has created and that a solution needs to be found with the contribution of all concerned and for the benefit of all concerned.
In fact, Juncker’s plan is aimed at harnessing private resources instead of leaving them idle, with the risk of them being used for speculative purposes.
This is a fundamental issue that needs to be addressed at an EU level as well as at the individual country level. Data continues to show that there exist the financial resources for investment in productive activities – those type of activities that generate wealth and employment for the many rather than for the few speculators who make money by just moving it around.
Yet, private investors are hesitant to commit funds to such investment.
There are some pertinent questions that we need to ask:
• Why are investors so hesitant?
• What are the risks that they are perceiving and which national governments and the European Commission are not addressing.
• Have private investors run out of ideas?
• Have they become so much in love with the financial economy, which enables them to make super normal profits within a short time, to such an extent that they have forgotten about the productive economy?
• Have private investors become so dependent on state intervention, to the extent that they are waiting for governments to invest before dipping their feet in the water?
• Have financial institutions forgotten their supportive role to the economy and are using the liberalist approach to assert their supremacy over the productive economy?
• Have banks become so big that they need to be broken up, not because they have become too big to fail, but to rediscover their real and intended role in the economy?
• Should we go back to the concept of regional banks, which operated within their own community and so had every interest to see the productive economy flourishing?
• Does the European Union need to reinvent itself to become once more a vibrant economy?
In the past decades it had managed to take the middle ground between the state capitalism of the Soviet system and the economic liberalism of the US and it had worked. Unfortunately, the model of the social market economy appears to have fallen into disuse. Does it need to become the primary economic model for Europe once more?
This discussion applies also to our country. Former prime minister Eddie Fenech Adami had been the key promoter of the social market economy in the local context during the early 1980s and then after he took office. The country’s performance of the last 27 years is a testament of how right he was. I believe that we need to strengthen this model in our country.
The answer to the question posed in the title of this week’s contribution is in the affirmative. The EU does need to reinvent itself by laying once more the foundations of a social market economy, which has in fact proved itself to be superior both to the Soviet system and to the capitalist system.