We all of us, have been highlighting the need for greater volumes of investment, public and private, in Europe, if significant economic recovery is to take hold.
We have been told, time and time again, that with the consolidation of public budgets and with the pursuit of structural reforms, investments and growth would follow.
As Italian Prime Minister Renzi has written in an open letter to the newspaper La Repubblica, this has not happened.
Austerity policies have not delivered growth and jobs.
The contrary has been the case.
Meanwhile, in economies like that of the US where austerity was not the watchword, growth has been stronger – the creation of new jobs much more robust.
What growth there has been in the eurozone is largely due to the fall in the oil prices , that of the euro’s exchange rate, and the quantitative easing of the European Central Bank.
The latter has been most useful and should continue.
But it has been successful in generating greater liquidities, as contrastred to greater investment.
Indeed it might have contributed to increase deflationary forces, which in turn, inhibited new investment.
The truth is that new public and private investment will continue to lag under current circumstances.
Private investment will follow not lead public investment.
Yet public investment has continued to lag.
Let me repeat: unless public investment gives the signal, by itself growing, private sector investment will keep back.
Europe urgently needs new public investment: in the economic infrastructure; in educational facilities for high tech studies; in promoting reindustrialization, even if this has become an empty slogan; in the provision of digital facilites; in social areas, like housing and old people’s homes.
Still, all that is needed by way of public investment has been materialising slowly… too slowly…
I said it last year during this meetig with national parliaments and I will repeat it now.
The rules of operation of the Stability and Growth Pact are to blame for this state of affairs.
They make no distinction between current expenditure and investment in the government budget.
Both are given the same weight when it is a question of calculating deficits and expenditures.
As a result, rules meant to consolidate public finance under the Stability and Growth Pact actually end up pushing governments towards cutting on investment expenditure, in order to safeguard politically valuable recurrent expenditures.
Why is this not recognised as a fact of life?
Why do we stick to procedures that are serving to confirm austerity, without really promoting the conditions that would generate growth, new investment and a sense that we direly need, of being in control of our destiny?

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