May I start by thanking the shadow rapporteurs and their staffs, as well as the assistants who worked directly with me, for their inputs in making this draft report possible. They have a very good share in what can count as its good points. I retain full responsibility for what it may carry by way of defects.
The report presents some conclusions regarding this year’s Country Specific Recommendations, CSRs, put forward by the European Commission in the wake of its Annual Growth Survey for this year. I say “some conclusions” on purpose.
Last year and this one, the Commission streamlined and reduced its recommendations. Better few and focussed to make a more meaningful impact, than many and diffuse, for these easily get blurred and overlooked. In preparing the present report, the aim has also been to streamline the presentation, mainly by focusing on one issue: investment.
Inevitably in the process of sifting through the over 330 amendments received and trying to establish a common text, the original aim had to be watered down. Not too much I hope, even if there could be dissatisfaction that very valid points made in amendments as tabled, have been sidestepped in the quest for focus. Some topics that were sidestepped happened to be quite important for me too, such as underdevelopment in peripheral and island regions, especially in the south.
The theme of investment, or its lack, within the overall thrust of the CSRs is central to the ongoing dilemma faced by eurozone economies, indeed the rest of the EU. It is quite likely central to the major capitalist economies. While this draft report was being prepared, the ECON committee held a meeting with the Governor of the Bank of France Mr. Francois Villeroy de Galhau. In his presentation he highlighted the investment deficit, or dearth as he calls it, which is at present plaguing not just Europe but also America. And this despite the low cost of capital, as of now. He claimed that the reason for this dearth is not well known or understood.
Arguably, investment dearth is a main reason why European growth rates have remained unimpressive. So it is in the interest of us all to reflect on this problem and to focus on how we can reverse the reluctance to invest.
Now, an academically respectable argument that was advanced during our discussions is that the unique exchange rate within the eurozone, covering as it does very divergent economies, is in and of itself a major reason to explain why the propensity to invest remains low. According to this critique, Keynesian approaches to revive the investment appetite will not work given the current eurozone framework.
Personally I find this analysis of great interest. However it does not explain why in the US economy too, the propensity to invest is at a historical low. Also, within Europe and the eurozone, there have been in the past periods when investment rates were much higher that the present ones, even though then as now, the eurozone could be claimed to operate at a suboptimal level. Surely, all other things being equal, it is rational and proper that one tries at least, to go “back” to the higher investment levels achieved in the past.
This is something about which all political groups should agree, though we will quibble whether the investment we look forward to should be only private, or both public and private, or something else. That this is so is shown in the various ways by which we have supported the EFSI intiative, though we do not share necessarily the same appreciation of its effectiveness. And in large part, we support too its extension and enlargement.
Naturally this time too, up for discussion came the ownership by national authorities of Country Specific Recommendations and their implementation rate – still very low – by the same authorities.
From what I heard, and from the insights that amendments submitted bring up, we will need to reflect more on this issue. Certainly, there is a crucial divide between the Commission’s necessarily eurocentric approach towards CSRs, and the national political perspectives that the capitals of member states will bring to their consideration. In the adversarial politics of parliamentary democracies, CSRs can very often be perceived as options which sacrifice national interests to make way for pan-European strategies. They can also seem like tools offered to Oppositions for them to indulge in partisan attacks against the government of the day.
In my view, the contradictory pulls of such tensions still need to be clarified.
Beyond this however, we need to recognize that the implementation of CSRs, not least where investment initiatives are concerned, is highly dependent on subnational and regional authorities. This is so to a greater extent than I believed when setting out to prepare the present draft. As now tabled, it recognizes the role of subnational and regional authorities in the implementation of CSRs. The greater involvement of these authorities could indeed hopefully help bridge the ownership and implementation gap between the recommendations as set in Brussels, and the measures undertaken in national capitals to satisfy the requirements of the European semester.
Thank you Mr Chairman.
Dr. Sant’s response
Thank you Mr. Chairman, and I thank again, all the other rapporteurs and all the other colleagues who worked with us on this report. I have listened to quite a number of arguments during this process. Many of them were very respectable from an academic and a professional point of view, especially those related to the fundamental critiques of the eurozone, however, our work on this report was not to go back to the creation. But, within the boundary positions, boundary conditions in which we work, to take a look at the CSR’s and come up with ideas, with comments, with recommendations that could make them, within a marginal perspective, from a perspective of year to year, onward going policy making more meaningful. It seems to me that looking at the CSR’s from the investment perspective makes sense. It makes sense because many of the problems that we face are related in a way to the investment dirt that has already been mentioned. This investment dirt does not relate only to the eurozone. It also relates to the capitalist economy model and the global capitalist economy as a whole, especially the US. If we are going to argue that the US is also a suboptimal monetary zone, then I think we are carrying the argument too far. On this basis, having the impetus to increase investment within the eurozone, on a marginal basis, from year to year, public and private I would say, that is a way forward to improve the living standard, to improve the economic performance, to improve the social performance of the zone as a whole and of the EU. And it is from this perspective that we have tried to achieve the compromises that we have presented today. Of course, we have not tackled, we have not dealt with the fundamental, creation-ary problems of the eurozone, that is something that is outside the limit of this report. Within the limit of this report though, I still think it is possible to make recommendations to make policy moves that can contribute to an improvement of the current situation whether it is optimal or suboptimal. And it is in this perspective that we have presented the amendments that’s here that you see before us. Thank you Mr. Chairman.