Not much gets Europeans excited these days. When challenges emerge — at least on the foreign policy front — the reaction seems to be almost always the same. Problems with Russia? Let’s expand sanctions. Iran? Let’s keep sanctions. Islamic State? Let’s impose sanctions although just how and on whom is not clear.
But suddenly, out of the blue, there is a bit of a buzz in the winter air. Europeans woke up on Nov 26 with a new “hero”: European Commission President Jean Claude Juncker who strode on to centre stage to promise peace — or at least jobs — in our time.
It was a seminal moment. For Juncker and Europe.
The former Luxembourg prime minister is facing allegations that hundreds of multi-national firms were reportedly attracted to Luxembourg in legal tax avoidance schemes. Juncker was prime minister at the time but denies wrongdoing. The new plan has the advantage of taking the almost-scandal off the media radar.
For Europe, the plan could be the answer to its dreams of revival. The 28-nation bloc is still struggling to climb out of a long and painful Eurozone crisis. Growth rates are low, unemployment is tragically high, especially among young people. People are downbeat and dejected. Even the German economy is beginning to flag.
To top it all, making pessimists even more downbeat, in a speech to the European Parliament last week, Pope Francis likened Europe to a grandmother, “no longer fertile and vibrant”. (I’m not sure he’s talking about the lively grannies I know though…)
Anti-granny remarks aside, the pontiff’s remarks do resonate for many. Europe is getting a tad worn out, depressed and haggard. A shot of vitamins is badly needed.
Enter Juncker with a magic bullet: a 315 billion euro plan to spend EU money on new infrastructure projects as part of an initiative to revive granny and help Europe grow and thrive again.
Only, there is no magic involved. There will be hardly any new money — only €21bn in EU funds as a guarantee to raise private cash in the capital markets — with the rest of the money expected to come from private sources.
EU policymakers say they will be looking for funds wherever they can. Chinese investments will be sought out avidly. Middle East investors will be welcome.
“I often hear we need so-called fresh money. But we need a fresh start and fresh investment,” Juncker told the European Parliament this week. “We will not betray our children and grandchildren by writing cheques they ultimately will have to pay.”
With one eye on developments across the Atlantic, the Commission chief moaned that “While investment is taking off in the US, Europe is lagging behind. Why? Because investors lack confidence, credibility and trust.”
The Commission is making up for the lack of solid details on the plan by upping the hype. Juncker says the initiative represents a cornerstone of efforts to revive an ailing economy.
Others have called it a historic moment, a make-or-break initiative, a European “New Deal” to get Europeans working again.
Certainly, the timing is right. Many European economists have been saying for some time Europe needs to move from the current focus on austerity to programmes which bring back growth.
And the best way to do so is to start investing again — especially in infrastructure.
The Commission believes it could create up to 1.3 million jobs with investment in broadband, energy networks and transport infrastructure, as well as education and research.
National governments could contribute to the fund if they wished and would be asked to come up with a list of projects with “high socio-economic returns” that could kick-off between 2015 and 2017.
With a nod to Martin Luther King, Juncker added that he had a dream. He wanted to see schoolchildren walking into a brand new classroom equipped with computers in the Greek city of Thessaloniki, European hospitals saving lives with state of the art medical equipment and French commuters charging electric cars on motorways.
The good news is that pro-austerity Germany — the bane of countries like France and Italy which want the EU to start spending itself out of economic stagnation — is in favour of the plan.
But EU officials admit the initiative will not fill the gap in the amount of investments needed, especially in infrastructure across Europe. There is also concern that there will not be enough credible projects around for investors to put their money into.
The European Investment Bank will be the “prime mover” in delivering seed money for those investments over the next three years. The plan will now be discussed by the 28 EU leaders at the Dec 18-19 summit.
Juncker’s shift from austerity and cutting debt to investment is not going to be the botox shot needed to transform “Granny Europe” into a vibrant young woman. But it is a start.