PM pushing for growth treaty

1,400 billion kroner of unspent EU structural funds could be used for investments to stimulate growth and jobs, PM Helle Thorning-Schmidt says

No Washington state fair would be complete without it (all photos: Luisa Kyca)
May 22nd, 2012 11:11 am| by admin
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PM Helle Thorning-Schmidt (Socialdemokraterne) said that the creation of a European growth treaty would be a perfect ending to Denmark's six-month presidency that ends at the beginning of July.

The PM’s statements came ahead of tomorrow’s informal meeting of European leaders in Brussels where Thorning-Schmidt hopes the first stages of the growth treaty will be agreed upon.

“It looks like we will be able to move ahead with discussions about creating growth and new jobs,” Thorning-Schmidt said, adding that she was optimistic about the outcome of discussions between the German chancellor, Angela Merkel, and the new French president, François Hollande.

“The election of Hollande means that there will be wind in the sails for many of the initiatives that the Danish presidency started,” Thorning-Schmidt said.

The PM pointed out that growth and job creation have been high on the Danish presidency’s agenda from the start, but admitted that tackling the euro crisis had instead taking centre stage over the past few months.

“We are happy that discussions that previously focused exclusively on the topic of economic discipline have now moved toward talks about growth,” Thorning-Schmidt said.

Among the potential tools in the new growth treaty is reform of the EU’s single market, a strengthening of the European Investment Bank to let it give more loans, and a proposal to create so-called ‘project bonds’ that would raise money for infrastructure projects. Finally, the presidency is hoping to speed up the creation of trade deals with a range of non-EU countries.

“We are also discussing how to use our structural funds in more intelligent ways that foster growth and job creation,” the PM said.

Despite the economic crisis that forced governments to make drastic cuts to public spending, there is currently about 1,400 billion kroner sitting in the EU’s bank accounts waiting to be spent. The money stems from the EU’s structural and cohesion funds – money earmarked for projects in the EU to support flagging regional economies – that instead could be integrated into a growth treaty.

“We will discuss whether we could use the funds in a better way. There is a reason the money is unspent and this is probably because the projects they were meant for were not good enough,” Thorning-Schmidt said. She dismissed, however, the possibility of borrowing to stimulate growth.

“No European countries want to go further into debt at the moment. Taking on debt will only damage growth,” Thorning-Schmidt said, adding that running healthy economic policies are rewarded with low interest rates that in themselves could stimulate growth.

Thorning-Schmidt has been criticised in recent weeks for siding with the conservative Merkel rather than the socialist Hollande on a range of issues concerning economic discipline, the conditions of a European growth treaty and the possibility of a financial transaction tax.

But Thorning-Schmidt rejects the accusation.

“It’s completely incorrect to say that I’ve thrown myself into the arms of Chancellor Merkel,” Thorning-Schmidt said. “My view is that we need to do both – we need to make sure that there is better control of the income and spending of EU member states, and that the members live up to their responsibilities in this regard. At the same time we need to do everything possible, both on a European and national level, to create growth in Europe.”

“These two goals are dependent on each other," she added. "You can’t have growth in Europe if there is no control of debt and a country’s finances. It’s also evident that it’s easier to take control of finances and keep a balanced budget if there is more growth in Europe.”

FACTFILE: The Danish Presidency – Thorning-Schmidt’s to-do list

The Danish presidency is approaching its closing phase and there is much to do, especially where economic growth is concerned. Here are some of the points that EU member states need to agree on soon:

Better use of structural funds

  • Over 1,400 billion kroner of EU structural funds are waiting to be spent. New rules would enable the money to be spent on national investments that would create jobs.

Expand borrowing opportunities

  • The European Investment Bank could be strengthened with more money and rules that make it easier to lend to businesses.
  • The creation of project bonds would enable countries to find the necessary investment to fund infrastructure projects such as in transport, energy and broadband internet.

More trade deals with non-EU countries

  • Negotiations for trade deals with countries such as Japan, Canada and India, which would open up enormous export opportunities, are currently underway.

Finalising directives and rules

  • According to the European Commission, the energy efficiency directive that is currently in its final phases of negotiation could create two million jobs before 2020.
  • Increased standardisation of products in the EU could increase trade and growth, as would a simplified patent system.
  • Rule changes for venture capital firms may make it easier to invest.
  • Improved internet trade, cheaper roaming prices and improved consumer rights all have potential to create growth across the EU.
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