Deficit rules bogging down EU states’ growth – Sant

Labour MEP Alfred Sant has called for new public investment in economic infrastructure and educational facilities for high-tech studies to promote reindustrialization, “even if this has become an empty slogan”.

Sant was one of the speakers on a discussion of the EP’s “experiences with enhanced economic coordination and governance” which was also attended by Jeroen Dijsselbloem, Eurogroup President.

Sant said that private investment would only follow on public investment, which was lagging under current circumstances. “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.”

Sant said that rules in the pact that are supposedly meant to consolidate public finance have ended up pushing governments towards cuts in investment expenditure, 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?”

Sant said austerity policies had not delivered growth and jobs, and cited as an example the United States where austerity was not the watchword, and in which growth and job creation had been stronger. “What growth there was 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,” Sant said.

“Quantitative easing has been most useful and should continue. But it has been successful in generating greater liquidities, as contrasted to greater investment. Indeed it might have contributed to increase deflationary forces, which in turn, inhibited new investment.”