Danuta Huebner w Parlamencie Europejskim

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Austerity - growth - cohesion policy. Remarks by Professor Danuta Hübner, 31 stycznia 2012

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Remarks by Professor Danuta Hübner. Think Thank Dialogue.

"We have reached the moment when even those who believed that extreme austerity would produce investor confidence and growth have lost their faith. There is no evidence of expansionary effects of fiscal austerity. If we leave aside the theory, we can see historical evidence of austerity measures working in the short term against overheating of the economy. We see evidence that in circumstances when the banking sector is dysfunctional and risk aversion is extremely high, austerity is the way to stagnation. The projected growth figures for 2012-13 serve as proof for this statement.

With the austerity packages, the risk of lasting damage to our productive structure, of failure of competitive firms - this risk is real. Compared to this risk, the cost of growth stimulation is low. The need to abandon "austerity at all cost" is therefore urgent. Unfortunately, cuts in policy areas that are fundamental for long term jobs and competitiveness have already been done (education, R&D&I). What is worrying is that this is also happening at regional and local level.

As finally we start designing measures to re-launch growth, it must be done in such a way that the new investment does not petrify the pre-crisis economic structures. Also, the move towards growth-friendly consolidation, announced by the Summit, must address the real challenge that Europe is confronted with, which is the diverging competitiveness among EU economies. Productivity gaps are dramatic and growing, unit labour costs continue to diverge, wage increases exceed productivity gains.

Austerity increases economic divergence within the eurozone, lowers growth, weakens the potential benefits of all reforms, aggravates social costs with all the consequences. Growing divergence undermines confidence.

If austerity continues to undermine potential for growth, getting economies back on growth paths will be more costly.

In summer last year, following the positive experience of the European Economic Recovery Plan from 2008, we looked at how we can better adjust cohesion policy rules facilitating the absorption of funds and increasing their leverage role. The recovery package was based on changes to the regulatory framework (simplification), and frontloading of funds. This was done because cohesion policy is an investment policy, based on conditionality, which is a stick, and investment funds, which is a carrot.

In autumn 2011, in record time, we passed in the EP the amendment to the general regulation of cohesion policy, increasing the co-financing rate for countries in distress which e.g. brought around 800 million euro to Greece at the end of the year. Now, we are working on the risk sharing facility, enabling the continuation of EIB involvement and reducing the risk for private capital. This will allow for the continuation of big infrastructure projects (e.g. in Greece). Certainly, more should be done to expand the use of existing financial instruments (Jeremie, Jessica), providing guarantees and venture capital.

The paradox, however, is that while in the time of crisis and growth-unfriendly consolidation and austerity packages, we reach out to all available ways and means to increase the take up of structural funds, at the same time, for the next MFF which will start during stagnation in Europe we propose macro-economic conditionality. This will be applied exactly in such situations like the case of Greece, Spain, Portugal, Italy. The difference between now and the future will be that we will be taking funds away.

Macro-economic conditionality, if adopted, will be generating a legal mess in the middle of ongoing programmes and projects, will discourage banks from giving credit due to the uncertainty with regard to the availability of funding for projects until their completion, and, as well, will discourage private participation in investment due to the same uncertainty".

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