Posted on 09/18/2003 10:08:11 PM PDT by Pikamax
Germany and France open their coffers Ambrose Evans-Pritchard in Brussels (Filed: 19/09/2003)
France and Germany yesterday unveiled a Keynesian spending blitz to pull their economies out of slump and halt the "de-industrialisation" of Europe, deftly side-stepping the spending constraints of the Growth & Stability Pact.
Jacques Chirac: side-stepping stability pact In a return to the dirigiste policies of the 1970s, France's Jacques Chirac and Germany's Gerhard Schröder outlined a 10-point list of headline projects, including high-speed railway lines, the Galileo satellite navigation programme, digital television, and broadband internet links.
Paris and Berlin already face possible sanctions for running budget deficits far above the 3pc limit fixed by the Maastricht Treaty, but many of the new schemes would be financed "off-books" by the European Investment Bank (EIB) in Luxembourg and other EU agencies.
President Chirac said: "Europe should not wait for growth, it should go out and look for it. Europe must mobilise to look for it. France is going to press for Europe to retake the initiative and fight the dangerous tendencies that could lead to de-industrialisation."
Chancellor Schröder insisted that the Stability Pact should not been seen as a rigid mechanism that blocks all means of stimulating growth, adding that it was time to ditch an austerity strategy "that cripples any recovery tendencies." He said the plan would release €50 billion for infrastructure projects over the next six years.
Critics suspect ulterior motives for recruiting the EIB as a tool for macro-economic policy, saying that EIB projects would come on stream too slowly to rescue the eurozone from its current troubles.
Professor Tim Congdon of Lombard Street Research said: "What they're doing is getting around the problem that the EU doesn't have a central fiscal authority to back up the euro, so they're creating a surrogate one out of the EIB. I always suspected this would happen. It's another step towards fiscal union."
A bank official said loans provided directly to EU governments would be recorded in the Stability Pact figures, but loans to private firms would be exempt. It is not clear how firms owned partially by the state would be treated.
The markets reacted calmly to the proposals. Two years ago investors would have punished the eurozone for "fiddling" the accounting books, but now they favour a looser fiscal policy in the zone, and seem just as worried about the American trade and budget deficits.
Dubya is turning the USA into the "Happy Dumping Ground"...
Like father, like son
Good riddance!!
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