Ed Balls and Peter Mandelson have cast past differences aside to join together this morning to propose a growth plan for Europe, reports Shamik Das.
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With the British and eurozone economies stagnating, the election of an anti-austerity President in France, and political and economic turmoil in Greece, Ed Balls and Peter Mandelson have cast past differences aside to join together this morning to propose a growth plan for Europe – with Britain taking the lead.
In a joint op-ed in today’s Guardian, the pair set out three main planks to kickstart the eurozone, namely:
1. A new political settlement
An ECB “willing explicitly to stand in the way of sovereign contagion from the periphery”; an active European stability mechanism to “meaningfully support short-term sovereign liquidity and the recapitalising of the European banking system”; and a system of collective economic decision-making among eurozone countries that ensures everyone plays by the rules.
2. Boosting public investment in the demand that will help drive growth
A “serious capital lift” for the European Investment Bank is desirable, to help provide fresh sources of infrastructure investment; infrastructure bonds, which “help to counter a failing private appetite for large-scale project finance”; and the recycling of unused structural funds into new programmes and investment projects that “help the weaker eurozone states to connect better with the large markets of northern Europe”.
3. Structural reforms to drive growth to make struggling eurozone countries more competitive
Raising economic participation rates, making it easier for businesses to grow and take on workers, improving competition in some product markets, and improving European economies’ skills bases.
• Will President Hollande be able to turn France – and the Euro Area – around? 8 May 2012
• Krugman: “Keynesians have been completely right, Austerians utterly wrong” 26 Apr 2012
• Mandelson: Time to “stand up, win the argument, act decisively and lead” on the euro 20 Sep 2011
The former European Commissioner and the current shadow chancellor call for Britain to be “at the centre” of the debate, “influencing the debate on the future of Europe, not locked out of the room where the big decisions will inevitably be taken on issues that directly affect our economic interests“.
They conclude:
“We would not simply be doing our European neighbours a favour by making the case for sustainable growth and playing our part in a revived European economy. We would be securing our own economic future.”
Elsewhere, serious attention is now being paid to the consequences of a Greek withdrawal from the euro, which the FT today describes as “no longer fanciful”, that:
“After 70 per cent of voters in elections on May 6 supported parties that rejected the terms under which €174bn of international bailout loans were offered to Athens, many investors now see a fissure in the 17-member eurozone as increasingly likely.”
And
“European governments are furiously thinking through the various scenarios, while still urging Athens to stick to its agreements on austerity and reform.”
The six questions today’s Financial Times ponders are:
1. Is Greece serious about quitting the eurozone?
2. Is Europe ready to jettison one of its own?
3. What would exit from the eurozone entail?
4. What economic effects will Greece suffer?
5. Is Greek business ready for an exit?
6. Can the eurozone contain the contagion?
Whatever Greece decides (or has decided for it), whatever happens in the eurozone, will impact us; as Balls and Mandelson say, it is in our interest for the eurozone economies to grow, the failure of the eurozone will result in further gloom and even less growth over here – eurosceptics should beware what they wish for.
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