For a european sustainable development plan

By Alfonso Iozzo (October 2011)

In today’s radically changing world, which is characterised by the participation of
increasingly large sections of the population in the processes of economic growth,
necessitating rational and efficient use of natural resources (food, energy), Europe must
implement a strict policy of control of resources, in order to bring about an equitable and
sustainable transformation of its economic and production system.
In this regard, Europe has already made fundamental choices in the right direction,
from the aims stated in the Lisbon Treaty to the European Council’s decisions for 2020.
The route of strict budgetary discipline (both for states and for individuals) and sustainable
development is one that can be followed only through a common European effort. Growth
can be resumed only through investments that make European businesses competitive,
reducing the consumption and costs of energy and raw materials, maximising the use of
information technologies, developing and spreading the knowledge society, and
rebalancing purchasing power.
The progressive increase in the per capita income of people in the developing
economies is giving Europe enormous scope for exporting its quality goods and services.
But unless it is made perfectly clear that it is possible to start moving towards a new and
different stage of development, this crucial opportunity to include the European economy
in the new global cycle will be lost.
The capacity to produce high-tech industrial goods, advanced services and cultural
goods is already widespread in many sectors and areas of the European economy, but
this capacity will not spread, increase and improve unless it is part of a specific strategic
choice.
The creation of the common market, and then the single market, allowed Europe to
enter long expansionary cycles. What is called for now is a similar choice, geared at
ensuring Europe’s full integration into the new global economy. Although the proposals
circulating in this difficult period for the European economy are often along the right lines,
the fact that they are restricted to the single national frameworks reduces their feasibility,
effectiveness and economic impact.
The 1992 single market programme aimed to tackle the costs of the market
fragmentation of Europe, referred to as “non-Europe”; today, nearly two decades on, the
solutions being proposed are still restricted by the costs that have to be borne as a result
of “non-Europe”. One need only consider the most outstanding example, that of
investments for research – especially in the field of new energy –, in order to appreciate
that purely national programmes, not integrated at European level, are an appalling waste
of resources, completely incompatible with the necessary austerity policy that is now
shaping budgets in the both public and the private sector.
It has become essential to launch a “European plan”, limited but decisive, in order
to show Europe’s economic and social actors the direction that has to be followed. It falls
to the European Commission primarily to put the necessary measures to the European
Parliament and the Council of Europe and to present them to Europe’s citizens and
political, economic and social forces.
This “plan” must also cover relations with those areas that, on account of their
geographical proximity, are most closely linked with the EU, especially the Mediterranean
countries that have recently started a process of radical political, economic and social
change.
The investment plan once proposed with great foresight by Jacques Delors must
now be realised in a form designed to create the conditions of competitiveness,
sustainability and social coherence on which Europe’s revival depends.
It is up to the Commission to indicate which projects to support, to make sure they
are feasible and to ensure that they are managed in a rigorous and transparent manner.
Ultimately, the European budget should be financed entirely by the EU’s own resources,
and the carbon tax, the tax on financial transactions, and the new European VAT should
be its key components. The proposals already put forward by the Commission with regard
to the carbon tax and the tax on financial transactions are, indeed, essential elements of
the “plan” and their adoption would secure it the funding it needs.
The carbon tax, moreover, could push the economic system in the direction of
sustainable choices; in addition, it is compatible with transitional measures aimed at
increasing the tax on goods imported from areas that have not adopted similar measures.
The tax on financial transactions, on the other hand, could be exploited as a means
to ensure that the change of economic system is socially sustainable in the transition
phase, as it would allow significant refinancing of the European Globalisation Adjustment
Fund (whose tasks would be redefined) and the shifting of at least part of the tax burden
from unskilled and precarious labour to financial income.
The launch of the “plan”, with its common European taxation measures, should be
accompanied by a reduction of the costs currently sustained by the single member states
in areas of joint action.
In order to guarantee that resources are used with the utmost transparency and
efficiency, it would be necessary, wherever possible and certainly in the field of research
into new energy sources, to activate specific programmes and, where appropriate, to
create agencies to oversee the use of the funds.
Since its main purpose would be to stimulate investment, the “plan” would have to
include major multiannual projects and the financing should cover a number of years. This
would mean starting to issue European project bonds and involving the EIB in the
preparation and management of the said investments. These would be implemented
through an “Assets Fund” which would retain ownership of the investments made (in areas
funded by the “plan”), thereby ensuring the availability of resources for future generations
– resources that would also be generated by deferred income on these investments.
Financial aspects
The tax on financial transactions would have to generate around EUR 30/40 billion
of additional resources for the European budget in order to guarantee adequate funds for
research and for the refinancing of the “fund “set up by the Commission in 2006 to cope
with the difficulties created by the adjustment of the labour market to globalisation. This
would bring the EU budget close to the ceiling (1.27 % of GDP) previously agreed
between the member states.
In past expansionary cycles Europe managed to create over 15 million new jobs.
The present “plan”, being designed to boost competitiveness, particularly of the services
sector, thereby halving the current unemployment rate, should allow the creation of at
least 20 million new jobs.
The investments envisaged by the “plan” should amount to at least EUR 300/500
billion, to be paid over 3/5 years. To cover the issuance, by the EU, of European project
bonds or guarantees, the carbon tax would have to be capable of generating income in
the order of at least EUR 50 billion/year. The use of the carbon tax to support the
investment plan in the start-up phase would be entirely justified by the fact that the tax
itself would tend to diminish as the European economy – also thanks to the proposed
“plan” – made greater use of non-CO2 generating energy sources.
At the end of the “plan” the Union would have assets probably worth at least twice
the investments made, thereby guaranteeing the upcoming generations adequate support,
rather in the way young Norwegians benefit from a state pension fund fed by oil revenues;
in this case, however, the revenues would come from the new energy sources created
under the “plan” through investments and research spending. In particular, the “Assets
Fund” could support the entry of young Europeans into the working world, through
community service projects aimed at young people who have come to the end of their
studies (along the lines of the “Erasmus” projects), training projects geared at eliminating
the phenomenon of insecure employment, and projects promoting self-employment and
the development of youth entrepreneurship.
Partial or complete activation of the “plan” by a group of member states
To guard against the possible emergence of insurmountable difficulties precluding
the participation of all the states, provision must be made for the possibility of a group of
states (probably the eurogroup and other interested member states) pressing ahead with
the “plan” without the others. This could be done by applying the rules on enhanced
cooperation, as already envisaged by the recent “Euro Plus” proposals on competitiveness
presented by the German government.