Investing in people, the environment and innovation

To ward off the recessionary tide that is sweeping in and to avoid the economic depression from becoming entrenched, European policymakers need to invest in:

• people and productivity to keep the economy going in the very short term. A rapid and massive deployment of labour market policies aimed at getting money to those who need it most, while also providing more security to workers. From January 2009, each Member State should invest an additional 1% of GDP in order to strengthen unemployment benefit systems, provide training and lifelong learning and to set up social economy employment programmes;
• innovation and the environment to climb out of the crisis.
  
  

Each Member State should prepare an investment package worth 1% of GDP – such a package should kick in no later than mid 2009. Priority should be given to those areas of investment that also strengthen the long-term potential of the economy, for instance sustainable development, social housing and European networks.

To make this plan work, Europe will have to mobilise forces to work together as one team:

• a coordinated and joint fiscal stimulus will have a double effect on economic growth compared with Member States acting in isolation from each other;
• Europe is to facilitate the practical implementation of such a stimulus plan by making it clear that all of the different forms of flexibility provided for by the 2005 reform of the Stability Pact are to be used;
• a European Sovereign Investment Fund is to be launched. By issuing European bonds through the European Investment Bank (EIB), Member States will benefit of accessing worldwide capital flows at lower rates of interest;
• a European industrial policy should be developed to equip the EU economy with a new and sustainable industrial basis;
• a coordinated policy process which aims to establish a downwards floor in wage developments of at least 2% in order to take out insurance against a deflationary wage spiral;
• Europe should provide its own emergency lending and do so in a sufficient way and without blindly following the International Monetary Fund (IMF) conditionalities: central and eastern European countries are not to be left at the mercy of IMF.
  
  

Further reading

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