A gamble for Jean-Claude Juncker
It’s a real gamble for Jean-Claude Juncker. On Wednesday 26 November, the President of the European Commission presented his plan intended to drain additional 315 billion euros in the next three years for investment in Europe. And mostly without public money.
This stimulus plan “will be operational in 2015″ and if it works, it “will be extended for the period of 2018-2020,” according to Mr Juncker. “This is the biggest recent effort for investment by Europe. Every euro put into this program will generate 15 euros for research and development and infrastructure,” he added.
The plan should theoretically fill an investment gap inherited from the crisis years and used to fund energy infrastructure projects, digital or transportation. Financing of projects failed because of being considered too risky. The aim is also to create jobs in Europe, tackling the problem of youth unemployment and stimulating growth.
The assembly concocted by Mr Juncker and his team is bold. This is a new fund, the European Fund for Strategic Investment (EFSI) that will be managed by the European Investment Bank (EIB). This institution has existed for more than fifty years, acting as the EU bank for financing long-term infrastructure projects.
Financing the EFSI
The EFSI will initially not be provisioned by capital and will count on solely on 5 billion euros from the EIB. For the rest, it will be guaranteed up to 16 billion dollars from funds of the EU budget (including 3.3 billion of the Connecting Europe Facility program). With these 21 billion mobilized in case of “blow”, the EIB may lend up to 60 billion euros (by borrowing from the markets, as it usually does, with a very low rate allowed by its triple A rating). The remainder will be provided by public co-financiers (eg national public banks) or private sector.
Up to 315 billion euros will be invested in projects, according to the hopes of the team of Mr Juncker, who does not close the door to direct state contributions to the fund. As for contributions, they are welcome but, not mandatory to start EFSI. “It was built without taking them into account,” remarked a European source. For countries that make the contributions, the amounts will not be taken into account as the deficit, in the respect of the Stability and Growth Pact.
No quotas by country
The Social Democrats who hoped for a Keynesian stimulus, with tens of billions of euros of public money, will be disappointed. The French Minister of the Economy, Emmanuel Macron, called for “at least 60 to 80 billion of European money”. The argument of Mr Juncker is simple: the states simply don’t have means for it.
The Juncker Commission wants to go fast now, with a realistic plan, and “as private money is abundant in the market, we want to take advantage of this momentum,” said a European source. The goal is that the first funding be released in mid-2015. Which projects will be funded? States have sent their list in Brussels (except Germany and the Netherlands). “To date, there are 800 projects, but not all of them will be funded,” warns a European source. Priority will be given to those who did not find conventional financing, whose business model makes sense, and can be quickly put back on track. The improvement of port infrastructure, the development of high-speed Internet and the construction of a gas pipeline are among the projects submitted by France, for example.
Depoliticized instruments of choice
But the Commission insists on “depoliticizing” its choices. There will be no quotas by country, says the same European source, because “it would drive away investors.” “Those will be the best projects to be selected,” is added by the source close to the matter. An independent panel of experts, “not political or technocrats,” says a source in Brussels, will do the final sorting.
Juncker will now have to “sell” his plan and convince investors that the EFSI is a profitable and safe investment. Jyrki Katainen, Vice-President of the Commission responsible for the growth was in London in mid-November in “road show”. All Commissioners will be asked to do the same.
The President of the Commission will also need the agreement of the European Parliament and Member State, since in order to put money from the EU budget as collateral for the funds, Community legislation must be amended. Suggested legislation should be proposed to the European Council and Parliament. In Paris, they already warn: “The French projects should not be let to be left aside. Europe complained enough that the French engine is down!” says a source in France.
Resonance of LuxLeaks scandal
This initiative could have been hailed by the Europeans, had it not been for the new European Commission to revive the debate on the responsibility of its president, Jean-Claude Juncker, after the revelations of LuxLeaks case in early November. A motion of censure against the entire Juncker Commission, bringing together 77 signatories, came to the administration of the European Parliament on Tuesday, November 18.
Among the signatories, mostly representatives of the europhobes parties EFDD (starting with the Briton Nigel Farage), and the delegation of the National Front in Strasbourg (Marine Le Pen, Louis Aliot, Steeve Briois, Aymeric Chauprade, and others). In their motion, these elected deplore “the fact that the members of the European Union have lost billions of euros due to tax avoidance scheme for companies established in Luxembourg, established when Mr Juncker was Prime Minister of the Grand Duchy. They also believe that it is “unacceptable that a person who has been responsible for a tax avoidance scheme is a representative of the European Union”.
According to the Rules of Procedure, the motion was discussed in plenary session in Strasbourg from 24 to 26 November, and subjected to a vote. It leads the resignation of the commission, if passed by two-thirds of the registered deputies. “It has no chance of being adopted,” it was argued in Parliament. But it will provide an opportunity for Eurosceptic MPs make their voices heard. More for the sake of the team of the President of the Parliament, Martin Schultz, who wanted to avoid overflow expected on Tuesday 25 November, associated with the Pope’s visit to Strasbourg.
Following the publication in forty international media on November 6, an investigation revealed the existence of a vast system of tax evasion in multinational corporations in Luxembourg. Mr Juncker, Prime Minister of country for seventeen years, had reacted on Wednesday, November 12, promising that the Commission would take strong measures against tax evasion. On this occasion, he received the unambiguous support in Parliament Conservatives and Social Democrats, both of which have the majority.
This motion could paradoxically enhance the strength of Juncker supporters: it could act as a foil for all MEPs, whom the left or the far left would want to join, but are afraid to be on the photo, next to Mr Farage and Mrs Le Pen.
The Juncker commission under pressure of europhobes
The European Parliament has for the first time fully felt the nuisance power of the europhobes, who came into force during the May elections. On Monday, 24 November, they imposed for almost an hour a debate on the censure motion filed jointly by the members of the group Europe of Freedom and direct democracy (EFDD) Nigel Farage and MEPs Frontists and their allies, led by Marine Le Pen.
The 77 signatories of the motion demand the departure of the Committee Juncker after revelations “LuxLeaks” early November, which uncovered a vast system of tax evasion for multinationals, Luxembourg. A State the President of the Commission was prime minister for nearly nineteen years.
The motion offered a golden opportunity for europhobes to be heard in the Parliament and display a facade of unity beyond their internal quarrels. An opportunity for the members of the UK Independence Party (UKIP) and Mr Farage, as well as Italians of 5 Stars Movement, associated with the British in the EFDD. But especially to Ms. Le Pen, who, unlike Mr Farage, has not managed to form a group in Parliament, and thus normally has very little speaking time and very small initiative. “It is about as credible to have Juncker as head of the Commission, as it would be to have named Al Capone president of security and ethics committee,” thundered Marine Le Pen.
To defend himself, Jean-Claude Juncker reiterated his promise to fight against tax evasion. He proposed to Pierre Moscovici, in charge of the economy and taxation, to propose a directive on the automatic exchange of “rulings” (advance tax rulings) in the heart of the “LuxLeaks”. Mr Moscovici must also provide a guideline on corporate tax harmonization in Europe. Juncker also proposed the establishment of a tax committee of the relevant ministers of the 28.
The motion has seriously disrupted the agenda of the plenary session in Strasbourg. It is indeed to justify themselves in person Mr Juncker and his College of Commissioners had to make the trip to Alsace earlier than usual, and they had to cancel the meeting scheduled on Monday morning in Brussels. It was to validate the opinion on the 2015 budgets of Eurozone countries. All commissioners – with the exception of the German Günther Oettinger – took to Strasbourg to support their president during the debate on the motion of censure. The meeting was scheduled for Tuesday. And publishing opinions on the budgets of countries in the European Union has been postponed to 28 November.
This is also partly due to this motion of censure that Mr Juncker chose to announce his plan on provision of 300 billion euros to the European economy on Wednesday, November 26 in Strasbourg, rather than to reporters in Brussels. Naturally, while the ex-minister of Luxembourg plays its legitimacy card with this stimulus package, he wants to run no risk of offending parliamentarians. He will need their support to “sell” his plan to heads of states. The support of conservatives – the majority in Parliament – is guaranteed since Mr Juncker was their candidate for the European campaign. The support of the Social Democrats is less obvious: the case of “LuxLeaks” has caused a stir within the second political force in Parliament.
“Acting against tax dumping”
Many MEPs fear that the motion has a more lasting effect on the political balance in Strasbourg, it might notably weaken the left wing. On the subject of tax evasion, which is nevertheless one of their favorite themes, the European United Left (GUE) and the Greens have indeed not been able to agree to start a war with Mr Juncker and left the field to the far right. Gabriele Zimmer, President of the GUE, regretted it on Monday during the debate: “We intend to file a motion against the Juncker Commission, we are disappointed that the Greens and the Socialists didn’t help us press it.”
“We think it is not yet time to tell Mr Juncker to leave. Instead, we must take the opportunity to ask him to act against tax dumping,” argues Philippe Lamberts, one of the leaders of the Greens. Among European ecologists, we are still concerned about the group’s ability to weigh into the debate. The former investigation judge Eva Joly pushes for the creation of a commission of inquiry and had to start on Tuesday, 25 November, a site “Act or Go” in an attempt to regain control of the debate of tax evasion”, according to a source close to the matter.
The Left and the Greens are not the only worry. The European People’s Party (EPP, right) also feared that Mr Farage and Mrs Le Pen repeat the experience of the covenant piecemeal and multiply the motions “to pollute the debate.” “They can play that game often, as much as they actually want. Provided you have 77 signatures. To prevent them, it would change the rules, impose more signatures. But for this, we will need a parliamentary report and approval from the responsible Commission for Constitutional Affairs. This can go on for months,” laments an influential member of Parliament.