The governments of the four largest economies within the Eurozone, Germany, France, Spain and Italy, have agreed to boost economic growth within the bloc. They are targeting a 1% boost to GDP to be achieved by boosting spending on infrastructure and other investments to the tune of €130 billion. For instance, the European Investment Bank would get an additional €10 billion of capital which would bolster its lending capacity by a multiple of this. “Project bonds” would be generated for infrastructure projects such as enhancements to pan-European transport networks. Also, the plan calls for unused money in regional funds held by the European Commission to be fully utilised.
Critics have already pointed out that the move is more symbolic than anything else since little or no new monies will be involved. The four leaders were meeting ahead of an EU summit meeting. No new common ground has been found with respect to the issuance of Eurobonds as a means of securing low cost finance by creating bonds which are backed by more than one nation. The Germans seem implacably opposed to the idea.
The French are keen to push the idea of a 0.1% financial tax on all EU-based financial transactions as a mechanism of raising much needed revenue. However, the British will not agree to such a tax for fear that it should harm the position of London as a leading financial centre. The Brits are afraid that financial institutions might relocate to areas outside the reach of the new tax, but the worry does not stand up to scrutiny. 80% of the new tax would be raised in London, so the obvious solution would be to defray the UK’s contributions to the EU against the new tax to some extent. The same UK politicians who are opposed to the new tax were the very people proposing caps to salaries of leading financiers recently – if anything would spur them to high-tail it to other jurisdictions, a personal blow to the wallet has to be high up on the list. It could certainly be argued that a much greater harm is being done to the City by the on-going saga of the Euro crisis.
Mr Monti had warned his EU peers that failure to agree on joint action would encourage market attacks on their economies. He had predicted "progressively greater speculative attacks" without unified action from all the eurozone members.
Speaking after the talks, Mr Monti asserted in English that "the Euro is here to stay, and we all mean it".
"We expect the conclusions of the EU summit will be more solid and credible compared with previous summits as far as growth is concerned," he predicted.
French President Francois Hollande, who made agreement of a European growth pact the central plank of his election platform last month, said the package would be "indispensable".
He said the four eurozone leaders had, he said, "made the prospect for growth much more concrete", asking whether anyone would have imagined a few weeks ago that the idea of growth would be on the agenda of the EU summit.