The conditions to be fulfilled. It is time to take a close look at the growth initiative and the priority programme for trans-European networks. Up until last week, it was still a matter of making sure that this double initiative really existed. It now appears to be in the bag, the European Parliament having lent its support, after the Commission and the Council gave theirs. A few MEPs expressed confusion about one aspect or another, but the overall green light is clear and explicit: the EU can bring in specific measures to boost its economy. It is clear that above all it is the smooth functioning of the single market, via structural reforms and via monetary stability that the EU can positively influence economic growth; what has just been decided on in principle, and which will be specified in the near future (end of November by the Ecofin Council, in December by the Summit), concerns the operational measures for a number of projects and actions which do not aim to support consumption by an increase in public money, but to boost the kind of investment which is likely to improve the functioning of the market and the competitiveness of the European economy (see this column on 14 October).
It would be a serious mistake to believe that, as political approval is there, achievement will be automatic, or virtually so. Let's leave aside the row regarding the plan's paternity, which Romano Prodi closed with humour: "the child has been accepted and so the number of fathers is increasing. According to traditional biology, there are always two parents, but we can compromise. The main thing is that the child is healthy, intelligent and good-looking". All those who took part in the preparations for the enterprise have their merits: Loyola de Palacio, Karel van Miert, Philippe Maystadt, Giulio Tremonti, and also the political godfathers who supported the projects, such as President Prodi, and the heads of government who brought a few corrections to the general guideline: Jacques Chirac, Gerhard Schröder, Tony Blair. Added to these are those who worked behind the scenes, who prepare and draw up texts and sometime hold considerable sway. Top of this list is François Lamoureux, in his function as Director General of Energy and Transport. Questions were asked in the media, first in Spain, then in France and elsewhere, about the existence of an internal document from Mr Lamoureux to other high-level officials also involved in this dossier. As one or the other of those who received it have announced the fact, I see no reason to hide from our readers the result of the reflections of those who project-managed "Penelope".
François Lamoureux's four categories of instruments. How can you guarantee that, after the political go-ahead, the planned programme will be achieved? François Lamoureux says that in order to keep its promises, the Union must adopt four categories of instruments that are indispensable to ensure funding: a) "high-risk debts" instruments; b) guarantee allocation instruments; c) an adequate Community budget; d) harmonised rules on charging for infrastructure use. These instruments are far from in the bag. Several governments have their doubts as to Community loans; and yet, as per Jacques Delors's 1993 White Paper, "it is perfectly rational and fair to use long-term debts to fund vital infrastructure projects which are vital to the smooth running of the European economy, as the future generations are the ones to benefit the most for these infrastructures". If the idea of a big European loan is not accepted, then, according to Mr Lamoureux, we will have to "look seriously at allowing the European budget to generate loans or guarantees on a few key rail projects for the interconnection of national networks (Brenner, Lyon-Turin, etc)", for these projects to be considered ultra-priority (quick start) enjoying Union loans or guarantees. Direct funding from the EU budget are also problematic, as the future financial perspective may not exceed the percentage of GDP of the Union that goes to Communities resources at the moment (1.27%). In other words, Mr Lamoureux puts the necessary budgetary input for transport infrastructure at 4.5 billion EUR a year. Furthermore, a system of guarantees is vital to encourage investment in infrastructure; we should hope that at the very least, the work being done will lead to a positive result on this. As for the fourth instrument, charging, Mr Lamoureux says that there is still a great deal of uncertainty on "the political will of the Member States to establish genuine tarification of infrastructures" (the resources of which would mainly be used for railway projects).
The gaps are still considerable. For want of these four categories of instrument, the "funding head-ache" still remains, for several reasons. Mr Lamoureux particularly stresses that:
"the risks inherent in major infrastructure projects and the doubts about the future revenue are considerable and scare investors off; we won't pull Eurotunnel on them twice!" Experience have shown that apart from motorways and two airports, the market is not up to funding major infrastructure without a substantial injection of state aid;
"It would not be intellectually honest to accredit the idea that the private sector is prepared to invest in railway infrastructure whilst railway companies continue to be managed as they are";
EIB (European Investment Bank) loans are certainly important, but the EIB balks at investing further "in projects which, with their characteristics, especially that of risk, cannot be funded by commercial banks and the capital markets. One can only note the skittish attitude of the EIB towards investment in the railway sector. Up until now it has also always refused to fund the Galileo programme by participation in the capital of the joint company".
The ties of the Stability Pact. Mr Lamoureux is personally in favour of interpreting the Stability Pact flexibly, excluding investments in projects which the EU has declared priority from calculations of the budgetary deficit. He recognises that the time is not ripe to go down that road (it would be seen as capitulation to France and Germany); but he feels that "this kind of measure, its compatibility with the rules of the Pact, the possible modalities for its organisation and its control, should at the least be examined in depth".
We know how much the Pact has been debated at the highest political level. It has become commonplace to hear a Head of Government, a Finance Minister, or some other authority, criticising the rigidity of the Pact, and then, upon reflection, taking a small step backwards. The issue is such a sensitive one that this is inevitable: giving rise to doubts about willingness to respect the rules of the Pact can only harm the stability of the Euro and the image of the institutions which manage it and this is unacceptable for the smaller countries, who had a stable currency and gave it up because they trusted the stringency of the larger countries. Last week, the very President of the European Council, Silvio Berlusconi, said that he had listened with interest to a participant at the Summit declare during the session that the Pact would do better to provide that in periods of strong growth, the ceiling for the deficit be even stricter (1% or 2% of GDP), but that in periods of stagnation or recession, it should be more flexible, up to 4%. The immediate headline of the press agencies was "President of the Union criticises economic pillars of the EU". His inevitable reply: "the Pact remains as it is, the 3% ceiling is not up for debate, it is a sensible one and has allowed several Member States positively to modify the management of their public expenditure".
A fundamental aspect of industrial policy. Whilst he waits for things to change, Mr Lamoureux will be insisting on these four instruments, if the networks are to become reality. To bring round the doubting Thomases, he recalls the advantages to Europe:
we should not expect short-term effects upon growth, but the trans-European networks have the potential to improve growth in the longer-term;
rail projects will help to balance railway's share with the road's share (7% of freight is transported by train in Europe, 35% in the United States);
all political authorities and all economists agree that Europe, even in its current difficult economic times, should not sacrifice productive investments. It is a test of the Union's capacity for economic governance;
the objective of cohesion is to satisfy various infrastructure requirements which remain, notably in Spain, Portugal and Greece (let alone the new Member States);
the planned programme is important for industrial policy, for two reasons: a) the quality of infrastructure is essential to attract investors and help fight disindustrialisation; b) the broken promises from Essen (1994) are not unrelated to the experiences of various European producers of railway materials;
these transport networks will contribute to technological development, innovation and programmes such as Galileo, and encourage considerable harmonisation of standards in various sectors.
With all these outcomes, the networks are a fundamental element of European industrial policy (which "is coming back into fashion"). This is François Lamoureux's conclusions. And mine too, for today.
(F.R.)