Paul Murphy (Dublin South West, Socialist Party) | Oireachtas source

I would like to focus on the so-called investment plan for Europe put forward by the Commission President, Mr. Juncker, which supposedly contains €315 billion worth of investment. It was described by him as a fresh start for Europe and it has the establishment parties across Europe patting themselves on the back as they say they will now deal with the massive collapse in investment to the tune of almost €400 billion since the crisis hit across Europe. The Taoiseach joined in this earlier, although he noted that the fund has received its share of criticism with questions from some quarters about whether the leverage ration of 1:15 is realistic. That is a slight understatement, given the programme has no money. Not a single euro will be brought to bear in this investment programme. It is a clear case of the emperor having no clothes but, instead, we have the establishment and sections of the media talking up something for which there is not a single euro.

Europe has gone from zero euro to €315 billion and this is reminiscent of the financial engineering that went on before the collapse of the bubble and the crisis that we are living through. Mr. Wolfgang Munchau writing in theFinancial Timessaid it reminded him of a synthetic collateralised debt obligation and an attempt to get from nothing to something. When people go through the figures, they will realise the programme is built on sand. A total of €8 billion taken from existing under-funded EU programmes was placed in the programme. That was doubled by saying everything would not collapse together and, therefore, a guarantee of €16 billion could be given. Another €5 billion was added from the European Investment Bank to give €21 billion. This was tripled by leveraging it on the bond markets to get to €63 billion. This was then multiplied by more than five to get to €315 billion on the basis of supposed expected private investment at a ratio of €5 in private sector money for every euro of public sector investment, which is not real money. There is no new money in the programme but the Commission and the Council want to be able to talk about a public investment programme to deal with the crisis.

The root of this is a shift towards the privatisation of public infrastructure and the socialisation of private risk because private investors are classified as a senior tranche of investors and if there are losses, even in excess of the €8 billion of EU funds that have been invested, the taxpayer will pay the bill. The private investors are given a senior classification and they do not have to pick up the tab. We have witnessed this model for the subsidisation of private risk previously with the taxpayer taking all the risk and the private sector creaming off the profits. This also points to privatisation. Mr. Juncker set out a great vision in his speech to the European Parliament of schoolchildren in Thessalonika walking into a new classroom decked out with computers and a hospital in Florence saving lives with state-of-the-art medical equipment. Private investors will only invest in hospitals or schools for two reasons - the first is if there is a fee, which means people will pay per use, or, second, if they are paid directly by the state. Either way, the public will pay and they will pay more than if there just had been simple public investment in these facilities because the private sector needs to be guaranteed a significant profit.

The Taoiseach referred to €315 billion in net additional investment in the economy. How does he know any of this will be net additional investment? How much of this is dead weight? How much of this would have happened anyway? The taxpayer will subsidise the investment and take all the risk. There is no guarantee this programme will generate new investment that would not have taken place anyway. The only difference is the taxpayer is taking on the risk. This is not a response to the collapse in investment; major public investment is the appropriate response. For example, ITUC has called for a investment of €250 billion or 2% of GDP. That could be funded at a time of historically low interest rates. The State could borrow and invest and this would pay for itself economically and socially or it could go after the massive amounts of unused capital, the hoarded profits and the €21 trillion held by millionaires in this country, which is greater than the sovereign debt of all the EU member states.

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