‘Fall in investments to blame for low growth’

By David Cronin

Date: 27/01/05

Declining public and private investment is to blame for low growth rates in the EU economy, the Socialist group in the European Parliament will declare next week. They will warn that the Lisbon Agenda is destined to failure without significant changes to the EU's macro-economic policy.

They complain that public investment in the 12-country eurozone has fallen from 4% of gross domestic product in the 1970s to 2.4% today.

In a report on the Lisbon Agenda, the group argues that to stimulate growth the money left unspent from the EU budget each year should be transferred to the Growth Adjustment Fund proposed by the European Commission and should be spent on programmes related to the Lisbon Strategy. Almost €5.5 billion went unspent from the Union's budget in 2003, it notes.

The Socialists warn against a "trade-off" between the economic, social and environmental dimensions of the Lisbon Strategy.

They say that Europe should not attempt to emulate American and Asian economic success stories. "We cannot and should not seek to imitate the lowest labour costs, most biddable labour forces, lowest taxes, most lax environmental, social and health and safety standards of our competitors," it insists. "We cannot save our economy by destroying our society."

The report describes low corporate tax rates offered by some member states to attract foreign companies as a "threat to the cohesion of the EU". A 'race to the bottom' in corporate taxation would run counter to the 'knowledge-based' model of economic growth on which Lisbon is based, as having world-class education requires healthy tax revenues.

Socialist MEP and former Danish premier Poul Nyrup Rasmussen said that it would be wrong for other European states to follow Ireland's example by building an economic boom on low corporate tax. "The Irish case was good for Ireland. But the Irish success was assured because the country was the only one that used that strategy. Now the danger is that the whole of Europe will apply a low corporate tax and that would lead to serious losses of income to finance our welfare states."

But Paul Hofheinz from the pro-business lobby the Lisbon Council accused the Socialists of making proposals that were against the interests of the new EU entrants.

Preview of a report on the Lisbon Agenda to be launched by the European Parliament's Socialist Group in the week following 31 January 2005. In the report, the group blamed declining public and private investment for low growth rates in the EU economy and warned that the Lisbon Agenda was destined to failure without significant changes to the EU's macro-economic policy.

European Parliament: Socialist Group: Policies: Lisbon Strategy, European http://www.socialistsanddemocrats.eu/gpes/public/polidetail.htm?topicid=550§ion=POL&category=POLI&request_locale=EN

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