This week, AK EUROPA, the Brussels office of the Austrian Federal Chamber of Labour, and the ÖGB Europabüro, the Brussels office of the Austrian Trade Union Federation hosted a panel discussion on a “Golden Investment Rule” for the European Union. Professor Achim Truger of the Berlin School of Economics and Law introduced a study, which he had prepared on behalf of AK and which he had also presented in the European Economic and Social Committee.

The concept of a “Golden Investment Rule” is intended to complement the EU's Stability and Growth Pact (SGP), which, as is well known, limits Member States’ national debt. Professor Truger stated that over the past years the SGP had drastically cut the investment activities of the public, which would do sustainable harm to the European Economy and exacerbate the crisis. As a way out it is the plan to expand it by a “Golden Rule”, which has been widely accepted by the financial economy and which intends to exempt national net investments up to a certain degree from the calculation of the national debt in future. This would only be fair with regard to future generations: as these would benefit from the fruit of these investments, they should also contribute by servicing the debt. This measure was neither radical nor new, as the German “Weisenrat” (economic council) in their statement on the controversial German debt brake had already demanded an exemption for investments. Concerning the interpretation of the SGP, the Commission itself had become “softer” over recent years, which Truger regarded as a step in the right direction. For Truger, the new Rule, according to which payments by Member States in the “Juncker Fund” EFSI (EFSI European Fund for Strategic Investment) would be of no consequence in respect of reviewing the national deficits, is the first small realisation of his concept.

However, he criticised the private investments, which the Juncker Funds would rely on: it would be significantly cheaper if public sector projects would be financed by currently extremely cheap government bonds rather than by so-called “Private-Public Partnerships” with private investors, which promise higher yields (around 5 %).

In the short term, there was no requirement for legal changes to realise “Golden Rule” Investments; however, in the long term an EU modification of contract would be needed.

Karl Pichelmann, Directorate General for Economic and Financial Affairs of the European Commission was critical of Truger's proposal. One the one hand, it was clear that public sector deficits had to be consolidated; however, it would be very difficult to define, which public investments would come under such a “Golden Rule” on the other. He named the much quoted Portuguese motorways that run parallel, which would be an example to demonstrate that “public investments” also had a negative side. Apart from that, the Austrian education system would show that the financial input, where Austria would be the front runner, is not necessarily a guarantee for the quality of the outputs. Furthermore, one could not hold the Commission and the SGP responsible for the low level of investment, as there was sufficient room for manoeuvre with the existing rules. He quoted Germany as an example, which in spite of balanced budgets would hold back with investments.

Further Information:

Study "Implementing the Golden-Rule for Public Investment in Europe"

Presentation by Achim Truger

Presentation by Karl Pichelmann

Pictures of the Event