State of the Union: Five key takeaways from Ursula Von der Leyen
17 September 2020
Key points from von der Leyen's state of the union speech [caption id="attachment_14822" align="alignnone" width="640"]...
GRTU Director General Vincent Farrugia as representative of Maltese employers at the European Economic and Social Committee (EESC) spoke on Monday 12th September at the Extraordinary General Meeting of the Transport Category of EESC in Brussels. Within the Transport Category Mr Farrugia represents Maltese transport categories on the current situation in the Mediterranean with particular reference to the importance of new investment in transport infrastructure as an essential tool to help the European economies meet the threat of slow growth and weak economic development.
Mr Farrugia said that his organisation, the Malta Chamber of SMEs, has taken particular interest in the importance of the EU investing more specifically in the whole European transport infrastructure and in support of improved transport infrastructure connecting the EU Member States with the countries neighbouring the EU. Vincent Farrugia emphasised particularly the importance of improved connections with the countries who desperately seek to prove that the democratisation process leads to better economic standards for all. Fostering better economic and commercial relationships with these countries is now more important than ever before and direct investment in the necessary transport infrastructure will benefit both the EU Member States who themselves seek new investment to provide jobs and economic growth as well as these North African and Middle East countries as they seek to create new job opportunities for their masses of unemployed persons. The North African countries that are now struggling to democratize and reform their economies on free enterprise principles and modern economic development look for new investments that make the Euro-Med economic dream come true.
Vince Farrugia said that the transport network in Europe, especially road, rail and sea transport has remained practically the same for decades and investment has not matched the requirements of an enlarged Europe and an extended common frontier with important economic regions. The full economic potential of the enlarged Europe and the extended frontier has not been redeemed as it should have been as the investment in transport infrastructure has been limited and as a result great economic possibilities for growth, new productive investment and new and great employment possibilities have been lost. Mr Farrugia emphasised that the time for investment for the future and to redeem the mistakes of the past is now. He said that history has shown that investment in the infrastructure is in reverse proportion to the figures for economic growth in Europe. As long as things look bright the interest in new investment in the infrastructure is lukewarm and investment depends on what EU member states can afford to include in their capital budgets. As the economic recession struck and the importance of budget deficit control become more urgent, investment in transport infrastructure suffered even further.
Indeed the situation should be reversed with urgency as new investment in infrastructure is not only important to revive the economy of many European Regions and lift consumer demand as the disposable income of the unemployed and economically deprived sections of the population rise, but it is in itself an essential step for the implementation of the new Transport Roadmap with the emphasis on new decarbonisation of transport targets by 2030. The new infrastructure investment must reach out to meet the shortfalls in connectivity with the neighbouring countries of Eastern Europe, Central Asia and the North African side of the Mediterranean. Particular and immediate attention should be given to the countries in North Africa and the Middle East that are struggling to democratise and foster better and more advantageous economic links with the member states of the European Union. The EU cannot just stare at the challenge ahead.
This is the time to invest in the infrastructure, emphasised Vince Farrugia, as the recession that many thought was over is still with us and the economic rebound at the level that is necessary to put back Europe at the rate of growth that we all desire will not happen if we continue to face the future with the tools of yesterday. The European Union needs to provide the necessary means so that the financing could materialise. When the crises hit, the European Union , almost overnight, funded the financial institutions for up to five thousand billion Euro, money that little of which translated into direct investment that generates economic growth and productive employment. Now the strategy must change and the EU must provide the incentives and guaranties so that the billions of investments that are needed can be provide by the financial institutions without risking a new wave of deficit financing by governments who may opt for public direct investments instead of financing the transport infrastructure investments needed through increases in the public debts of Member States.
It is essential that this massive investment programme is financed by new financing mechanisms. The European Union must be the catalyst that provides the necessary stimulus package geared towards specific lines of investment and the transport infrastructure must appear as a top priority. The stimulus package this time round should create the right incentives and guarantees necessary for the financial institutions to be willing to provide the billions in funds that are needed to finance a massive programme of new investments. With the right support and the appropriate loan guarantees the financial institutions could do for the transport category what they did for property development in the pre-recession years. In those years the financial institutions created the massive credit mountain at the expense of the mortgages of millions of householders. Before the crisis they caused a never ending boom in the property markets using the investments of millions of people throughout the globe to create a bubble of credit that lead to a financial crisis that the world has never witnessed before. This time round credit must be created with the support of the authorities, but not to create bubbles but to provide for the stability of the future.
Simply supporting the financial institutions through financial stimulus packages as happened when the crisis hit hard and at level of financing never before dreamt of is not good enough as the financial institutions will, and this has been proved, not invest necessarily in what is socially and economically desirable, but in what is profitable for them. For them to invest and provide credit to sectors like transport infrastructure they need the guarantees of government or the support of special financial instruments. Europe must act, through new schemes of financing. The European Union can create a revolution in transport infrastructure that would bring forth new investment in civil engineering projects and new plants and transport systems in air, road, rail and sea transport. The challenge is large but the economic potential is tremendous.
At the end of the discussion the Transport Category invited Vincent Farrugia to present a Paper in the next Transport Category meeting in October detailing the specific requirements of transport investment in the centre of the Mediterranean with particular emphasis on the urgent need to rebuild the infrastructure that connects with Libya.
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