European recovery fund

wiseguy

I posted this in another thread but this is something I think which deserves a thread of its own.

Where is the modern day equivalent of Marshall Plan? why is there no talk of it at EU meetings yet there is talk of corporation taxation and financial taxes which would have not prevented what has happened.
How is it that they find time to discuss irrelevant points to solving the current crisis yet have no discussion on ideas that would create jobs and provide stimulus and help everyone involved be it Ireland, Greece or Germany itself?

wiseguy wrote: »

Where would Germany be if it wasnt for the Marshall Plan {hint contrast and compare with East Germany} aid and loans?

Where is the modern day equivalent of the Marshall Plan? Why doesnt Germany via european institutions such as European Investment Bank loans money to go into construction {and only construction not current spending such as welfare or PS} roads+motorways, high speed rail, broadband, schools, research facilities, grids and pipelines in the countries experiencing difficulties now within the euro.

This will create badly needed jobs here {and in Germany}, especially among men who now find themselves with nothing to do. And provide and grow the market to which German firms export {think windmills, Siemens equipment, german cars}

It would be a win win, and has worked in past with US "stimulating" Germany and others via Marshall Plan after the devastation of WW2

hmmm

wiseguy wrote: »

Where is the modern day equivalent of Marshall Plan? why is there no talk of it at EU meetings yet there is talk of corporation taxation and financial taxes which would have not prevented what has happened.

Who's going to pay for this? I hope you don't say "the Germans" because they are looking at things like this and wondering why they are expected to bail out Ireland
http://yoursdp.org/index.php/news/singapore/2159-who-are-the-10-best-paid-politicians-in-the-world

Scofflaw

I'd say a combination of the issue hmmm raises, and the fact that such a plan is basically Keynesian, which (pace our libertarian friends) is currently out of favour. The current liberal-leaning economic dogmas favour 'tough love', countries getting themselves back on their feet themselves, and then square-jawedly paying back any assistance that was loaned to them in their hour of unmanly weakness.

cordially,
Scofflaw

wiseguy

Both of you raised good points, let me try to address them

"where will the money come from"

There are 2 options which are not exclusive, keep in mind that I am talking about loans here directed and infrastructure not "gifts":

• Germany and other few euro members with AAA ratings left who can raise money on bond markets for cheap (2% in case of Germany) can raise money in that manner and then loan via EIB at lets say 4% to other EUro countries who wish to tap into this for "stimulus"
• The tasks of the FED in US are: 1. maintain employment, 2. keep prices stable, 3. and keep interest rates at a moderate level
  The task of the ECB on the other hand is only to maintain inflation at 2% nothing else, giving the ECB the task of maintaing employment could open it up for provide loans to EIB who in turn loan it out to create a stimulus and employment.

"why they are expected to bail out Ireland"

Make no mistake what I propose would be a win win for both PIIGS and Germany et all. Of course the Germans might not see it that way but the way they are continuing at the moment there might not be a euro left, that will be bad news for everyone.
The Germans could be pointed at their own history of the Marshall Plan being good for Europe and being good for US by creating a market for their goods and services, against an alternative of the euro collapsing and yes Germany would suffer to in this case.
Thats of course if the ECB is not made target employment.


"the fact that such a plan is basically Keynesian, which (pace our libertarian friends) is currently out of favour"

It would be a counter cyclical policy, yes. As opposed to pro cyclical policies in the current EU treaty draft which not only would have not prevented what has happened {nor will in future} but would have made things worse.


In several threads now I presented various options available, I am not just critising the curent path being taken for the sake of it, the path we are being led to by Merkozy is only making matters worse and worse.


Cheers

antoobrien

The problem I see with this is that the Marshall plan (& its successor) took several years to get results - e.g. rationing was still in place in the UK well into the 50s. That said the situation isn't the same as it was then (many industries had been totally destroyed across Europe, which took time to rebuild, not the problem we have now). We don't really have years.

While I agree with what you're saying I don't think it has a chance of working because of the "optics" of where money will be spent. For example, the justification for cutting infrastructure spending (IMO very short sighted) was that it is hard to justify spending money on building things when people are going hungry.

The first thing the government should do is replace the entire IT system (across all departments, & organisations that receive funding from the government) with something that can actually do the job - call in IBM, Microsoft, HP, SAP, Oracle or whoever and pay them as much as is required to get it done. While it might cost several (dozen or even hundred) million euros, we'll save it in the long run. Even a decent billing system would bring in millions for the HSE (that wouldn't cost a whole lot to get in on its own).

hmmm

As Anto has pointed out, our current deficit (which is a massive stimulus in itself, with us borrowing 10% more than we produce) is largely going on current spending, not on capital spending. Putting more money in the pockets of teachers or child benefit recipients is not a very productive use of debt.

Remember too that post war Europe had a massive infrastructural deficit with large parts of the continent lying literally in ruins. There was scope for massive infrastructural investment which would produce almost instant returns. The Europe of today doesn't have such an obvious deficit so it is hard to see where the returns could be made - we have a great motorway network now, we don't need more trains, metro north can barely pay its way.

It is also a loan/subsidy. Germany can raise money at 2% because the debtors expect to get repaid. If Germany raised money at 2% and tried to loan to Greece at that rate, Germany's borrowing costs would rise.

K-9

hmmm wrote: »

As Anto has pointed out, our current deficit (which is a massive stimulus in itself, with us borrowing 10% more than we produce) is largely going on current spending, not on capital spending. Putting more money in the pockets of teachers or child benefit recipients is not a very productive use of debt.

Remember too that post war Europe had a massive infrastructural deficit with large parts of the continent lying literally in ruins. There was scope for massive infrastructural investment which would produce almost instant returns. The Europe of today doesn't have such an obvious deficit so it is hard to see where the returns could be made - we have a great motorway network now, we don't need more trains, metro north can barely pay its way.

It is also a loan/subsidy. Germany can raise money at 2% because the debtors expect to get repaid. If Germany raised money at 2% and tried to loan to Greece at that rate, Germany's borrowing costs would rise.

Indeed, hence people not getting around the idea that we haven't got zero or low interest loans from the EU. It isn't because they don't want to, its because they get charged interest to lend to us.

GSF

hmmm wrote: »

Who's going to pay for this? I hope you don't say "the Germans" because they are looking at things like this and wondering why they are expected to bail out Ireland
http://yoursdp.org/index.php/news/singapore/2159-who-are-the-10-best-paid-politicians-in-the-world

The Marshall plan wasnt popular in the USA at the time it was approved. Unsurprisingly people there were saying, why should we pay to rebuild Germany?