The European Union lives better without the United Kingdom than with it. Belgian Paul De Grauwe, an academic at the London School of Economics, claims that with the British it would not have been possible, for example, to launch the Next Generation funds project. De Grauwe was in Barcelona this week invited by the Economic Circle and participated in a meeting organized by the Political Economy Opinion and Reflection Group Europe G.
Is the ECB right to raise interest rates when there is an international banking crisis?
Yes. It is an inevitable thing. The question is how far it should go. At the moment I am in favor of giving birth. There is no need, unless inflation re-emerges. If not, the economic recovery could be in jeopardy.
Can European banking rest easy?
It is in a solid situation. With an interest rate of 3% on the deposits that European banks have with the ECB, there is a transfer to the institutions of 130,000 million euros every year. So I don’t see much risk right now.
He maintains that the Stability and Growth Pact is “dangerous”. Because?
Where do their figures, a 3% deficit and 60% debt over GDP, come from? out of nowhere Is it a religion or what? the trinity They have no scientific basis. Then there is the rule that the budget must be balanced, which implies that governments cannot issue debt to finance public investment. This is dangerous, because we need public investments, especially now that, with the climatological effects, they are taking on an existential dimension.
Better public investment than private?
We have had this idea since the eighties, that when the State invests it displaces private investments. It was the neoliberal foundation. To say that private investment by definition is more productive than public investment is false. Look at China: have they seen what they have achieved with their railway network? In reality both are complementary. With climate change you have to invest in infrastructure to have a new source of energy. And it is the State that must finance it. Private companies won’t. They don’t care. But when that infrastructure exists, then they can take advantage of it.
But don’t we run the risk of increasing the debt?
The cost of public debt today, for most countries in the Eurozone, is between 2 and 3%. A few years ago it was 0%. But the return on investment is more than 3% per year, unless you have no imagination. It doesn’t matter what the country’s debt level is, because when we invest, the possibilities of GDP growth will be greater and, therefore, we will have the means to finance this debt.
So debt is not bad.
It is necessary to destroy the dogmas: “It is not possible, we cannot issue the debt”. Of course we can do it! What will our children say to us in 20 or 30 years, when they see that we have not invested enough? They will say: “You didn’t invest!” If instead we do and the debt goes up, our children will say, “Were you stupid when you went up the debt?†No! They will say: “Lucky you did it”. Yes, this debt will be transferred to our children. But at the same time, assets and infrastructure will be created that will make the energy situation more efficient, more sustainable.
And the debt that is in the hands of the ECB does not count?
When the accounts are consolidated it is as if it does not exist. It is a debt to ourselves. A debt has been replaced by bank deposits. It is true, the ECB could at some point start selling it, but it should not and there is no reason to do so.
Should the Commission monitor that these public investments are profitable?
It is already doing so under the Next Generation EU funds. For example, the Italian Government had in its program, among other things, the renovation of football stadiums in Italy. And the Commission said no. We need someone, a referee to decide.
But no one controls this referee, who is not subject to elections, unlike the
It is a political problem. It is the weakness of the Stability Pact that imposes rules and means that they are supervised by people who do not have political legitimacy. They have legal legitimacy, of course, because everything is the result of a treaty and all countries have signed it. But when there are people in Brussels who have the power to force, to pressure the national government, which does have political legitimacy, whenever there are economic problems it will reject these rules.
He lives in London and was very critical in 2016 of Brexit.
The European Union has won with Brexit. Let’s be realistic, with the pandemic we created an investment project, the Next Generation funds, but the British would have opposed it. The reason they were in the EU was not to strengthen it, but to weaken it from within. This has always been their strategy for hundreds of years.