March 15, 2020 / By mobanmarket
Click:electric confetti cannon
Efficiency must be at the heart of a European growth pact.
The news last week that 16 Spanish banks had been downgraded because Spain is once more in recession followed hard on the heels of news that 26 Italian banks had also been downgraded. The Italian case was particularly startling: previously strong banks are now among the least creditworthy in Europe. Moody’s cited Italy’s return to recession, an increase in bad loans and ongoing demand-depressing austerity measures as key reasons for its decision.
The move captures well the European dilemma: for fear of being downgraded, banks will not lend and governments will not borrow to back growth policies. The results are a financial and political tailspin and a bleak economic outlook.
Jobs and growth were on the agenda at last night’s informal summit of EU leaders, but the central question – how governments can reconcile stimulating demand with bringing budget deficits under control and keeping the ratings agencies happy – remains unanswered.
Clever technical fixes could provide part of the answer: unspent EU budget funds could be re-focused, and more capital could be injected into the EU’s bank, the European Investment Bank. But what is perhaps more important is to identify sectors that could spur growth and to set out measures that would boost growth while not adding to the public debt.
There is a strong candidate: energy efficiency. Developing this sector would create jobs. Those extra jobs – but, above all, the savings available to households – would increase consumer spending. Analysis by Cambridge Econometrics found that the UK’s energy-efficiency policies between 2000 and 2010 increased real gross domestic product (GDP) by 0.1% annually. US data suggest that a 1% improvement in energy efficiency increases long-run GDP by 0.18%.
For investors, such growth offers the potential for attractive returns. Yet, of the $260 billion (€204bn) that Bloomberg New Energy Finance estimates was spent globally on clean energy in 2011, less than 7% went to energy efficiency. In Europe, the EU’s goal of increasing energy efficiency by 20% would require €700 billion to be spent. Yet the bloc is currently on track to improve efficiency by only 10% by 2020.
The EU has not done enough to secure demand. There is no silver bullet to achieving this but a mixture of binding targets (to indicate the size of the future market), incentive frameworks (to overcome market inertia) and regulation (to maintain momentum over the longer term) will be critical. The involvement of public banks as co-investors with the private sector to share risks and build confidence will also be crucial.
With these key pieces of the jigsaw missing in many countries, the number of large-scale opportunities for investors is limited. Clearly, the EU and member states need to do more to kick-start energy-efficiency markets.
That is what the European Commission has sought to do in its proposed energy-efficiency directive. The measures are strong enough to put the EU back on track to meet its 20% target for 2020. Whether the proposals will survive negotiations is, however, far from clear. The European Parliament has endorsed the directive, but the EU’s member states have proposed a counter-package that kills it through a thousand cuts, weakening it to the point that the directive would only narrow by a third the gap between performance trends and the 2020 target.
Cost is the principal reason that governments give. It is an argument that ignores a recent analysis by the Commission, which found that its proposals would save Europe collectively €20 billion per year. Economically, there is no more sensible investment.
The Council of Ministers’ counter-proposal is an indication of inertia and of a lack of vision and courage on the part of governments. But, politically, the time could not be better for governments to secure public support. Unemployment is high, voters are increasingly agitated about rising energy bills and there is an increasing belief that growth-friendly policies are necessary.
If the EU cannot seize an opportunity like this, the chances of agreeing a growth package that enjoys credibility are tiny.
Click Here: cheap nrl jerseys
Categories: News