EU is Geared for New Growth Plan （Chen Xin）

Abstract：Since the outbreak of European debt crisis, many European countries began to implement their austerity programs under the impetus and guidance of Germany. Many debt-crippled nations has taken steps to slash their budgetary deficits in a bid to regain the market confidence with an aim to cut down the financing cost and foster the afordable environment for sustainable development of their finance. But the austerity program fails to deliver what the market expects it to perform after two years’implementation—the interest rate of government bonds of the heavily indebted nations surging high, the cost of financing skyrocketing—which has called in question the validity of the austerity program. For many debt-ridden nations, it is doubtful whether retrenchment is the only way out or it might deprive them of the capability to recover if it is administered an overdose as a remedy. While Germany always advocate for enhancing the competitive edge through structural changes, it is not altogether against growth but instead embracing a growth other than through financial stimulus package. As is known to all, Europe is now facing stiff challenges from the emerging countries , so it consider the structural change as the only way out to sharpen the European overall competitiveness. As the Fiscal Compact reached among the 25 EU member states is still in the process of being ratified by their legislatures, it is unlikely that a new round of fiscal stimulus package will be passed among the member states since the fiscal compact has made too much demanding and mandatory requirements upon their public budgetary deficits.  As a result, the financial stimulus plan can be only implemented on the dimension of the EU, which can be carried out in the following three aspects: issuance of project bonds; increasing the capital fund of European Investment Bank so as to boost their loan capability; and improving the efficiency of EU Structural Fund.

IES Innovation Project Briefing，No. 13, 2012.