Global Economic News
EU Nations Sacrifice Infrastructure at the Balanced Budget Altar
Aug. 4 (EIRNS)Instead of moving to heal their hemorrhaging economies with large-scale infrastructure projects such as NAWAPA, Spain, Portugal, Britain, and France, which have adopted unprecedented fiscal austerity programs, are committing hara-kiri by scrapping major investment in both physical and human infrastructure programs.
Spain: The Infrastructure Minister, under the sophistic label of the "adjustment program," announced on July 22 that for 2010-11, some 200 infrastructure programs (17% of total, EU6.4 billion) will be frozen, 112 of them for roads and highways, 87 in rail. Only ports, airports, and very few high-speed TGV rail connections will not be scrapped. Other projects, which were initially tapped to get public financing, will become public-private partnerships (PPPs), i.e., debt for the state, the cash for the banks. Local communities can no longer share the costs either, since the tax revenue on real estate transactions, which was EU16.7 billion in 2006, are expected to drop to a mere EU1.8 billion this year. As a result, 115,000 direct jobs and 1.1 million indirect jobs will be lost, while unemployment is already over 20% (3.9 million).
Portugal: Earlier this Summer, the government announced it was canceling plans for a high-speed rail link from Portugal to Spain, and the rest of Europe, on orders from the IMF and the EU to cut spending.
Britain: Chief Secretary to the Treasury Danny Alexander announced on July 12 that the U.K. will totally abandon 12 public infrastructure programs worth £2 billion and freeze 12 others worth £8.5 billion. The Green Party is happy since the airport expansions at Heathrow, Gatwick, and Stansted will be scrapped. In 2004, the U.K. pledged to spend EU66 billion between then and 2023 to upgrade school buildings and to construct new ones. Today, 58 of the 715 schools originally included in the program will not get upgrades. The motley list of victims of the cuts also includes construction of a new hospital in Wynyard and a court building in Birmingham. Contrary to the Tories' election promise, only two of the five necessary new prisons will be constructed.
France: While nothing is "officially" being scrapped, several programs are having "difficulties," notably a rapid metro (RER) connection between downtown Paris and Charles de Gaulle Airport; Highway A51 connecting Gap and Briançon; A24 connecting Amiens and Belgium; and A32 linking Nancy to Thionville. The "Seine-North" canal, needed to connect the Seine River basin, including Paris and the port of Le Havre, with the inland canal grid of northern Europe (Belgium, the Netherlands, and Germany), which was launched as a PPP, is unable get the financing it requires. Bankers will underwrite only TGV lines already decided on, because they are considered "profitable." As of 1972, France carried out annual maintenance and upgrades on 1,100 km of rail, after that dropped to only 500 km; it has now decided to do annual maintenance and upgrades on 1,000 km, since normal maintenance costs exploded three years ago, forcing trains to run at lower speeds in order to not kill their passengers.
Japan's Mizumo: Economic Growth Is Now Obsolete
Aug. 2 (EIRNS)Japan's Prime Minister Naoto Kan, fresh off a devastating loss in Upper House elections, appointed Kazuo Mizuno, chief economist at Mitsubishi UFJ Morgan Stanley, to a Cabinet post in charge of economic research late last week.
Mizuno's fame rests on statements such as, "Economic growth is now obsolete. There is no place for a growth strategy in the 21st Century." Unfortunately, this outlook coheres with much of the governing Democratic Party of Japan's basic policy of destroying the pro-growth alliance between the Japanese government and industry which initially made Japan unique in Asiaat least, before the rise of South Korea and China.
Japan's industrial growth path was forcibly derailed into speculation and financial operations in the past decades, although the country maintained its advanced capabilities in nuclear, high-speed rail, heavy construction and other key areas.
The Liberal Democratic Party (LDP), which led Japan for almost all of the period since the early 1950s, including during the time of Japan's most rapid advancement, has accused the DPJ government of having no growth strategy. Kan's response was: "The LDP came up with 16 growth strategies in 10 years. And what have they accomplished?" But Kan's action in appointing Mizuno and pushing for a doubling of the sales tax to pay down the debt, is telling.
Kan's position as head of the DPJ (and thus Prime Minister) is unlikely to be confirmed by party elections on Sept. 14.