The Labour Party today launched its proposal for a €20bn Strategic Investment Bank to stimulate the economy by channelling funds to the SME sector and to infrastructure investments such as green energy and next generation broadband.
It is proposed to ring-fence €2bn from the National Pension Reserve Fund to support these productive investments, as opposed to the government plan to plough much, if not all, of these funds into Anglo Irish Bank. This modest initial investment would allow for the generation of up to €20bn to support our SMEs and critical infrastructure.
Joan’s full statement:
“Yesterday’s quarterly unemployment figures painted a truly appalling vista.
There were 167,000 fewer people in work at the end of 2009 than a year earlier, nearly half of this number being men losing jobs in the construction sector. Emigration and falling labour market participation are other key drivers of this staggering decline.
In just two short years, unemployment among under 25s has more than doubled, from 28,700 to 66,800, two thirds of these being young men. This cohort makes up 1 in 5 people on the dole.
When the world renowned economist, Danny Blanchflower, was in Dublin recently he talked about the devastating long-term effects that persistent youth unemployment can cause in society and for the economy.
Over the past two years, the Labour Party has consistently called for investment in job creation to be put at the top of the agenda, but our government can’t see past bailing out Anglo Irish Bank and Irish Nationwide.
Fianna Fáil’s ad-hoc response to the crisis in Irish banking has been characterised by a string of broken promises. We were told that the bank guarantee would be the cheapest bank rescue in the world. This has turned out to be a disastrously bad call, and has led to a seemingly endless series of bailouts and creeping nationalisation.
So far, we have seen no upside in the real economy. The credit famine continues. People continue to lose their jobs in record numbers. They have seen their hard-earned pension pots go up in smoke. Businesses are going to the wall because of lack of credit and a lack of demand from hard-pressed consumers.
Next week, the Minister for Finance will announce the latest round of bank bailouts for our broken banks. Anglo Irish Bank alone has already sucked in €4bn that will never again see the light of day. This could rise to €13bn as good money is thrown after bad in a desperate attempt to breathe life into this zombie bank. This is nearly €7,000 for every worker in the country.
Having been told that NAMA would take a €28bn punt on dodgy Anglo loans, it now looks like this once-in-a-lifetime gamble could reach €36bn or more, with untold potential losses for this generation of taxpayers and the next.
Irish Nationwide Building Society looks set to cost taxpayers a further €2-3bn up-front through recapitalisation after they take on €8bn in risky NAMA loans.
These niche banks alone could eat up the remainder of the National Pension Reserve Fund if there is no stop put to government folly.
Even as the Minister was concocting NAMA, the IMF warned that it would not significantly increasing lending in the economy. This means no new jobs.
At great cost, NAMA has been designed to deal with the toxic legacy loans of a burst property bubble. To get our economy back on track, we need to look to the future and invest in our future.
The Labour Party is proposing to launch a Strategic Investment Bank to address two critical market failures that were apparent even at the height of the boom.
We propose an initial up-front investment of €2bn from the National Pension Fund, into a new vehicle which will raise funds to channel into Ireland’s SME sector and into financing vital infrastructure. Rather than pumping this money into a failed banking system, we propose that it be ring-fenced for productive, job-creating investment.
The SIB will be both a commercially driven business bank and a public project financing powerhouse. It can be a key driver of green energy, micro-finance and next generation broadband.
Has this been tried before? Yes, just yesterday, Alistair Darling proposed the establishment of a green investment bank to support investment in the eco-innovation and environmental sector.
France last year launched its own Strategic Investment Fund tasked with taking long-term, minority stakes in French companies with a view to catalysing further private sector co-financing.
Labour’s Strategic Investment Bank has been modelled on the hugely successful KfW bank, based in Germany. Established as part of the Marshall Plan, KfW has played a leading role in supporting investment and development in Germany. KfW is the sixth largest bank in Germany, one fifth the size of Deutsche Bank, and one of the largest capital issuers in Europe.