A translatlantic schism

“Clearly austerity has its time, but there also are times for investment,” says Julieta Valls Noyes, the US State Department official with responsibility for relations with the European Union and western Europe. She spoke exclusively to Prospect, her remarks coming as the eurozone risks slipping towards deflation.

Asked whether Europe, Britain included, has gone too far with austerity policies, Valls Noyes says: “I have heard people say that. This is not a question that we necessarily would draw broad conclusions about, but we certainly would welcome seeing in some countries that are able to do so a greater focus on investment as well.”

Valls Noyes, Deputy Assistant Secretary in the Bureau of European and Eurasian Affairs, indicates that the idea of greater spending is finding favour in Europe. On a recent trip to Germany, she says “I heard a lot of talk… saying that they needed more investment in their infrastructure and that there needed to be a focus not just on austerity and exports, but also on domestic investment and on other avenues toward growth.”

In the 2014 Budget, the Treasury stated that total public and private infrastructure spending between 2011 and 2013 had been $45bn. In capital spending plans set out by George Osborne at the 2013 spending round, the Chancellor promised £100bn of capital investment in 2015-16 for transport, science, schools, housing broadband and flood defences. That is a substantial increase in government capital investment­, although the general election in 2015 makes it uncertain whether Osborne will be the one to implement it.

Valls Noyes also discussed the rise of eurosceptic politics in Britain. When asked whether the US would prefer Britain to remain within the EU, she says: “Short answer—yes.” The first reason concerns sanctions on Russia: “One of the most important things that the United Kingdom can do is to help maintain EU resolve in maintaining the sanctions,” she says. Britain’s role “is to help maintain that pressure and maintain the EU coherency and the united EU approach in maintaining the sanctions.

“Having Britain, which has been very strong and has been one of the strongest proponents of a forceful response to Russian aggression is in our view very, very important in maintaining that unity of purpose and that unity of approach.”

Valls Noyes also commented on the Transatlantic Trade and Investment Partnership—known as T-TIP—a colossal trade deal currently being negotiated between the EU and US, which is intended to harmonise standards on agriculture, manufacturing and services. The intention is to open up US and EU markets to one another, with substantial benefits for both. Valls Noyes calls it “an extraordinary agreement of the leading economies of the world that will set the standards for the rest of the world for decades or generations to come. “T-TIP is going to be an agreement with the EU and our view is that the EU is stronger with the UK in it,” she says, brushing aside the idea that rising anti-EU sentiment within many European countries was anything more than “a lively public debate” on the role of Brussels.

Though there is no formal date set for the conclusion of T-TIP negotiations, both sides are aiming to sign before mid-2015, when the centre of political debate in the US will move towards the 2016 presidential elections. EU member states, presently facing the threat of deflation, expect better trade relations with the US to improve dwindling GDP growth.

“We think that T-TIP is one of the initiatives that can help lead to growth and to job creation and to new investment,” says Valls Noyes. “It can be one of the avenues to help restore growth and prosperity in Europe—and as Europe goes, so goes much of the rest of the world.”