Another World is Possible

Monterrey Conference
European Development Fund

Monterrey Conference

Little can be said because this has been a forum of pure personal exhibitions, calculated rhetoric, bluster, absence of realities and many promises. The true results of the meeting of the Heads of State and Governments have been the goodwill to continue the alms with some increases in order to quiet the poor. Conferences that are announced, bringing hope, and end with disenchantment, pain and hatred. The only concrete agreements have been to continue working on an agenda full of calls for meetings in order to find forms of financing destined to develop the poor countries.

European Development Fund

This Fund is a suggestion to the twelve countries, Poland, Rumania, Slovakia, Bulgaria, Czech Republic, Hungary, Slovenia, Estonia, Latvia, Lithuania, Cyprus and Malta, so that, in the short term, they may join the European Union, as an answer to the following press commentary observed during the Barcelona Council.

“It is assumed that in the next few months the calendar for the extension of Europe towards the east can fail.”

There are indications that support this prognosis. My opinion is that the Twelve countries will not wait for the opening of the doors to the EU to reactivate their economies and decrease unemployment, but rather they will, work together immediately, carrying out the Project for the construction of housing that I detail in this Web site. Solidarity in common objectives through work, in contrast to the dissimulated confrontation of national interests in the organization of the Fifteen.

Becoming integrated in Europe forming a single bloc, yes, always yes; but not waiting patiently for years, immobile, in order to take part in this integration when they can take the initiative to carry out the Project of massive construction of self-financed housing, thus making their integration in the European Union easier.

Challenge for the European Union is the subtitle of The Third Way, published at the beginning of 1999 with the Project of construction of housing with zero cost and the ample creation of employment. It showed, as I do in this Web site, with mathematical financial calculations, that the only form of generating economic resources estimated in billions of euros, without going into debt, was to assume the program of the construction of housing to cover the housing needs. The available resources would be for social services programs, investment in infrastructures, research and development and also in forming mixed enterprises of capital – work force (based on the Partnership Contract described) in order to execute large projects, and the financing of the SMEs as medium-type enterprises.

The European Union set up the Agenda 2000 with the calendar for the integration of the central and eastern European countries that had requested it. In my book, I insinuated that part of the resources generated through my Project could be destined to facilitate the incorporation of those countries by covering part of the costs that should be included in the community budgets. My suggestion was expressed in this way:

“AGENDA 2000. In the next meeting of the representatives of the Member States, there could be tension between the countries that consider their contributions to the common budgets to be excessive and those that do not want to see the aid that they receive from the EU reduced. “The Third Way” suggests applying part of the reserves generated by the national housing construction programs to moderate and satisfy both positions. These housing programs could also provide resources to smooth the road for the countries who have requested integration in the EU; they could even adhere to the Macro-Project.” (I referred to the massive construction of housing.)

My suggestion included the tacit invitation to the petitioning States to change their passive attitude of waiting into active collaboration and that their entrance in the Union be of a less dependent nature. Three years have passed, the countries continue waiting, adapting themselves to the requirements of Maastricht and subordinated to the particular reasons of the member countries. The tensions, distrust and doubts continue; I do not know if to a greater or lesser degree. What I do know is that in the recent Barcelona Council concepts and commentaries surfaced that should be taken into account. I will copy the following quotes from the communications media referring to this subject.

“The fear among the candidate countries is that the European Union is afraid of the entrance of a group of countries poorer than the present European average, and that this could make the process even more difficult. If the candidates from central and eastern Europe entered all at one time, the European Community territory would increase by 34 percent, up to 500 million, but the Community GDP would only increase 5 percent. And the per capita income would fall by 16 percent. When Spain and Portugal entered, the average European income was reduced by 6 percent.”

“The expansion can export stability but it can import instability.”

“The German Government warned of the great debate that the EU has ahead concerning the reform of its internal operation, of the policy of agricultural subsidies and of the cohesion funds. Berlin announced firmness in the defense of its national interests. A great debate in the next few years to reform agricultural policy, and of the cohesion funds to adapt them to the needs for expansion and to control expenses. The incorporation of new members will require a gradual transfer of funds towards them and, at the same time, decrease and even suppress aid to countries that currently receive it.”

“The German Government seems decided to assert their national interests, without complexes. (The Chancellor) admitted that the financial plans agreed to in the Agenda 2000 were valid up to 2006, but he made it very clear that the philosophy would have to change.”

The previous quotes suggest the following conclusions:

1. The integration into the EU of the 12 aspiring countries can be long term.

2. In 2000, the community budgets were approved up to 2006, establishing the amount of cohesion funds, nerve center for balance in the contributions of the Member States. The entrance of 12 new countries will bring about the redistribution of this balance for the following period; that is, it is presumable that the expansion will initiate after 2006. There are four more years of waiting with scarce hope of a joint entrance.

3. The Maastricht Treaty set five convergence criteria for any country that wanted to form part of the European Union relating to inflation, interest rates, monetary stability, public deficit and public debt. The average rate of inflation among 10 of the aspiring countries is 5.9 percent. Of the remaining two countries, one has exorbitant inflation and the other is 3.4 percent.

4. The unemployment rate reaches double digits for 6 countries, with a maximum of 18 and a minimum of 13. In the other 6 countries, unemployment varies between 8.8 and 3.4 percent.

With this information, the economies of the Twelve are a long way from meeting the convergence requirements. While they wait for the opportunity to enter the EU as a member with full rights, they must make internal changes and apply economic shock therapies. Could a collectively assumed shock therapy be applied? I think it can, as long as the 12 countries form a temporary union to carry out a new economy in a concrete sector divested of political interests and developed in each country according to its needs. The ultimate objective would be to impel their integration as a bloc into the European Union for their own merits, free from the label of poor countries.

In this Web site (Page 15), in referring to the EU, I write: “Neither can we say that it forms a single economic body because it is the sum of heterogeneous groups. The European cohesion must be looked for in the formation of a single economic bloc; it cannot be a general figure formed by industry, agriculture and fishing or by economic products from concrete geographic areas, because they bring out the exclusionary national differences. There must be a characteristic sectorial composite, newly created, with common pressure, in a branch of goods of general necessity, desired, long term, revalued and transmissible.”

“I feel This sectorial branch should be the self-financing housing construction industry.”

It is clear that the 12 aspiring countries do not make up an economic unit, but it is also certain that to improve the economic situation of their respective citizens they can agree to this unit by directing all their efforts to a sector that meets the requirements pointed out in the two previous paragraphs. They can institute perfectly a temporary Association of Nations and create a European Development Fund with the main function of constructing all the houses necessary for the 12 countries, sharing the work and self-financing. Entering in the EU would be the objective that cannot be renounced and its initiative would be a necessary condition for development while their integration in the European Union is not in effect. I have no doubt that their experience would become a model and example for the 15 countries that form the current EU, who would also unanimously adopt the Project or only the convinced countries.

The question that arises is whether or not we are dealing with a real Project or a mirage. They say that mathematics is the base of life. I do not know if this is true, but I am absolutely sure that the viability of the European Development Fund that I propose to the 12 countries that would make up the Association of Nations, is not a possibility but a reality supported by mathematics. Whether this Project is accepted or not does not depend on me, but it can never be classified as a utopia. The best jury will be the 12 countries to whom I explain and detail the Project, just as I did to the heads of the EU. The difference in appreciation between both groups will only come from their receptivity, which is very different for those who have their needs covered and those countries who, from the beginning, are considered poor countries.

The proposal is clear: construct all the needed housing, self-financed, with the initial results being the massive creation of jobs, generation of resources without going into debt, destined for education, social services and, preferably, family aid.

The Project is not circumstantial, nor does it constitute an emergency plan to solve passing situations. It is not a project of political opportunism but rather an economic project to establish a new economy based on work and social protection. It does not speculate with arguments or random hypotheses as if it were a lottery. The Project is based on a real proportionality. If the beginning is zero, the result will be zero; if the beginning is one, the result will be that which corresponds to 1 in the ordinary reserves, financial reserves and in the remainders. If the beginning is 100, the results will be in the same proportion. We must begin with positive numbers, that is, construct houses upon demand. We will never proceed to offer constructed houses because it would break the planned financial scheme. When in the example contained in the Web site I comment on the results obtained with the construction program of 500 houses, I presume to have an equal number of firm requests. Only in this way can we plan the Bond issue in coordination with certain information.

Following this scheme, I am going to present the cash resources the Twelve can obtain in order to develop their economies. It is advisable that the reader refer to the Web site in order to study, step by step, how the results are obtained. Here I will only repeat the basic conditions of the program and the final results. Prior to this, I should make two clarifications.

1. The 12 grouped countries form a population of more than 100 million inhabitants.

2. In this preliminary study I will start from the hypothesis of constructing 5 million units among the Twelve, distributed according to the needs of the respective populations. Criticisms are unnecessary as to whether they are many or few because I point out that the program starts with a strict number of houses with previous purchase agreements. The payment terms are long and the interest is favorable, with additional advantages.

To execute the Project among the Twelve, there are no political or economic conditions as they are unnecessary. Neither will there be negotiations among them because there is nothing to negotiate. All that is necessary is to subscribe to the agreements of coordination in the collective work. Each country will construct the houses that it needs and according to this need will project its work plans in its territory, administering its own resources generated by the Twelve in an activity of common cooperation. The union will take part in carrying out a collective, but individualized, Program, in order to have greater credibility. Collective responsibility in the face of the acquired compromises in the issue of the Bonds guaranteed by the work of the 12 countries.

The basic parameters used in the construction and sale of houses are:

Construction encouraged by the States. The industrial benefit in the construction of houses is estimated to be between 30 and 40 percent over the cost of the land and construction. From this benefit, the State will receive 12% calculated on the sale price. The decrease in profit for the construction companies will be fully compensated for by the increase in contracts and by the almost canceling of financial costs because the State will pay without delay, when the finished-job certifications are presented.

Sale price is according to the market prices. 1,200 euros per m2 is calculated, in 100 m2 houses. Units of 80 and 60 m2 could also be constructed. Therefore, the cost will be the sale prices less 12%, equivalent to 1,056 euros. These prices would vary according to the countries, areas, and market conditions.

Acquisition conditions: initial payment of 15% and the rest to pay in 30 years with fixed 6.75% mortgage interest. This interest includes a life insurance premium for the owner and certain family aid per number of children.

Turn to the Web site to verify the calculations.

The financial sequence that I adopt is:

1. Determine the number of signed promises to purchase. That will be the number of houses to build.

2. Calculate the amount of quarterly payments made by the buyers.

3. Calculate exactly the number of Bonds that we will issue at 7% interest, whose quarterly amortization coincides with the payments by the house buyers. In this way the obligations we acquire through the Bond issue will be paid with the money collected. We will use the net amount of the issue to construct houses, leaving the surplus for the State, with free disposal, as Ordinary Reserves, which translated into figures would be:

Millions of euros

Sale value of the 5 million houses 600,000
Initial payments, 15% 90,000
30-year financing, at 6.75% 510,000

Necessary Bond issue at 30 years, at 7% 497,206

Payments to the contractors, including their profit 528,000

Resources necessary for construction
Payments to the contractors 528,000
Plus 2% over sale price for administration 12,000
Less receipts for down payments 90,000
Total amount invested 450,000

Income from Bond issue 497,206
Paid out for construction 450,000
Ordinary reserves in the construction of
5 millions houses with zero cost for the 12 States 47,206 euros

which, for each house, corresponds to 9,941 euros

Tax harmonization

The fiscal policy taxes interest as capital income. The type of tax varies in the different countries and some day the European Union will agree to harmonize this by establishing a single rate for the euro area.

The Bonds issued in the construction phase will pay 7% annual interest to which tax withholding will be applied. If the issued Bonds were of the EU, the rate of tax would require a prior agreement between the Member States, with each country applying its own tax rate. In Spain it is 18%. In the theoretical Union of the Twelve this problem would not exist because they are Bonds with special characteristics in their origin and in their purpose and, therefore, from the beginning, they would have the autonomy to set the withholding rate. Twelve percent is appropriate so that the investments in Bonds yield 6.16% net.

This is a theoretical minimum yield. This project tries to make the investments in Bonds profitable and safe, without variations up to their amortization. The Bonds will be issued with quarterly payments of interest and amortization at 30 years with a bonus of 50% free of taxes, meaning an increase of 1.66% annually of the nominal value of the Bonds.

Fixed conditions, unalterable and unheard of in the bond market.

Financial Reserves

If we settle for the Ordinary Reserves, we will have used a system that permits the construction of houses without investment and brings in a profit of 9,941 euros per unit. It would be unforgivable to waste the potential for generating free resources that we have on hand. Unforgivable and absurd to reject an economic tool capable of creating and distributing wealth from housing programs with job offers. If the bureaucracy of the European Union did not know how to appreciate what I explained in The Third Way, I trust the 12 aspiring countries will be more receptive.

To verify the figures that follow, you must turn to the Web site and multiply by 10,000 the results indicated in Ordinary Reserves, Financial Reserves and Remainders. In the Web site, we talk about 500 houses and here 5 million.

The ordinary reserves are obtained through the construction of 5 million houses that require the issue of Bonds for the amount of 497,206 millions of euros.

The figures to consider are:

Millions of euros

Bonds issued at 7%. 30-year duration 497,206
Interest paid in 120 quarters 1,044,133
12% Withholding 125,296
12% Withholding per quarter 1,044

Remember what was stated in the Web site. These taxes that are assessed on the interest should not be considered as normal income and should not be integrated in the budgets for the reasons expressed. During 30 years, each country will have quarterly income from the Bond issue to build houses. This is net and available income. Let’s give it a concrete purpose: consider it as the amortization quota of a new Bond issue. The calculation of the nominal value of this second issue is 52,224 million euros.

In contrast to the first issue of 497,206 million euros that was marked for building, these 52,224 million are available for national projects. They do not constitute any direct debt because they will be paid with the withheld tax on the interest of the first issue, which, at the same time, will be paid periodically by the homebuyers. With the same process we obtain a third issue for a value of 5,485 million, free for investment. Grouping the second and the third issues, we will have available income of 52,224 + 5,485 = 57,709 million euros as Financial Reserves that are equivalent to 11,542 euros per house built.


In the Web site, I explain what they are, how they are invested and how they are capitalized. From the two parts that form the quarterly amortization quota of the Bonds – interest and partial return of capital – we only pay the interest and we keep the part of the capital amortization, which allows us to have available remainders (income) in each one of the three Bond issues, in this way:

Quarterly Remainders in millions of euros
First 1,239.6
Second 130.2
Third 13.6
Total 1,383.4

in other words, each house generates 276.6 euros per quarter in remainders destined to capitalizable investments in order to reproduce the nominal value of the issued Bonds.


Construction of 5 million houses with ZERO COST
Generation of resources without indebtedness. Millions of euros
Ordinary Reserves 47,206
Financial Reserves 57,709
Quarterly Remainders 1,383
Remainders in 120 quarters 165,960

Two questions arise: What can we do with so much money? and Is
it possible to obtain so much money?

The answer to the first question is: cover the needs for housing, attack unemployment. Having work stimulates consumption and economic activity. Social services can be improved and a solid pension plan can be activated. In the creation of new companies the Partnership Contract can be initiated which I have described so that workers are co-owners of 50%. Use a percentage of 2 to 5 percent for developing countries. Investments in infrastructures. Assignations for research.

To the second question, besides the criteria expressed with respect to the profitability and security of the Funds to issue, I examined the information of the bond markets published in Barcelona on April 11, 2002, as regards investment funds, both national and foreign, and I verified that:
National funds 706
Negative 475
Less than 1% 156
From 1 to 4% 39
Form 4 to 7% 15
Over 7% 21

Foreign funds 44
Negatives 18
Less than 1% 7
From 1 to 4% 11
From 4 to 7% 3
Over 7% 5

How many billions will the deposits reach in these 750 funds from Spanish investment?

In the Web page “Welcome to the Third Way” that I published in 1996 (it can be seen from the Google search engine, typing Web Montaner), I transcribed the information that the first 20 investment funds surpassed 20 billion pesetas and the savings deposits in the first 30 Savings and Loans were 31 billion pesetas, without counting on Banks. Just in Spain. Without being too optimistic there exist conditions for security and yield to cover the Bond issues to build houses. On the contrary, as a minimum we can build houses with zero cost and have available the ordinary reserves. And another question: To what level can the savings reach of the Twelve when deposited in investment funds in Savings and Loans and Banks?

On the other hand, if the twelve aspiring countries adopt my Project for self-financed construction of housing, I will explain how to free up additional resources, also without indebtedness, in order to construct houses with accessible rent and receipt of ownership documents after 15 years, destined for the economically weak population.

For the financial channeling of the Twelve upon carrying out this Project, I cite another of the commentaries from the Barcelona European Council:

“The Fifteen decide to postpone until 2004 the creation of a Euromediterranean Bank. Until that time, aid to the southern shore of the Mediterranean will be channeled through a credit line of the EIB.” (European Investment Bank)

It is logical that the Twelve, by not being subordinate to any time frame, nor prior agreements, proceed immediately with the creation of the Central-Eastern European Bank in order to channel the financial operations and put into effect this housing Project and Bond issue. Each country will have predetermined rights.

The Twelve can give a lesson on solidarity by attaining common objectives through work, in contrast to covert confrontation of national interests. There exists just one common goal: work to obtain and consolidate economic results, because the political interests have disappeared. The value of work will stand out above the passive and decaffeinated politics.

To end, remember the following quote in the communication media during the Barcelona Council:

“Turkey and Russia, pending matters. The expansion will make the European Union border unstable regions. The exclusion of Turkey and Russia calls on the community members to look beyond their borders.”

Can’t what I have written in these paragraphs be a motivation for Russia and Turkey to adhere to the Project for the construction of houses with ZERO COST? The two nations, as well as the rest of the world, can carry out the Project by themselves.

The persons who agree with this Project can help to spread it by recommending the address “”. But these efforts and the encouraging letters that I receive are insufficient and do not get results. The second part of the Challenge for the European Union is dedicated to the 12 candidate countries. I suggest helping the Twelve to get to know the Web site. It can be done by going directly to the governments or the Embassies and Consulates and through the communication media. It would be ideal that some or various communication media or NGOs sponsor the diffusion of this Project that can provide so many benefits to the States that adopt it and to the international community deprived of the most elemental services. What is important is that it is carried out because, with ZERO COST, it creates a great amount of jobs and generates important resources without indebtedness.

This is an urgent call to the global conscience to combat poverty and save millions of human beings from starvation and abandonment. Nothing is asked for and it costs nothing. Only that the countries organize work that they do not have to pay for.

Francisco Montaner

Globalizing housing with zero cost