Marty, O. (2015) “The Juncker Plan – the vehicle for revived European ambition?“, Fondation Robert Schuman – The Research and Studies Centre on Europe, European Issues – European Issue No. 347, 09 Μαρτίου 2015.
The proposed regulation on the creation of the European Fund for Strategic Investments (EFSI) was presented by the European Commission on 13th January 2015. The trilogue is going on until the end of the Latvian presidency with the aim of implementing the Fund by the summer. An agreement of principle is expected to be found by the “Ecofin” Council on 10th March. In this perspective, this paper recalls the three dimensions of the Juncker Plan, analyses how their joint effect can guarantee the success of the latter, and sets out some views on the technical aspects currently under debate.
The European Commission has delivered the proposed regulation on the creation of the European Fund for Strategic Investments (EFSI) to the European Parliament and the Council. This guarantee fund is part of a wider political project that aims to ensure the catalysis of private investment in order to fulfill European priorities. Under which conditions can the “Juncker Plan” succeed?
I – The Juncker Plan comprises three strands linking financing, a project pipeline and an investment-friendly environment
- The mobilisation of 315 billion € of additional investments for the European Union over a three year period
The first strand of the Juncker Plan aims to mobilise 315 billion € in additional investments in the European Union over the next three years, i.e. in addition to the European Investment Bank and the States’ usual activities. This aims to rectify a severe shortfall in investment in the European Union since the start of the crisis. The basic structure of the Plan entails using the Union and EIB’s funds to guarantee additional EIB’s investments, ones that would be more risky than its prudential rules allow, and thereby catalysing private investment.
The new Fund (EFSI) will act as a guarantee fund totaling 21 billion €. It will be provided with 8 billion € by the “Connecting Europe Facility” (CEF) the “Horizon 2020” programmes and reallocated EU budgetary lines. 8 billion € of the EU’s budget will be made available to the EFSI, after the redeployment of EU programme packages that have already been allocated to the States. The EIB will take 5 billion € from its own funds for the EFSI.
The EFSI’s 1:15 multiplier effect will be achieved in two stages. 1 € allocated to the EFSI will allow the EIB to invest using risky products to a total of 3€. These investments will attract private investors to a total of 5€ for each euro invested by the EIB. The total volume of the final investments is estimated at 315 billion €; 240 billion of this overall total is to be spread across strategic infrastructure projects of European interest (transport, energy, broadband, education, healthcare, R&D, etc.) and 75 billion € in risk financing of SMEs and mid-caps.
- A project pipeline in sync with European priorities
The financing thereby mobilised will support projects planned for their European interest and which are consistent with the Commission’s priorities. In December 2014, member states were invited to deliver a list of public or private projects to the Commission (that is meant to be developed and changed), which now totals 1,300 billion €. These projects, which have now been identified better, will logically be put forward by their promoters to the EIB and sorted individually by the ad hoc Investment Committee which will, in all likelihood, be set up on the basis of flexible lending criteria, before being examined for EIB risk financing as part of the Juncker Plan.
A vital detail in the second strand of the Plan is the technical assistance organised by the EIB (and in part financed by the European Union’s budget) which will appreciably be developed to help promoters to structure and finance their projects better. This platform notably aims to support the introduction and increased use of complex financial packages and to increase cooperation between the EIB and the national promotional banks (NPB), which use similar business plans and which are sometimes granted these instruments, as in France (the BPI and the CDC). The platform will have significant means available since the proposed regulation provides for the allocation of 110 million €.
Dialogue between the Commission and the EIB, the promoters, investors and other institutional players is provided for on European, national and regional levels to facilitate developments and to raise awareness on the new financing methods. This will provide an opportunity to explain the EIB’s risk activities, the synergies between national programmes and those undertaken by the Union and financial instruments. The possibility of converting the Structural Funds into these instruments will also be used as a means to complete – and even to go beyond – the plan’s goals, as provided for in the proposed regulation. This reflects a change in approach on the part of the Commission – we shall return to this later.
- Establishing an investment-friendly environment on the national and European levels
The third strand of the plan firstly aims to foster increased regulatory predictability both on the State and Union levels. This aspect, which is vital to any investment, is too often neglected by public decision makers. Attracting and securing private investment requires simple, predictable, sustainable rules. Here we refer to fiscal issues that must also provide enough incentive, and to the quality of spending made nationally and by the administrations, which could be significantly improved in many countries, notably as part of the European Semester.
An important aspect of an improved investment environment also means unlocking long term disintermediated finance sources, whilst at present the Union’s economy is financed by the banks in the main (around 75%). Since the latter are constrained by their lending capacities notably due to the regulatory framework that has been imposed since 2009, the development of capital markets could “take over” from the banks and foster the investment of European private savings in the long term financing of infrastructures and innovation. The so-called “Capital Markets Union” is therefore closely linked to the success of the Juncker Plan.
Finally, completing the Single Market by guaranteeing regulatory harmonisation and the removal of regulatory hurdles to investment could greatly help in the success of the Juncker Plan. Financing opportunities will emerge from a harmonised market via policy guidance and predictable, stable convergent legal and fiscal rules. Knowing what the European energy policy mix will be beyond the goals set in the Energy-Climate packages or how domestic markets will be opened to foreign service providers is decisive in the energy sector for example.
Σχετικές αναρτήσεις:
- Sander, H. (2015) “The ‘Juncker plan’ does not offer a genuine route to boosting the Eurozone’s recovery“, LSE EUROPP, 19 Μαρτίου.
- Blome, N., Pauly, C., Peter Schmitz, G. & Schult, C. (2014) “Mr. Europe? The Ghosts of Juncker’s Past Come Back to Haunt Him“, Der Spiegel Online, 10 Νοεμβρίου.
- Lannoo, K. (2014) “Juncker raises high expectations with ambitious agenda“, Politics and Institutions, CEPS Commentaries, 16 Ιουλίου.