The European Commission, the European Union’s (EU) executive arm, this week announced a €315 billion investment plan to help revive growth and create jobs on the continent.
The proposed scheme, to be voted on by the European Parliament and member states next Tuesday, largely relies on the creation of a European Fund for Strategic Investments (EFSI), which will seek to channel private capital towards worthy projects by providing public money guarantees and non-financial support.
The fund will be set up in partnership with the European Investment Bank (EIB). It will include a guarantee of €16 billion from the EU, combined with €5 billion committed by the EIB.
Basing their assumptions on what they described in a statement as “prudent estimates from historical experience”, both institutions believe they will be able to generate €15 of total investment for every euro of public money originally pledged to the fund. In so doing, the aim is to mobilise more than €315 billion of additional finance over the period 2015 to 2017.
“We need fresh investments in Europe and for this we need to mobilise extra private finance. The new European Fund for Strategic Investments will act as a multiplier,” commented Jyrki Katainen, European Commission vice-president.
The capital used to seed the fund won’t be added to the EU’s balance sheet, European Commission President Jean-Claude Juncker said on launching the initiative. It will instead come from a number of existing programmes currently run by the EU, such as the €30 billion Connecting Europe Facility, as well as EU budget reserves.
The vehicle will seek to catalyse projects in sectors including infrastructure, notably broadband, energy networks and industrial transport, as well as education, research and development, renewable energy and energy efficiency.
“The Investment Plan we are putting forward today … is an ambitious and new way of boosting investment without creating new debt,” Juncker said.
The initiative has been the subject of considerable debate in Brussels, with a number of EU member states wanting fresh cash from the European Commission instead of “fantasy” financial engineering aiming to put “old wine in new bottles”, in the words of observers skeptical about the vehicle.
EFSI has also received mixed reviews in private circles, with an investment consultant telling Infrastructure Investor this week that the creation of “another fund”, in the context of too much money already chasing too few deals, was “at best unhelpful and at worst damaging”.
The European Union intends to bolster the fund’s powers via the establishment of a “transparent pipeline” identifying viable projects and the provision of technical assistance to support project selection and structuring. It also plans to design a number of measures aiming to make Europe more attractive for investment by removing regulatory bottlenecks, most notably in the energy, telecoms, digital and transport sectors.
“[In Europe] we are faced with a crisis of confidence, so the challenge is to re-connect private investment with attractive projects,” said EIB president Werner Hoyer. “To achieve this, we need to take on more risk to encourage project promoters to launch their investments.”
The EU hopes for a swift implementation of the initiative, with the objective to set up the fund in spring 2015 and launch it by mid-2015. The joint Commission-EIB Task Force, a working group backed by both institutions, is expected to provide a first list of possible investment projects in December this year.