The European Commission has announced a €315 billion investment plan to get Europe growing again and get more people back to work.
The plan is built on three main strands: the creation of a new European Fund for Strategic Investments (EFSI), guaranteed with public money, to mobilise at least €315 billion of additional investment over the next three years (2015-2017); the establishment of a credible project pipeline coupled with an assistance programme to channel investments where they are most needed; and an ambitious roadmap to make Europe more attractive for investment and remove regulatory bottlenecks.
According to European Commission estimates, the proposed measures could add €330 to €410 billion to EU GDP over the next three years and create up to 1.3 million new jobs.
European Commission president Jean-Claude Juncker said: “If Europe invests more, Europe will be more prosperous and create more jobs – it’s as simple as that.
“The investment plan we are putting forward in close partnership with the European Investment Bank is an ambitious and new way of boosting investment without creating new debt.
“Now is the time to invest in our future, in key strategic areas for Europe, such as energy, transport, broadband, education, research and innovation.”
Vice-President Jyrki Katainen, European commissioner responsible for jobs, growth, investment and competitiveness, said: “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. Every public euro mobilised in the fund will generate about €15 of investment that would not have happened otherwise. The fund will start with a very significant firepower and will be able to expand its activities further as more stakeholders join.”
The Commission is calling on member states and national promotional banks to join in to multiply the impact of the fund and trigger even more significant positive knock-on effects for the European economy.
European Investment Bank president Werner Hoyer said: “We have ample liquidity in Europe, but we don’t have enough investments. We are faced with a crisis of confidence, so the challenge is to reconnect private investment with attractive projects. To achieve this, we need to take on more risk to encourage project promoters to launch their investments.”
The investment plan will unlock public and private investments in the real economy of at least € 315 billion over the next three years. At a time when public resources are scarce while financial liquidity exists in financial institutions and on the bank accounts of individuals and corporations, ready to be used, the challenge is to break the vicious circle of under-confidence and under-investment.
The investment plan foresees a smart mobilisation of public and private sources of finance – where every euro of public money is used to generate additional private investment, without creating new debt.
We need fresh investments in Europe and for this we need to mobilise extra private finance
The EFSI will be set up in partnership with the European Investment Bank (EIB). It will be built on a guarantee of €16 billion from the EU budget, combined with €5 billion committed by the EIB. Based on prudent estimates from historical experience, the multiplier effect of the fund will be 1:15. In other words, for every public euro that is mobilised through the fund, €15 of total investment that would not have happened otherwise, is generated.
The focus of the fund should be to invest in infrastructure, notably broadband and energy networks, and transport infrastructure in industrial centres; education, research and innovation; and renewable energy and in SMEs and middle capitalisation companies.
Establishing the fund within the existing structure of the EIB group will allow it to be set up rapidly in spring 2015. The fund has the potential to mobilise over €315 billion of additional finance over the period 2015-2017. The objective is that the fund is operational by mid-2015.
In addition, this investment will be complemented by maximising the leverage of the European Structural and Investment Funds 2014-2020, using loans, equity, and guarantees rather than traditional grants. This will increase the leverage ratio to between 1:3 and 1:4. By doubling the amount of innovative financial instruments and using the leverage effect thus created, €20 and €35 billion in terms of additional investments in the real economy could be mobilised between 2015 and 2017.
The investment plan will enable finance to reach the real economy through the creation of a transparent pipeline identifying viable projects at EU level and providing the necessary technical assistance to support project selection and structuring and the use of more innovative financial instruments.
The new fund will support strategic investments in infrastructure, notably broadband and energy networks, transport in industrial centres, as well as education, R&D, renewable energy and energy efficiency.
It will also support risk finance for SMEs and mid-cap companies across Europe. It will help them to overcome capital shortages by providing higher amounts of direct equity and additional guarantees for SME loans.
Member states are already providing the joint Commission-EIB Task Force established in September with lists of projects selected according to three key criteria: EU value-added projects in support of EU objectives; economic viability and value – prioritising projects with high socio-economic returns; and projects that can start at latest within the next three years.
The investment plan will contain a road map to remove sector-specific regulations that hamper investment.
To improve the business environment and financing conditions, the plan will focus on measures in the financial sector, such as the creation of a Capital Markets Union, to provide an enhanced supply of capital to SMEs and long-term projects.