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Tuesday, January 19, 2016

Larger economies are the biggest recipients of EFSI funding

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News In 2015, the EFSI was mainly utilised by the EU’s big economies such as France, Italy and Spain.

Launched in 2015, the European Commisison's investment plan, which aimed to mobilise €315 billion, has led to operations in 22 of the 28 member states. But some countries, notably France, Spain and Italy, have fared better than others.

Last year, the Juncker Plan mobilised €7.5 billion through the European Investment Bank (EIB), a sum that it hopes will act as a catalyst for around €50 billion of investment.

France the third biggest recipient

After Spain and Italy, the third biggest recipient of Juncker Plan funding in 2015 was France. Paris received €1.3 billion from the fund last year, which stimulated around €7 billion of investments.

With the promise of mobilising €315 billion of investment in SMEs, environmental projects, infrastructure and innovation, the investment plan launched by European Commission President Jean-Claude Juncker was designed to close Europe's investment gap and boost its economy.

The EU provided €8 billion to the European Fund for Strategic Investments (EFSI), to act as a foundation from which the €315 billion would be raised.

This initial capitalisation was provided in the form of guarantees from the EU budget to facilitate the payment of a further €8 billion from the European Institutions. A further €5 billion were added by the EIB.

This €21 billion is now used to back investments in higher-risk projects than those usually supported by the EIB.

The fund's managers bet on a fifteen-fold "multiplier effect" to reach their €315 billion objective.

A question of leverage

The EFSI has so far been successful in creating the desired multiplier effect with higher-risk investments than those usually financed by the EIB.

French projects include supporting third financing companies to carry out energy efficiency renovations on private homes.

Changing governance

The ECB's reluctance to support certain projects has also been a topic of debate. The institution, which can borrow very cheaply thanks to its triple A credit rating, has often been criticised for its aversion to risk.

But the objective of the Juncker Plan was to address precisely this issue: to finance projects that would normally be unable to attract private investors due to their high risk or low returns.

For the year 2015, the investments of the Juncker Plan were selected by the EIB's board and validated by the European Commission. The investment plan was launched before the EIB could assemble a Steering Committee, which will meet for the first time this January and take charge of the official validation of projects.

This new process will also include the European Parliament, as the presidents of the Steering Committee and the EFSI will have to report to the European Parliament every six months.

Source :  Euractiv


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