Recently, the European Parliament adopted its position on the European Fund for Strategic Investments (EFSI), and began the negotiations with the the Council. State of play of the Investment Plan for Europe, aimed at revitalizing the sluggish growth of the EU.
A €315 billion plan
The Investment Plan for Europe, more commonly known as the Juncker Plan, is based on the European Fund for Strategic Investments, which will be managed by the European Investment Bank (EIB). It will enable the EIB to finance riskier projects than usual, thus investing an additional €315 billion in the economy over the period 2015-2017. Despite this higher risk taking, the EIB will not lose its AAA rating which allows it to borrow at low rates, its Vice President Jonathan Taylor stated.
How will the funds be raised?
The EFSI will be established thanks to a guarantee from the European Union of €16 billion and to €5 billion from the European Investment Bank, to which co-financing from other public investors, such as public banks, may be added. The Commission has announced that it will adopt a positive attitude in relation to the Stability and Growth Pact concerning contributions of this type.
The Commission estimated that the Plan would generate a multiplier effect of 15, which is explained as follows: one euro from the EFSI allows the EIB to borrow three euro for a project, which represents about 63 billion euro in total. Each euro invested by the EIB then attracts 5 euro from private investors. Thus, the final investment will reach 315 billion euro according to the forecasts made by the European Commission, based on the experience of previous programs of the EU and the EIB.
These €315 billion will be divided as follows:
– €240 billion will be allocated to strategic investments of European scale in the fields of energy, transport, digital, broadband, education, research and innovation.
– €75 billion will be earmarked for supporting SMEs and mid-cap companies.
An expert committee set up by the EIB and the European Commission is in charge of reviewing projects from lists submitted by the Member States, and ultimately selecting the projects. There will be no geographical quota.
Launch scheduled for the second half of 2015
On Wednesday 22 April, the European Investment Bank approved the first four projects that will benefit from the plan without waiting for the results of negotiations between the Parliament and the Council. €300 million which should generate €850 million of investments will be loaned to the following projects: a medical research centre in Spain, the expansion of Dubrovnik airport in Croatia, the construction of 14 new health care centres in Ireland, and finally the innovative activities of an Italian SME working in the field of steel.
Six states have already pledged their support to the EFSI through their national promotional banks such as Italy, France and more recently Poland, which should each provide an additional €8 billion.
An agreement between the two co-legislators of the European Union is expected by the month of June, so that the Juncker Plan will be fully operational in mid-2015, as scheduled by the President of the European Commission. If the plan is successful, Jean-Claude Juncker announced that it would be renewed for the period 2018-2020.