The European Court of Auditors (ECA) asked for a clear mandate to control the European Fund for Strategic Investment (EFSI), the €315 billion Juncker Plan.
In a 19-page opinion, auditors reiterate that the aim of the initiative is to put savings and financial liquidity to productive use, without creating new debt, so that the project would create 1 to 1.3 million new jobs over the next three years.
It needs to be clear that the overall cost to the EU budget will not exceed €16 billion, the ECA writes. It adds that furthermore, the potential liabilities to other sources of public funds will need to be carefully controlled and disclosed.
The €16 billion will originate from the existing margins of the EU budget (€2 billion), the Connecting Europe Facility (€3.3 billion) and the Horizon 2020 programme (€2.7 billion), for a total of €8 billion. The EIB would commit €5 billion. Member States can contribute to the EFSI either at a risk-bearing level (complementing the existing contributions), via an investment platform, or by co-financing specific projects and activities.
Although its legal status is not specified in the European Commission’s proposal, the EFSI has its own governance structure, the ECA writes. A Steering Board shall determine the investment policy, including the risk profile. Membership in the Steering Board is proportional to the contributions. But the EU budget majority participation in the EFSI is not reflected in the governance structure, the ECA observes.
EU taxpayers will be in the front line for absorbing losses on public projects funded with private finance under the EFSI. That means that the right arrangements need to be in place from the outset to ensure that projects guaranteed by the EU meet its criteria and can deliver public benefits, the ECA insists.
Furthermore, the ECA argues that EU taxpayers need assurance that EFSI funds will be as well spent as EU budget funds. For that reason, the same basic rules and principles of sound financial management should apply.
However, in the ECA’s view, the Commission’s proposal says too little about how the performance of projects under the EFSI will be selected, monitored and assessed, how risks to public finances will be managed and scrutinised, and who will audit and report on those matters.
The European Commission unveiled the mechanism for its much-heralded €315 billion investment plan on 25 November 2014.
The cash is aimed at investing in Europe’s crisis-ravaged south, in an effort to boost solidarity.
The idea is to create a new European Fund for Strategic Investments (EFSI), with €5 billion coming from the European Investment Bank and an €8 billion guarantee from existing EU funds designed to secure a contribution of €16 billion in total from the institutions.
The €8 billion guarantee will come over a three-year period from the Connecting Europe Facility (€3.3 billion); Europe’s research programme Horizon 2020 (€2.7 billion) and so-called “budget margin”, or unused funds, worth €2 billion.
The resulting EFSI fund totaling €21 billion is expected to generate €240 billion for long-term investments and €75 billion for SMEs and mid-cap firms over the period 2015-2017.
- European Court of Auditors: Opinion concerning the proposal for a regulation on EFSI
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