EurActiv.com

EU news and policy debates across languages

05/12/2016

EU’s larger economies are Juncker Plan’s biggest winners

EU Priorities 2020

EU’s larger economies are Juncker Plan’s biggest winners

Ambroise Fayolle

[UNIDO/Flickr]

In its first year, the Juncker Plan was mainly utilised by the EU’s big economies, notably France, Italy and Spain. EurActiv France reports.

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.

“France was one of the main beneficiaries of the Juncker Plan in 2015, and this will continue into 2016,” said Ambroise Fayolle, the vice-president of the EIB.

>>Read: Juncker Plan cleared for take-off

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.

“Investment within the European Union today is 15% lower than in 2007, which is not the case for our main commercial competitors,” Fayolle said.

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.

>>Read: Juncker plan financing under scrutiny

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.

“We cannot measure the leverage effect project-by-project, we can only do it after the fact,” Ambroise Fayolle warned. “But the €10 billion capital increase of the EIB in 2012 allowed us to generate €180 billion of financing, an 18-fold multiplier effect,” he added.

>>Read: Rifkin: Juncker plan not enough to lift Europe’s struggling economy

The EIB vice-president went on to explain that “the projects supported by the Juncker Plan in France are high risk investments where there are gaps in the market”.

French projects include supporting third financing companies to carry out energy efficiency renovations on private homes. “This is an activity we are trying to encourage, because the banking sector is almost completely absent at the moment,” Fayolle said.

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.

Fayolle said, “We will see a real change of scale for the financing of more risky projects with the Juncker Plan.”

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.

>>Read: Xavier Timbeau: ‘The Juncker Plan is not working’

Background

On 25 November 2014, the European Commission revealed the details of its €315 billion investment plan.

In a gesture of solidarity, the money from this plan is largely designed to be used in the south of Europe, in the countries worst affected by the crisis.

>>Read: Juncker's €315bn investment plan unveiled: fifteenfold leverage and solidarity for the south

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 totalling €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.

The plan drew questions over the lack of new cash, with some members of the European Parliament calling it "recycling and re-labelling" of existing programmes.

>>Read: Juncker investment plan draws questions over lack of new cash