Socialist MEPs took pride in the expected adoption in plenary tomorrow (24 June) of the European Fund for Strategic Investments (EFSI).
They also admitted that previous attempts of their political group to push for less austerity, and more growth and employment had turned into bad experiences, and said they had learned their lessons.
The EFSI, better known as the €315-billion Juncker Plan (see background), Socialist legislators told the press today, is yet another achievement of their key priority to reorient EU economic policy towards growth and investment.
On Friday, EU finance ministers endorsed the agreement for a Regulation on EFSI, which is at the heart of the Commission’s €315 billion Investment Plan for Europe. Negotiations on the Regulation were successfully concluded on 28 May, just four and a half months after the Commission adopted the legislative proposal on 13 January.
The European Parliament is due to vote in plenary on the Regulation on 24 June which, once approved, will allow the EFSI to be operational by September as planned.
Udo Bullmann (SPD, Germany), said the outcome of the negotiations represented a success for his political family. But he also referred to the “Compact for Growth and Jobs” agreed in June 2012 as a counterbalance to the austerity measures adopted at this time, as well as to the Youth Guarantee, adopted in April 2013, an initiative aimed at tackling youth unemployment across Europe, as negative examples of high hopes by S&D which didn’t produce the expected results.
The ‘bad experience’ of the Youth Guarantee
“We do not intend to act on the bad experiences of the past, the bad experience of the so-called Growth and Employment Pact, the bad experience of the so-called Youth Guarantee, which did not work, which did not pay off, which did not deliver,” Bullmann said.
Asked by EURACTIV what would prevent EFSI from following the same negative pattern, Bullmann said that the Youth Guarantee was an obvious example that the EU was capable “to construct a positive element in a way that doesn’t work”. He said that the Youth Guarantee machinery was constructed badly and that it could not be subsidised, which was in fact needed because by definition this is not a self-financing tool.
“This was wrongly constructed machinery. And we try to avoid this basic mistake here, with [EFSI], otherwise we are permanently telling stories about imaginations that do not make reality,” the S&D MEP said.
The S&D group believes that during the negotiations it has been capable of “framing” EFSI by three different instruments. The first is the investment criteria, spelled out in the Regulation, the second are the investment guidelines which are spelled out in the annex of the regulation, and the third is the scoreboard, which allows the EFSI structure, the Steering Board and the Investment Committee to give priority to those kinds of projects which would be of best use for the European development, Bullmann explained. The scoreboard assesses ex-ante how the different projects meet the criteria.
The EFSI is set up within the European Investment Bank (EIB) and is to be governed by a Steering Board (Commission and EIB). The day-to-day management is ensured by a Managing Director. The Investment Committee (8 independent experts) is responsible for examining projects. Following pressure from MEPs, the EP will have the right to approve the appointment of the Managing Director and the Deputy Managing Director of the Investment Committee.
Putting the money where the mouth is
Regarding the volume of financing, Bullmann said that the expectations of Commission President Jean-Claude Juncker were not met, as member states shy away from investing in the overall structure, while seven member states did so in the fund of projects to be financed by EFSI, which is a secondary structure.
Member states may invest in the EFSI alongside the EIB and the Commission. It is also open to national promotional banks, public agencies and private sector entities. France, Germany, Italy and Poland have announced contributions of €8 billion each to the fund for financing projects, Spain has announced a €1.5 billion contribution, Slovakia €400 million and Luxembourg €80 million.
“We want to invest in the future and not in the past,” he said, explaining that the scheme should not be used for projects which would be financed anyhow or “projects of huge prestige without any function to modernise the economies”.
Belgian MEP Kathleen van Brempt said that the Socialists didn’t agree with those in the Council and the Commission who were insisting, especially in the beginning of the discussions, that it was up to the market to determine what projects would benefit from financing. In contrast, she said that the Parliament’s position was that clear criteria were needed and the EU-added value should be prioritised.
And the first project to obtain financing is…
Van Brempt argued there were clear frameworks which should attract financing, such as the Energy and Climate framework, or the Energy Union, but the first EFSI-funded project was going to be an airport in Croatia.
“That’s the example where we don’t want the investment to go to,” she said.
Asked by EURACTIV what positive examples of projects she would provide instead, Van Brempt said energy efficiency in buildings, and in particular in school buildings. Other examples she mentioned was broadband in rural areas, where specialised companies didn’t find interest to invest, or developing tidal energy. She made reference to a firm that had developed the technology, but as there was risk involved, it needed the support which EFSI could provide.
Asked if too many rules for EFSI would not kill investment, Bullmann said that the selection would remain on the policy side and not engage in micromanagement, and that that politicians should not take the place of the engineers.
On 15 July 2014, Commission President Jean-Claude Juncker obtained support for his election by the European Parliament, and in particular by the S&D group, thanks, largely, to the investment plan he proposed during his campaign.
At that time, the plan was still sketchy. Last November, Juncker kept his promise by presenting more details to MEPs.
The plan is based on a 15-fold leverage of a limited €21 billion of initial public money. As Juncker explained, the fund will be called European Fund for Strategic Investments (EFSI), guaranteed with public money from the EU budget and the European Investment Bank (EIB). The Fund will be able to mobilise €315 billion over the next three years.
For the EFSI, the Commission has put up €8 billion from the EU budget. This backs up a €16 billion guarantee given to the Fund. Topped up by another €5 billion from the EIB, the sum totals €21 billion.
In addition, the European Investment Bank (EIB) can give out loans of €63 billion. But private investors will be pitching in the remaining €252 billion.
As the Socialists and Democrats had asked, Juncker said that the member states’ contributions to EFSI would be deducted from the calculation of public deficit and public debt under the Growth and Stability Pact.
Juncker warned about national wish-lists, and said there was no guarantee how much they would profit from the fund, if they contribute to it.