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06/12/2016

UK makes the biggest contribution to the Juncker Plan

UK & Europe

UK makes the biggest contribution to the Juncker Plan

Jyrki Katainen: "I am delighted." [European Commission]

The UK may be a Eurosceptic country, but it has made the biggest contribution to the flagship project of the Commission led by Jean-Claude Juncker – the €315 billion Investment Plan for Europe designed to stimulate the EU’s post-crisis economy.

The UK announced yesterday (16 July) it will contribute £6 billion (about €8.5 billion) to projects benefiting from finance by the European Fund for Strategic Investments (EFSI),better known as the Juncker Plan. This is in fact the biggest contribution so far.

Commission Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, said he was delighted that the UK announced £6 billion – nearly €8.5 billion – of co-financing for the EFSI.

“This is the biggest announcement yet and will have a big impact on SMEs and infrastructure in the UK. The Investment Plan for Europe is moving into high gear,” Katainen said.

Britain is the ninth country to contribute to the Plan after Germany, Spain, France, Italy, Luxembourg, Poland, Slovakia and Bulgaria, even before the EFSI becomes operational.

In February, Germany and Spain announced that they would contribute €8 billion each. In March, France and Italy also announced €8 billion in pledges. In April, Luxembourg announced that it will contribute €80 million, and Poland announced that it will contribute €8 billion. In June, Slovakia announced a contribution of €400 million and Bulgaria announced it would contribute €100 million.

Last February, a report by credit rating agency Standard & Poors said that the UK will benefit almost twice as much as the other large European countries from the Juncker investment plan.

>> Read: UK set to mop up Juncker Plan gains

The report found that the resulting multiplier effect was greater in developing economies than in the developed countries, but the UK was a notable exception.

S&P estimated the benefit to economies over a three-year period (2015-2017) of an increase in public sector spending of 1% of GDP in the first year.

The UK would see multiplication on a scale of 2.5 over the same period, more than twice that of Germany (1.2) and almost double that of France (1.3) and Italy (1.4).

It is expected that EFSI will become operational by September as planned.

Background

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.

>> Read: Juncker: Christmas has come early, here is my big plan

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.

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.

Further Reading