Low Juncker Plan funds for broadband internet spark doubt

Jyrki Katainen [European Commission]

Less than a year after the Juncker Plan for investment started, only eight percent of projects that have been financed so far will go into building new digital infrastructure.

European Commission Vice-President Jyrki Katainen told euractiv.com in an interview he thought that figure would be higher.

“I could have imagined for instance that broadband or digital infrastructure would be higher represented in the list but for some reason there hasn’t been demand so far,” Katainen said.

“Some people say that in many countries rural areas are quite difficult for the private sector to invest in broadband. The last miles are usually the most expensive so in order to get good penetration somebody should help to finance the last miles and that may trigger the whole network then afterwards,” he added.

Broadband infrastructure was named as one of the three focus areas for the Commission’s flagship Juncker plan for investment, or EFSI, that was launched last summer. The other two main areas covered by the programme are large energy and transport projects.

The scheme gives loans to high-risk projects from executive and European Investment Bank (EIB) funds in a bid to attract private investment. Since last August, €10.6 billion in EU loans have been earmarked, with 26% of the total funds going to energy projects and 17% to transport infrastructure—much more than the amount approved for digital infrastructure.

European Commission statistics from 2015 show that 62% of rural homes have broadband internet, while 25% have a fast connection.

By December, around half of the funds approved were for energy-related projects.

The Commission wants the programme to boost Europe’s struggling post-crisis economy by leveraging a total of €315 billion in investment around the EU by 2018.

But industry sources and EU officials are skeptical about how well equipped the Juncker Plan is to pump funds into broadband networks.

One telecoms industry source said the programme isn’t ideal to boost large companies’ investment in broadband infrastructure since building networks in rural areas won’t bring in big profits.

So far, one in southern Italy and two projects in northern France have been approved for loans to build fibre networks.

More needs to be done to 'sell' Juncker Plan, confesses Katainen

The European Commission’s investment plan has been one of its biggest priorities this year. Now that the legal skeleton is in place, its political pilot, Vice-President Jyrki Katainen, recognised that he has to redouble efforts to ‘sell’ the package.

The European Commission and EIB select loan recipients from applications they receive. Officials say they picked a small amount of broadband projects because they only received very few requests.

A Commission source defended the executve’s efforts to promote the Juncker Plan to telecoms companies and governments, but argued the programme isn’t likely to attract many big broadband projects.

“Obviously many big telcos don’t need EFSI money. So for large transactions, and because the EIB needs to focus on big transactions to make solid impact on the European economy, there’s a little bit of mismatch,” the official said.

Less than a year into the Juncker Plan’s pledged three-year run, officials say they’re hoping to  see an uptick in loan applications.

“The EIB has focused for many years on traditional sectors. It takes time to build awareness in the digital sector,” the Commission official said.

Katainen told EURACTIV he wants to “keep all the options open” regarding a renewal of the Juncker plan after 2018.

“I could imagine, having my background in national politics, that if it functions and manages to gather a big amount of private resources, that it’s a good way to use European taxpayers’ resources and that ministers and the members of the European Parliament will want to continue,” he said.

“I could imagine that if you manage to get the results we’re aiming for, then there’s a need for a continuation process,” he added.

Katainen has already promoted the Juncker Plan on trips to China, Singapore and the US, where he said investors are interested in funding EU-based infrastructure projects.

While he hasn’t set a date yet, Katainen said he is planning to visit the Gulf region soon to court potential investors.

“It’s very good to finance football clubs—nothing against it—but there are also fascinating projects on the infrastructure side and in R&D here,” Katainen said.

China uses Juncker Plan to boost involvement in Europe

China could become the largest non-EU contributor to the so-called “Juncker Plan”, the European Commission President’s flagship investment initiative to revive growth in Europe.

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

The plan has three objectives: removing obstacles to investment by deepening the single market, providing visibility and technical assistance to investment projects, and making smarter use of new and existing financial resources. According to European Commission estimates, the investment plan has the potential to add at least €330 to €410 billion to the EU's GDP and create 1 to 1.3 million new jobs over the coming years.

The main pillar of the initiative will be 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.

In line with the European Council conclusions of December 2014, which invited the European Investment Bank (EIB) Group to "start activities by using its own funds as of January 2015", the EIB has already approved several projects to be pre-financed in the context of the Investment Plan for Europe, in which it is the Commission's strategic partner. Meanwhile, on 22 July, the Commission agreed on a package of measures that will allow the EFSI to be up and running by early autumn.

The investment 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.

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