The European Investment Bank and the European Commission were forced to defend their flagship ‘Juncker’ investment plan, following a report of the European Court of Auditors published on Tuesday (29 January) that questioned its added value.
“We are not convinced that the Court shows the full picture,” Commission spokesperson for Economic and Financial affairs Annika Breidthardt told reporters following the publication of the ECA’s report on the European Fund for Strategic Investment (EFSI), popularly named after the Commission president.
The auditors argued that while EFSI has been an effective investment financing tool since its launch in 2015, its success may have been overestimated.
Established in 2015, EFSI was intended to make it easier for European businesses to obtain funds from the EIB, through guarantees and loans funded by the EU budget, that they would not been able to access otherwise.
However, according to the Court’s report, some of the projects would have been eligible for EIB financing under different terms.
Speaking at the annual press conference of the lender, EIB President Werner Hoyer admitted this might have been the case for some projects, but insisted that the cash received would have been “no way” near the “scale in volume and maturity” the EFSI provides.
In their report, the Auditors also questioned the geographical scope of the programme.
“I believe we’ve made considerable progress with the geographical distribution of our lending,” the EIB president said.
Hoyer dismissed the “myth” about the geographical spread by pointing out that the main countries benefiting from the Juncker plan in terms of GDP were Greece, Estonia, Portugal, Spain and Lithuania.
EIB president said the prejudices on the geographic distribution started only one year after the implementation of the EFSI, when “some bigger countries with strong commercial banks were faster in taking advantage of the possibilities of EFSI.”
Three years later, Hoyer said, “I simply don’t buy it anymore.”
He added that many of the concerns expressed by the auditors had been already addressed in the renewed version of the investment programme, including “the technicalities of calculating the investment mobilised.”
Meanwhile, Breidthardt stated that the Commission estimations “are made using well-respected methods” and questioned the Court’s assessment as their report is based on the analysis of only fifteen projects.
“It is a relatively small sample for such a big extrapolation,” the Commission spokesperson said.
The European Fund for Strategic Investments (#EFSI) has been effective in raising finance for investments in the EU, but the amounts of investment mobilised may be overstated, according to a new report by the @EUauditors.
— European Court of Auditors (@EUauditors) January 28, 2019
A Juncker success story?
Hoyer underlined that in July last year, the program had already generated €350 billion in additional investment. After the Commission decided to renew the instrument last year, €25 billion more have been triggered, with a target of €500 billion by the end of 2020.
The EIB chief praised the “extremely courageous decision” of Juncker to launch the initiative following the 2014 European elections, “to embark in a more creative way of using financial instruments in a responsible manner.”
Hoyer added that the EU needs new financial instruments to achieve its policy objectives, as well as to contribute to the Sustainable Development Goals. “All the taxpayers in the world will never be enough to allow us to reach the SDGs,” he warned.
The EIB president explained that the Juncker plan, and the legislation that accompanied it, “has changed the DNA of the bank.”
The blueprint had multiplied the bank’s abilities to fill the financial gaps in Europe’s economy, “shifting from financing the recovery during the crisis to strengthening our economic competitiveness,” said Hoyer.
The European Fund for Strategic Investment 2.0 will keep running until 2020. After that, the Commission has proposed to replace it with a similar instrument, InvestEU.
InvestEU, Hoyer said, “is about transforming EFSI into a long term robust and financially sustainable tool to support EU policies to deliver in key areas: climate, innovation and cohesion.”
Towards a greener EU economy
In 2018, the European Investment Bank signed 854 projects, and made innovation and climate change two of the main objective of the its funding.
The EU bank increased the proportion of its lending that goes towards combating climate change to close to 30% and invested almost as much in innovation as in the preceding year, €13.52 billion.
Small businesses are still the main recipient of the EIB’s funding. The bank lent €23.3 billion to 374,000 companies in 2018.
But the bank is not isolated and is well aware of the upcoming challenges. “This year promises its share of turbulence,” Hoyer said, “signs of an economic slowdown have intensified in the past couple of months.”
Hoyer also confirmed that the EU-27 have decided to use the EIB’s reserves to replace the capital that will be lost to the EIB when the UK leaves the EU on 29 March.