The EU’s investment fund set up in the aftermath of the financial crisis has mobilised €284 billion to date, mostly in private capital, surpassing the halfway point of its 2020 target.
EU officials said on Tuesday (24 April) that almost a third of that money (28%) went towards financing SMEs in Europe. Around 22% was allocated for Research and Development and Innovation, and an additional 22% for energy-related projects.
The European Commission led by Jean-Claude Juncker came up with the European Fund for Strategic Investment (EFSI) shortly after it took power in November 2014. Its aim was to mobilise mostly private funds to finance projects with a high risk profile, by using public guarantees.
The facility was beefed up and extended last year until 2020. The Commission and the European Investment Bank offer a total of €33.5 billion in guarantees that could attract at least €500 billion in private investment.
The countries with higher EFSI investment relative to their GDP are Greece, Estonia, Portugal and Spain.
EU institutions are satisfied with the return on taxpayer money achieved so far and the added value thanks to its support of projects that would struggle to gain backing from commercial banks.
But the Bruegel think tank and other analysts questioned whether private money really had been unlocked to finance risky projects.
In order to improve it, legislators set up clear criteria to approve projects financed by the EFSI. They should address market failures, have a risk profile and an innovative character.
EU officials added that the new regulation also strengthened the transparency of the projects selected as the decisions are now made public.
But despite the success of EFSI, the investment level in Europe remains below pre-crisis levels, while the investment gap in some areas that are crucial for the EU’s competitiveness keep widening.
In the digital sector alone, around €700 billion is needed in investment, according to the EU institutions.
EFSI’s firepower will be reviewed as part of the next long-term EU budget for post-2020.The European Commission will present its draft proposal for the next mutliannual financial framework on 2 May.
Some countries, including Spain, are also pushing to use the positive example of EFSI to set up a new financial instrument to support member state investments when they are hit by an economic shock.
But EU officials think it is unlikely that the design of a fiscal capacity for the economic and monetary union, currently under discussion, would end up taking this shape.