With increased pressure on the core cohesion budget, financial instruments utilised as a means of delivering EU structural fund support are touted as a way to do “more with less” by leveraging EU and public money to generate private investment and recycle resources.
The role of repayable assistance in cohesion policy, the EU’s bid to decrease disparities between its regions, has grown significantly over the past decades.
From only €600 million in 1993-99, the EU and member states have spent more than €17 billion in the 2007-13 in loans, guarantees and equity investments in non-listed companies.
According to the latest available figures for the 2014-2020 budget period, by 2018 the EU has already committed to spend €16.2 billion in financial instruments under cohesion policy, climbing up to €22.1 billion if we include contributions from national budgets.
Meanwhile, EU countries are pushed towards planning more repayable cohesion projects under the next seven-year budget.
In this Special Report, EURACTIV looks into the changes the rising role of private investment in implementing cohesion policy could bring and explores the potential of market-based solutions to the bloc’s regional gaps.
Increasing the role of loans and guarantees utilised to narrow the disparities between European regions may help combat the misuse of EU funds but cannot replace the role of accountability, transparency and sound domestic institutions.
Faced with tight deadlines to programme recovery and new cohesion funds while still implementing projects from the previous budgetary period, EU countries may be tempted to forget about repayable Union assistance, warned Portuguese MEP José Manuel Fernandes, in which case a lot of cheap money would be left on the table.
Equity projects remain an under-explored form of EU financing to jump-start innovation in developing capital markets, but Fil Rouge Capital, a Croatian project, shows they can be a fruitful avenue to stimulate the domestic business ecosystem while raising the country's profile internationally.
One of the consequences of the development processes in the EU is the growing disparity in cities and urban areas. In Poland, EU projects utilising financial instruments aim to narrow disparities but experts fear that there is still little appetite to use repayable assistance when grants are available.
Having undergone a significant transformation that raised its public profile, the European Investment Bank (EIB) is set to occupy an increasing role in bridging development gaps between the EU's regions while raising funds for greening, but public finance watchers warn …