Regions chief: ‘Use local nous to mobilise investment fund’

This article is part of our special report Investment for regions.

SPECIAL REPORT: Committee of the Regions’ President Michel Lebrun welcomes the EU’s new investment fund plan, but calls on the expertise of local regions to be deployed to maximise its impact.

A former Belgian federal MP, Michel Lebrun was the head of the Christian Democratic group,  and he has served as minister of higher education, research and international relations in the French community. He became Member of the Committee of the Regions (CoR) in 1994 and was elected its president  this year.

He answered questions put by EURACTIV’s Jeremy Fleming

What are your first reactions to the Juncker investment plan announced this week?

I welcome this investment plan which has the potential to mobilise private investment and kick-start growth and job creation so badly needed in Europe. The three main strands (the creation of the European Fund for Strategic Investments, the establishment of a credible project pipeline and an ambitious roadmap) look indeed very much like an “investment offensive that optimises our economic policy”, as Juncker called it.

The Plan does not provide fresh public money but it does use it in a way that can maximise its impact. In the words of President Juncker it is “smart public money”. Using the EU budget to partially cover potential losses of private investors who invest in projects does carry risks and it is wiser to test it with limited public resources and assess its implications before surging forward.

The commitment made by President Juncker that future contributions to the Fund from Member States will be excluded from the Stability and Growth Pact calculations of deficit is a step in the right direction towards increased flexibility. The same logic should be extended to all national and regional co-financing in the context of the European Structural and Investment Funds. Indeed, this would allow Member States, and also cities and regions, to make today the investments that will help deliver the growth and the jobs of tomorrow.

Does the fifteenfold multiplied leverage seem feasible to you?

The figure of fifteen is a simple estimate. The final figure will depend on individual projects and their capacity to attract new investors and private investors. Other funds under the European Investment Bank’s responsibility are reaching a higher multiplier effect of 1:18 so I see no reason to doubt this estimate at this stage.

The new European Fund for Strategic Investments totalling €21 billion is expected to generate €240 billion for long-term investments and €75 billion for SMEs and mid-cap firms over the period 2015-2017; do either of these funding measures apply better to the regions of Europe?

What good are broadband internet and improved transport infrastructure if companies do not take advantage of them creating jobs? Middle capitalisation companies, and even more so SMEs, are the backbone of our regional economies and create the vast majority of jobs in the EU. They need financing and currently many struggle to find sufficient amounts or at acceptable conditions. It is clear that this extra support for companies can have a huge impact in unlocking growth. Long-term investments and the financing of SMEs and mid-cap firms go hand in hand which together, I believe, can kick-start growth in Europe’s regions and cities.

These two pillars of the Plan as complementary: they are the two sides of the same coin. Long-term investment in transport and communication infrastructure, energy, research or education, are key to enhance the economic and social development prospects of our regions. They give a solid basis for our economies to build upon and in the case of investments in renewables or resource and energy efficiency, are necessary to preserve our environment and in the long run our well-being.

The method of distribution of the funds will be decided by an administrative council jointly controlled by the EIB and the Commission, though no quotas are foreseen in respect of member states, or indeed regions. Do you think that is the best way to administrate the new funds?

What is important is that the funds go where they are most needed and used to fund projects that bring the most added-value, having the greatest impact locally.  This is why I welcome President Juncker’s speech to the European Parliament where he explicitly stated that “all levels of government” shall be mobilised in the investment Plan so regions and cities have a key role to play. Their knowledge of the local economy and local challenges is invaluable in identifying the best projects to be funded. It is essential to make the most of this expertise in the governance of the Fund if it is to fulfil its potential.

What will the CoR be looking for from the plan in order to deem it a success?

It’s important to remember that this Plan is an additional tool to stimulate private investment and could have a serious impact. But, as President Juncker has said, it comes on top of many other EU initiatives. EU structural and investment funds are the key investment tool of the Union not only because of the quantity of resources, €350 billion over seven years, but because of the unique approach it takes requiring the involvement of EU, national, regional and local actors in delivering growth. We will look at the impact of the Plan on Europe’s regions and cities but we are aware that it is not our only bet.

Also rather than starting to consider whether this Plan will be a success, what is important in the coming weeks and months is to do everything in our power to make sure that it is one. The CoR has already begun work and intends to provide proposals to strengthen and maximise its territorial impact. We should not forget that more than 70% of public investment in Europe are made by local and regional authorities. Therefore we should ensure that we make the best use of local and regional expertise in identifying and implementing projects worthy of investment and ensure those investments are also focused on small-scale projects and clusters of projects at sub-national level. Due to their quicker implementation, these projects often instigate the most immediate impact on growth and jobs.

Since the funds are intended to act as levers for growth, will there be a bias towards those regions – particularly the southern Mediterranean countries – which have suffered most as a result of the financial crisis? Will that suit the CoR?

The Commission’s Communication is very clear in this respect: “there should be no thematic or geographic pre-allocations”. This is key to ensuring that projects are chosen on the basis of their quality and utility and that we do not finance the construction of bridges to nowhere just to tick a box. The projects selected for funding will be chosen based on their societal and economic added value and I fully support this approach. But this does not mean that all the funds will be channelled to less favoured regions. All regions have their own specific investment needs and all regions have projects that should be judged on their own merits. Simply because an infrastructure project is located in a more economically developed part of Europe does not mean that it cannot have a hugely beneficial impact for the region and for the EU as a whole. What is important is that there is synergy between the Juncker Plan and the European Structural and Investment Funds, to avoid duplication and make possible the concentration of funds where the real need is. The countries and regions that have suffered the most from the crisis will of course have greater needs in some respects but as long as the allocation of funds is made on an objective and fair basis, and maximises territorial impact across the EU, I am confident that the CoR will put its full weight behind the Investment Plan.

Can you give examples of the types of regions – and project – that are likely to benefit most from the plan?

What I would like to see in the Plan’s implementation is particular attention given to small-scale projects and clusters of projects that can be undertaken at the local and regional level. These types of projects might not make the headlines but taken together can have an enormous and rapid impact on employment and prosperity. The reason for this is that these projects can often be implemented much faster and that thanks to cities and regions’ knowledge of local strengths and challenges, truly respond to the needs of European citizens and businesses.

Subscribe to our newsletters