Brussels eyes investment and capital markets to revive weak growth

Commission Vice-President Valdis Dombrovskis called on the co-legislators to adopt the CMU proposals in the pipeline. [European Parliament/Flickr]

Against the backdrop of weak output growth in Europe, the European Commission announced on Wednesday (14 September) that it will double the funds for its ‘successful’ investment plan and urged the Parliament and the member states to adopt the Capital Markets Union proposals to relaunch the real economy.

The Commission President, Jean-Claude Juncker, told the European Parliament plenary session on Wednesday (14 September) that the institution will increase the firepower of the European Fund for Strategic Investments to €500 billion, from €315 billion as it stands today.

Juncker to announce €200 billion extra funds in 'State of the Union' speech

Energy and digital infrastructure projects are expected to receive a further €200 billion funding boost under plans to be announced today (14 September) by the President of the European Commission in his State of the Union address.

Moreover, he will propose to prolong the one-year-old guarantee scheme two additional years beyond 2018.

EFSI could reach 630 billion by 2022 once the co-legislators have agreed the next EU’s long-term budget for 2020-2026

“We will make sure that our European investment fund will provide a total of at least 500 billion euros of investment by 2020 and we will work beyond that to reach 630 billion euros by 2022,” he added.

The so-called Juncker Plan, launched in 2015, was based on an EU-backed guarantee scheme to mobilise private investment. With €16 billion and €5 billion from the European Investment Bank, the scheme intended to attract at least 315 billion by 2018.

The Commission explained that the additional funds will serve mainly  to finance more cross-border and sustainable projects, linking the EFSI to the ambitious targets from COP21 climate deal.

The executive will also take on board some of the member states’ recommendations to improve the investment plan, including the additionally, the transparency and the geographical balance.

Accordingly, Brussels will mobilise an even greater amount of private financing. In parallel, the Commission will detail exactly why each project was chosen and how it meets the criteria set out in the EFSI Regulation, proving its “additionalilty”.

Finally, the executive will give stronger emphasis on providing local technical assistance and will facilitate the combination of EFSI guarantees with other EU funds, such as the European Structural and Investment (ESI).

The sleepy Capital Markets Union

Juncker also seized the opportunity of the state of the union address to revive the capital market union.

The project is one of the flagship initiatives of Juncker’s Commission, but the legislative proposals progressed at snail’s pace and its impact has been questioned after Britain voted to exit the EU.

Commission presents piecemeal Capital Markets Union strategy

The European Commission unveiled on Wednesday (30 September) its strategy to strengthen capital markets in Europe, and thus reduce the “very high dependence on bank funding”, as President, Jean-Claude Juncker put it, when he took office last year.

“It’s now time to finish the first building blocks of the Capital Markets Union and move forward with new priorities,” Commission Vice-President Valdis Dombrovskis said in a statement.

“We’ll work closely with co-legislators so we can progress quickly and make the CMU a reality.”

The executive said it would amend insurance and banking legislation by the end of the year to “further unlock private investment in infrastructure and small and medium-sized enterprises”.

The executive will also put forward a programme to support the development of national and regional capital markets in member states.

The EU executive will also present a draft law on business restructuring that it said would allow “honest entrepreneurs to benefit from a second chance after overcoming bankruptcy”.

In its revised CMU roadmap, the Commission pays special attention to the emerging  field of fintech (the digitalisation of the financial sector) or sustainable finance.

But EU sources also admitted that this new push aims at sending the message that the capital markets union “matters more than ever” in an EU without Britain’s massive financial services market.

In February 2015, Lord Jonathan Hill, Commissioner for Financial Stability, Financial Services and Capital Markets Union (CMU), unveiled a green paper as part of the process to establish a Capital Markets Union.

The aim is to develop a financing system to complement the banking system, unlock capital across Europe giving more investment choices, and establish a market whereby investors can use their funds across borders without hindrance. One of the concrete proposals is to make it easier to raise funds for the bloc's flagging economy through markets, rather than banks.

European Commission

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