“I promised to present an ambitious Investment Plan before Christmas. One month later and Christmas has come early – I am here to deliver on my promise”, Commission President Jean-Claude Juncker told MEPs, presenting his €315 billion investment plan.
Juncker presented his €315 billion investment plan, which has indeed put together in record times. He pledged to present such a plan on 15 July, when MEPs confirmed him as next Commission President, but had time to work on it only after his team took office on 1 November.
As EURACTIV already wrote, the plan is based on a fifteenfold leverage of a limited €21 billion of initial public money. As Juncker explained, the fund will be called European Fund for Strategic Investments (EFSI), guaranteed with public money from the EU budget and the European Investment Bank (EIB). The Fund will be able to mobilise €315 billion over the next three years.
For the EFSI, the Commission has put up €8 billion from the EU budget. This backs up a €16 billion guarantee given to the Fund. Topped up by another €5 billion from the EIB, the sum totals €21 billion.
In addition, the European Investment Bank (EIB) can give out loans of €63 billion. But private investors will be pitching in the remaining €252 billion.
The money taken from the EU budget comes from the Horizon 2020 and Connecting Europe budget lines, but Juncker said this didn’t mean the money is lost.
“Every euro from these programmes paid into the Fund creates €15 euros for those very same research and infrastructure projects. We are not just moving money around. We are maximising its input,” he said.
Juncker also said that if member states step up to the plate and contribute to EFSI, then the knock-on effect of this significant amount will be even bigger. The €315 billion of total expected investment is not a ceiling, and if the plan is successful, its ceiling could be even higher, he said.
The projects to receive investment from the fund for the funds should be attractive to investors. Those who will choose them will not be politicians but technicians who have the experience and know-how to do so. A special Investment Committee made up of experts will validate every project from a commercial and societal perspective and based on what value-added they can have to the EU as a whole.
Public deficits will not be aggravated
As the Socialists and Democrats group had asked, Juncker said that the member states’ contributions to EFSI would be deducted from the calculation of public deficit and public debt under the Growth and Stability Pact.
Juncker warned about national wish-lists, and basically said there was no guarantee how much they would profit from the fund, if they contribute to it.
“Geographical silos will not serve anyone. France growing is good for Italy. Southern Europe growing is good for Germany. We are all in this together. Our fates are linked. We should stand shoulder to shoulder”, Juncker said.
Changing the paradigm
Commission Vice President Jyki Katainen, responsible for Jobs, Growth, Investment and Competitiveness said EFSI would increase the firepower of the EU budget by shifting the priority from grants and loans to investment support and investment guarantee.
EFSI will focus on long-term investments with higher risk profiles, he said. All projects will be moved into a single hub which will provide information and help in financing the projects for promoters., he said.
Katainen also called on member states to contribute to EFSI by providing capital, by using the structural funds allocated to them in the new financial instrument.
“Currently, 92% of structural funds go to grant schemes. This has to change. Once that money is granted, it is gone. We need to make better use of this financing so that it goes further and has a real effect on the economy,” Katainen said.
He also said that a Taskforce led by the Commission and the EIB, with member states, is currently identifying over 1000 projects which are ready to be assessed. “We want to give a European label for the most viable ones,” Katainen said.
This Plan is not a magic wand, Katainen said, adding however that if it is implemented, it would change the European investment landscape permanently and for the better.
EIB President Werner Hoyer, who was present alongside Juncker and Katainen in front of the MEPs, was asked about journalists if the fifteenfold multiplier for raising private money was a realistic one.
He said that the fifteenfold multiplier was in fact a conservative figure, and that liquidity was abundantly available in the EU. It is not used because of the lack of risk-bearing capacity, he said.
Hoyer said that the “horrifying story” was that Europe has been lagging behind on investment levels compared to the pre-crisis period by an average of 20%.
The centre-right EPP, the Socialists and Democrats and the liberal ALDE political groups made statements, largely supportive of the Juncker plan. Anti-EU political groups called the plan “Monopoly money”, “Hocus-Pocus” and “Abracadabra” (see Positions). Parliament President Martin Schulz called the Juncker plan a “a turning point”, adding that he was looking forward for its “big success”.
The centre-right European Peoples’ Party (EPP) strongly supported the Juncker plan.
EPP group leader Manfred Weber (Germany), argued that the EU needed optimism and readiness for change.
“What we cannot do, is continue applying solutions of the past. This is why mobilising private capital and spending money in a smarter way to finance innovative projects is the right path”, Weber said.
Weber also said that the plane would be efficient only if it goes hand in hand with deep structural reforms in the member states.
“Italy and France should follow the example of countries like Portugal, Ireland and Latvia, and spare no effort in the implementation of structural reforms”, Weber said.
Manfred Weber also called on member states to contribute to the financing of the plan.
The centre-left S&D group paid many compliments to the Juncker plan.
S&D group President Gianni Pittella said the “paradigm” has finally changed.
“From the blind austerity dogma of the Barroso era, we are now moving to a new phase focused on investment, jobs and growth.”
“Member states contributions to the new investment fund will now be deducted from the calculations of their deficits and national debts. We broke the taboo of rigidity.”
“It is not about breaking the rules, but rather about the need for member states to count on flexible rules being applied in an intelligent way. This is the clear outcome of our political battle. The S&D Group fought hard for that and we can now be proud of this achievement.”
"Member states must be encouraged to contribute to the investment fund”, he also said, adding: "We are not interested in what the rating agencies say, we are interested in people's lives. We will judge the effectiveness of this plan based on the number of jobs created”.
The European Conservatives and Reformist Group (ECR) reacted sceptically on the Juncker plan.
ECR group leader Syed Kamall (UK), resonding to Juncker's analogy that the fund will act like a watering can for Europe's economy, he said:
"I like your analogy of using the watering can. How do we make sure it is a watering can that stimulates growth? How do we make sure that it's not a government flood that washes away private investment? Or a private irrigation system that is never turned on?"
However, a bit later, he made a blunder, saying that the eurozone was much better at attracting investment than the non eurozone. As people around him laughed, he corrected himself.
The liberal ALDE group welcomed the Juncker plan, but took the occasion to table its own proposals.
ALDE President Guy Verhofstadt stressed that three points are crucial:
1) Member States need to implement structural reforms. Without structural reforms Europe will not become competitive again such reform should be in the labour market, pensions and health care.
2) There needs to be a huge leap forward in the liberalisation, opening and unification of EU’s markets.
3) Instead of an unfruitful discussion about leverage, Guy Verhofstadt urges the Commission to focus on two key conditions: that the member states should be on board and ensuresa funding of investments of around €600/700 billion, and that and “interesting” return on investment be secured.
“The best solution for this is a tax exemption on the interest that this fund creates. This will attract not only institutional investors but also ordinary Europeans," Verhofstadt said.
The Green/EFA group carefully welcomed Juncker’s plan, saying that it lacked ambition and clear goals.
Greens/EFA co-president Philippe Lamberts said that in terms of ambition, the headline €315 billion sum was “clearly wishful thinking”.
“The plan relies on wildly unrealistic projections on the ability to leverage private investment; it is hampered by the low level of public investment and the doubts as regards whether many of the funds are fresh or merely recycled existing commitments. Reallocating €21 billion of already committed funds will not mobilise €315 billion: a leverage effect of 15 is not serious”, Lamberts said.
The green leader said the plan should be aimed at leading to increased purchasing power for citizens and improved sustainability of public finances, to address social exclusion and poverty and empower all citizens to play a dignified role in society.
The leftist GUE/NGL group slammed the Juncker plan as a ‘publicity stunt’.
Dimitrios Papadimoulis (Greece) said the package was empty and contained “not one euro of fresh money".
"You say this will create a multiplier effect of 15. No economist in the world would say that in this climate of stagnation, recession, and impending deflation in the Eurozone could we have such a multiplier effect. Without new funds, there can be no growth or recovery and we've seen this time and again throughout the history of economics."
"While my own country, Greece, faces 30% unemployment, 60% youth unemployment, and a humanitarian crisis, you propose a package of business as usual," Papadimoulis concluded.
- 18-19 December: EU leaders endorse the Investment Plan including the decision to set up EFSI.
- December: Parliament to endorse Investment Plan including the decision to set up EFSI.
- January 2015: Commission proposes regulation for setting up EFSI. Parliament and Council discuss the regulation.
- June 2015: The regulation setting up EFSI.
- Commission: Commission Priority: Investment Plan
- Commission: Statement in the European Parliament plenary session on the € 315 billion Investment Plan
- Commission: Speech by Vice-President Jyrki Katainen on the Investment Plan
- Commission: Remarks by Jyrki Katainen to press conference
- S&D group: Pittella: "A good starting point – austerity dogma has been broken"
- Green/EFA group: EU investment plan
- GUE/NGL: Juncker package a ‘business as usual’ publicity stunt
- EURACTIV France: Le plan Juncker, un projet a minima pour mettre tout le monde d’accord
- EURACTIV Italy: Piano Juncker: sì a deroga al patto