Commission identifies 1,000 potential investment projects

Plan envisages €315 billion fund to provide stimulus

The investment-fund package will need approval of EU nations and the European Parliament, although the EIB will be able to start some operations ahead of final approval

The investment-fund package will need approval of EU nations and the European Parliament, although the EIB will be able to start some operations ahead of final approval

 

More than one thousand potential projects have been identified by the European Commission for inclusion in its €315 billion investment programme, the EU’s vice-president for economic affairs Jyrki Katainen said yesterday, as the European Commission unveiled its much-awaited investment package for Europe.

Announcing the proposal in the European Parliament in Strasbourg on Wednesday, European Commission president Jean-Claude Juncker said the plan would “breathe new life” into Europe, and called on European governments to do their part by participating in the project.

The investment package is built around a core fund of €21 billion, comprising €16 billion in EU guarantees and €5 billion from the European Investment Bank, which it is hoped will attract up to 15 times the initial investment from private investors. Underpinning the fund, the Commission is providing an €8 billion backstop drawing from already-existing funds within the EU budget, including from the Connecting Europe Facility, and the Horizon 2020 research programme.

Some €240 billion of the €315 billion package is being earmarked for long-term investment projects, while the remaining €75 billion will be targeted at small and medium-cap firms.

EU leaders are expected to sign off on the investment package at their summit next month in Brussels, with the fund expected to be up and running by the middle of next year.

An independent assessment board will assess application for the fund, though projects will be selected “according to merits,” Mr Katainen said, with infrastructure, broadband, education and energy projects expected to be prioritised. The former Finnish prime minister is expected to embark on a number of roadshows in different EU member states in the coming months, to meet investors, banks, social partners and other interested parties.

Speaking to reporters in Strasbourg, Mr Katainen said that the new fund - known as the European Fund for Strategic Investments (EFSI) – would differ to the existing European Investment Bank system by its ability to target high-risk investments. The European Investment Bank, which has a triple-A rating, has been previously criticised for focusing on low-risk projects. He said the ‘first loss’ principle – whereby the fund will take the first hit in the event of losses would also encourage investors.

“There is ample liquidity in the market, interest rates are low [AND]a real demand for credible investment projects and yet investment is not happening. There is a severe disconnect,” he said. The fund would be “a new vehicle that can take more risk,” he added.

stimulus

President Juncker also stressed that that so-called peripheral euro zone countries perceived as higher-risk by investors will be prioritised in the plan.

Speaking in Strasbourg, Minister for State Dara Murphy welcomed the announcement and in particular Mr Juncker’s commitment to target peripheral euro zone countries. “Because the level of capital expenditure in Ireland has been restricted in recent years, this is welcome news,” he said, adding that various government departments were engaged in identifying projects that could be suitable for capital funding projects such as the EU Investment plan on an ongoing basis.

Fine Gael MEP Brian Hayes urged the government to come forward with potential projects as soon as possible.

The European Union, and in particular the euro zone economy, has been struggling with low growth, falling inflation and consistently high levels of unemployment in the wake of the euro zone crisis.

The structure of the investment programme means that no new EU money will be used for the plan, as the EU tries to entice investors to buy into Europe.

European Commission vice-president Jyrki Katainen said the aim was to attract investment into feasible projects. “There is ample liquidity in the market, interest rates are low and there is a real demand for credible investment projects and yet investment is not happening. There is a severe disconnect,” he said.

Large-scale projects in the field of energy, infrastructure, telecoms and education are expected to be eligible for the plan, with an independent assessment board assessing applications.

President Juncker said that so-called peripheral euro zone countries will be prioritised in the plan, amid fears that investors will shun perceived high-risk member states, and instead favour investment in countries such as Germany. However, officials stressed that the new fund – known as the EFSI – will have a different risk profile to the European Investment Bank, which would allow it to guarantee more risky investments.

Commissioner Katainen said that the fund would focus on high-risk investments, complementing the traditional lending practices of the European Investment Bank.

EU leaders will sign off on the plan at their summit in December in Brussels, though the investment plan will not be in place until the middle of next year.

Responding to the Investment Plan in Strasbourg Guy Verhofstadt, head of the Liberal Group Alde in the European Parliament, said that countries must still be required to make their own efforts to improve their economy, and said that support from the fund should be conditional on countries making structural reforms.

Fine Gael MEP Brian Hayes, who met with Jean-Claude Juncker on Monday evening in Strasbourg, said it was vital that Ireland comes forward with projects for the plan. “Because public investment and private investment has been badly hit in Ireland in recent years, former programme countries, like Ireland, need more support from this plan,” adding that Ireland has a chance to get “first mover advantage.”

Ireland South MEP Sean Kelly said the funding needed to translate into tangible projects, highlighting a number of road projects in the south of the country that could benefit from the investment package.