Investment in Europe is still 15 per cent below the long-term average, with the shortfall reaching 25 per cent or even 60 per cent in some EU member states. This is hampering both the demand and supply side of our economy - and we need policy action on both. And yet we know that there is liquidity in the system. Research tells us that a major barrier is the lack of risk financing - a lack of certainty regarding investment projects and regulatory burdens.
Within days of the new mandate, the commission presented the investment plan for Europe, which aims to reverse the downward trend in investment and help boost job creation and economic recovery, without weighing on national public finances or creating additional debt burdens to the member states.
The investment plan is a comprehensive one, since there is no silver bullet. It is built on three pillars: the creation of a new risk-financing facility inside the European investment bank (EIB) - the European fund for strategic investments (EFSI), to mobilise private investments; the creation of a transparent pipeline of projects to increase EU investment projects visibility and a European advisory hub, to help public and private promoters structure their projects; and most importantly, the removal of barriers to investment through the European semester and the completion of the single market.
"According to estimates, taken as a whole, the proposed measures could add €330-€410bn to EU GDP over the next three years and create up to 1.3 million new jobs"
As part of the investment plan, we are also committed to improving the investment environment through a deeper and wider single market, with better regulation at its core. On 6 May, the commission will present its strategy for a connected digital single market. In February, we launched the energy union strategy and the green paper on the capital markets union. And colleagues are working hard on a reasonable and balanced transatlantic trade and investment partnership with the US.
As regards to the EFSI, here's how it will work: EFSI regulation establishes an EU guarantee fund, which will provide a liquidity cushion for the union budget against potential losses incurred by the EFSI when supporting projects. It will gradually reach €8bn by 2020 via payments from the EU budget, by using 3.5 per cent of the Horizon 2020 budget, 10 per cent of the connecting Europe facility budget, and the rest from unused funds in the budget margins.
The EFSI will be built on a guarantee of €16bn from the EU budget, combined with €5bn committed by the EIB. Every public euro mobilised in the EFSI will generate about €3 of additional lending by the EIB. Every euro of additional lending will in turn attract additional euros from public and private promoters in EFSI's projects.
All in all, for every budget euro put to the guarantee fund, €30 of investment to the real economy will be generated. The EFSI will focus on private investment, and public-private joint ventures, but not pure public investment. According to estimates, taken as a whole, the proposed measures could add €330-€410bn to EU GDP over the next three years and create up to 1.3 million new jobs.
Some people are concerned about using Horizon 2020 resources for the investment plan. I myself am very much an education and research-oriented person - this has always been my political priority. But I truly believe that EFSI can serve research and innovation better by providing the type of risk-financing that innovative companies are lacking in Europe today - such as equity.
"I truly believe that EFSI can serve research and innovation better by providing the type of risk-financing that innovative companies are lacking in Europe today - such as equity"
Moreover, with EFSI's tools, it will be easier for universities to attract private capital to fund research activities. This is the message I am constantly getting when visiting member states on my roadshows. I am a big supporter of Horizon 2020 - it is the world's largest research programme, standing at €77bn.
We are planning on using 3.5 per cent of it (€2.7bn) to convert grants into financial instruments, which will allow research and innovation to receive funding far exceeding €2.7bn. Investing in research is and remains a priority for the EU, and of course grants for fundamental research will continue.
The investment plan will attract additional investments in the real economy in areas such as transport and energy infrastructure, education, research, innovation, renewable energy and energy efficiency. It will also focus on supporting small and medium-sized enterprises (SMEs) and mid-cap companies (companies with between 250 and 3000 employees).
We have therefore set aside one quarter of the EFSI financing capacity for these emerging companies, who are the innovative job creators of the future. The investment plan also sets up an advisory hub to provide advice and support to projects and investors. And there will be a project directory so that investors can see what investment opportunities exist across the EU, whether or not they are financed by the EFSI.
There won't be any geographical or sectorial quotas when choosing which project to finance through the EFSI. Strict criteria will be set by the steering board, and then independent experts in the investment committee will make the individual proposals to the EIB for final approval. This way, there is no chance of political interference in the decision-making, which pleases private investors.
Member states signed off on the regulation for the EFSI in March, and MEPs are currently working hard on their report. We expect the EFSI to be up and running by September, but a handful of SMEs and infrastructure projects will already benefit from pre-financing from the EIB by the summer. The plan won't solve everything by itself and there is a crucial need for structural reforms, but I am confident that we are on the right track.