Investment Plan

On June 8, the European Parliament discussed the mid-term review of the investment plan. Please find a summary below.

By Christopher Ball

08 Jun 2016

Commissioner Katainen began by saying that this is a very important topic. Much has already been achieved in promoting investment and job creation. The investment plan had three strands. The most important part is the removal of barriers to investment. There are national and European barriers and the Commission has looked at them in detail. For example, the Annual Growth Survey analysed national barriers. Member states are being encouraged to undertake structural reforms. The internal market also needs to be deepened and widened. There are many major projects in this respect including the digital single market, energy union, CMU and the circular economy. He then noted that capital charges for insurance companies engaged in long-term infrastructure projects were lowered and the Commission will put forward a venture capital fund of funds. The state aid rules are also being looked at. He called for Parliament support for these projects.

The second pillar was the creation of the investment advisory hub to help private investors. This is functioning well as over 100 requests for advice to improve quality of projects and so-on have been received. Under the second pillar, the investment project portal was also created. This was actually a British idea. This portal allows better visibility of projects. It is a kind of dating service for projects and financers. This was set up very recently.

The final pillar was, of course, EFSI. So far, funds worth 12.8 billion have been invested in infrastructure and SME financing. This is expected to trigger private investment of 80 billion. As such, EFSI seems to function as planned. The problem in the EU is risk financing. There is plenty of liquidity in the EU. It is a question of unlocking it. There are around 65 projects already financed. There are also 185 agreements between the fund and private banks on SME financing. This should provide financing to around 150,000 SMEs. He called for special attention to be paid to equity financing as this seems to be seriously lacking in the EU. He noted that the UK has been very active in this regard.

The Commission will present a new proposal to prolong EFSI later this year. There will be an analysis of what has worked well and so on. The main issue is to focus on addressing market failure. EFSI financing must be focused on those areas in which the market does not function properly. Financing for innovation and environmental projects must be at the heart. The Commission also plans to propose an external investment plan. This is about using EU development funds in a more innovative way to try and address the root causes of migration. There should be a proposal on this later this year.

Othmar Karas (EPP, AT) noted that the EU has structural problems, high deficits, too little innovation and too little employment. The Investment Plan was one of the answers to these problems. The plan has had some successes so far. He particularly welcomed the work on SME financing and called for larger projects to be financed. Strategic coordination between the EIB and the promotional banks would also be beneficial. He welcomed the idea of extending the plan.

Gianni Pittella (S&D, IT) noted that economic growth, social cohesion, transition to a sustainable economy and a reduction of debt through growth is what Europe needs. Not blind austerity. The S&D calls for President Juncker to put forward an investment plan for Europe. The plan in place has achieved some results but more must be done. This financing must be additional, not a substitute. It cannot just be projects that the EIB would have funded anyway. The EIB needs to accept higher risks. The AAA rating should not be a dogma. On links with the Parliament, he called for full cooperation.

Sander Loones (ECR, BE) argued that questions remain as to whether it is too early to judge the plan. There remains many projects that have only just been signed and there is not real in-depth analysis of the plan available at this stage. Where is the real analysis? It is too early to promote an extension. On whether the plan should be extended to third countries, he argued that whilst the UE does have a role to play in this respect, there would need to be additional controls to avoid corruption and investments going bad. EFSI can play a positive impact on the investment climate. Structural reforms are essential.

Pavel Telička (ALDE, CZ) agreed on the need to deepen the single market. However, existing legislation should be looked at to cut the administrative burden for SMEs. In terms of the financial means already invested, he noted that the programme had a slow start, but this is normal. The largest concern is the type of projects being financed and this is a major weakness. He found it difficult to see the difference between the projects that would be funded through other EU funds and the projects funded by EFSI. Where is the additionality? Should the EIB not be financing more high-risk projects. He then argued that the circular economy must be a key priority. If so, why has only one single circular economy project been financed?

Miguel Viegas (GUE/NGL, PT) argued that this is a way to finance large companies in rich areas of the EU. Fake results are being broadcast.

Philippe Lamberts (Greens/EFA, BE) noted that the plan is a key element for this Parliament, but the funds are limited in the plan and it is so fragmented geographically and thematically that it will have no real impact. He called for a real focus on those countries where there is a lack of funding. In addition, it must be focused on energy transition. The obsession with structural reforms is causing greater poverty.

Nigel Farage (EFDD, UK) argued that private capital is not interested in this. These grand projects undermine the EU. For example, the Euro. Enlargement also undermined the EU. The inclusion of poor countries and free movement has led to the rise of some deeply unpleasant political parties. He argued that if Britain leaves, others will also leave. 

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