Juncker investment plan needs 'full commitment from member states'

Guy Verhofstadt, Jean Arthuis and Dominique Riquet lay out the conditions that are required for Juncker's investment plan to work.

European commission Jean-Claude Juncker was elected by an overall majority in parliament on the promise that he would do everything he could to align member states' public finances with EU deficit targets and fill the European investment gap. We gave him our votes, now we expect results.

At the heart of his grand design is the 'European fund for strategic investments', more commonly known as the 'Juncker plan'. The idea is laudable: to attract private investors through a guarantee fund for large scale growth-generating projects and, in order to encourage member states' participation, the promise to disregard any contributions to the fund in the calculations of their national deficit.

The EU budget will serve as a financial safety net, and the European investment bank is the operative arm. The Juncker plan is currently being examined by parliament and council, the two branches of the EU legislative authority.

As legislators, we must put ourselves in the shoes of a private investor and ask ourselves: under the current state of affairs in Europe, would I take up projects guaranteed by such a fund? It is difficult to come up with an immediate answer to this question.

First, the climate in which the fund operates is unstable. The single market is still severely fragmented - 28 different regulators, 28 ever-changing regulatory frameworks, 28 aggressively competing tax systems. Fair competition means the same rules for all and non-discrimination in market access. 

What is more, siphoning off two successful EU programmes as seed money for the fund could create even more uncertainties. Horizon 2020 - the EU innovation and research programme - mainly consists of grants for researchers and students. A shift from direct subsidies to simple guarantees might discourage operators.

"Governments must grant Europe financial autonomy and genuine budgetary own resources, in order to alleviate pressure on national budgets and give the commission the financial means to act"

Second, the guarantee is not straightforward. The EU budget is still insignificant (one per cent of Europe's GDP), it is shaky (€25bn of unpaid bills in 2014), it is abnormal (as the EU does not enjoy financial autonomy, the European parliament is the only house that does not have a say on issues relating to revenue) and cumbersome (annual budget negotiations always end late at night and the new budget procedure created by the Lisbon treaty fails every other year).

Third, the political signals are ambiguous. Member states have lined up a list of national projects without clear European added-value, and have so far failed to demonstrate any willingness to contribute directly to the fund.

Regrettably, it has become apparent that the commission is not ready to pick a fight with France over the three per cent deficit rule, therefore removing a crucial incentive for some member states to subsidise the Juncker plan.

We wish the new college well. The first commission president to be elected under the new Lisbon rules- known as the 'Spitzenkandidat' process - is decisively more political than his predecessor and he actually has a plan. Member states must now play ball and renew their commitment to the European integration process.

In practice, this means helping the commission effectively take down remaining national barriers and achieve the single market in future-oriented sectors, such as an interconnected transport system, energy, digital and telecommunications.

This means that member states that bang on about investment must put their money where their mouth is and provide the fund with the financial support it needs. 

It also means that member states must implement the necessary structural reforms for their companies to regain competiveness, as investments will only flow where perspectives of profitability are tangible. The essential reindustrialisation of Europe depends on it. 

Any countries running a surplus must seize this opportunity and put these additional funds to good use. In other words, governments must grant Europe financial autonomy and genuine budgetary own resources, in order to alleviate pressure on national budgets and give the commission the financial means to act.

A final but crucial aspect is confidence. What investors need above all is stability and coherence. If Europe is to succeed in a globalised economy, it must reconcile economics with politics. 

Doubts over the future of the eurozone must be removed, and a full commitment to achieving the single market is required. More tinkering on the edges will not do - member states should wake up to this fact.


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