As of today we are changing the way public money is used in Europe. This is not a one off investment stimulus measure. It is a 3-5 year programme to bring back investor confidence in Europe.
While there is a lot of liquidity available, Europe is lacking investment. The gap to sustainable investment growth trend is around 300 bn Euro. Weak investments are holding us back, leading to a sluggish recovery and little change in high unemployment levels.
Our central aim is to take uncertainty out of investment by:
- Mobilising new investment finance
- Providing trustworthy projects – to make finance reach the real economy; and
- Improving the investment environment.
Our Investment Plan will expand lending capacity and attract private investment. Taken as a whole, it will unlock more than €300 billion of public and private investment in the real economy.
At the heart of this package there is a political choice. Either we continue business as usual with traditional grants and loans – and that is as far as the money goes. Or we use our budget in the most efficient way – to support riskier borrowing and create a larger lending capacity. This is the choice we have made. It is a new approach at European level – to change the way public money is used.
Together with the European Investment Bank (EIB) we will establish a new fund: the European Fund for Strategic Investments (EFSI). This EFSI will have 21 bn Euro of capital from the EIB and European budget. This will enable us over 60 bn Euro of fresh lending capacity, which in turn will unlock more than 300 billion Euro in private finance investment. The new EFSI Fund will act as a guarantor with different financial tools to take out uncertainty by taking 1st losses.
The fund will finance two different strands of investments:
1) Long-term investments with higher risk-profile than conventional EIB activities. This is to make sure investment reaches those areas where it is most needed, and
2) credit protection for new European Investment Fund activities to fund SMEs and mid-cap companies.
Let me be very clear. We don't need and we don't want a massive increase in public debt. We are going to use public money to remove the fear factor and unlock the investment funds which are already waiting to be used.
Let's come back to the EU investment triangle:
Mobilising investment is not enough. We need to identify viable projects, which are in line with our policies, economically viable and can be started rather quickly. It is a starting point. It is not an exhaustive list, it is a reference list of good projects. But investors need also clear information. This is why we need to pool our resources into a single Hub. This Hub will provide information and help in financing the projects for promoters. It will also share information about viable European projects for institutional and other investors.
Thirdly, we will eliminate barriers to investment. For me, this Single Market dimension – the third side of the triangle – is the most important part of our work and the one that can really change Europe permanently.
At EU level, this is about removing barriers in the Single Market. There are many companies out there creating digital products. They have a Single Market in the US – but not here. There are many people who want to invest in the Energy Sector, but we need to have an Energy Union. There is capital, and there is demand – but capital does not flow across borders. On its own, this Investment Plan is not a magic bullet to transform the European economy. But if we manage to implement all 3 elements of our Plan, it will change the European investment landscape permanently, and structurally, for the better.
We will deliver as we promised: With the EFSI alone we will mobilise over 300bn. Now we are calling on Member States to contribute to this initiative and top-up our efforts by providing capital to the new fund! This can be done SGP neutral way. Member States can also double the use of the innovative financial instruments in the structural funds. But we can make the biggest and most permanent effect on investment, competitiveness, growth and jobs by going forwards with an ambitious reform agenda for the Single Market, structural reforms and better regulation.
So what is our timescale for all of this? The answer to that is – soon!
Between now and the end of this year we expect Heads of State and Government and the Parliament to endorse the Investment Plan. In the first half of the next year we aim to get the new European Strategic Investment Fund up and running and start the investments flowing.