On behalf of the European Commission, allow me to wish you a warm welcome to the third annual Fi-Compass conference on financial instruments for agriculture and rural development. And what better place to have it than in France, the heart and soul of Europe's family farm tradition.
Later today I will appear before the Assemblée Nationale to outline some elements of my vision for the future CAP, and I will place the family farm model firmly at the centre of that vision. But I will also outline how the family farm needs to evolve and adapt to a changing world.
Our EU agri-food sector needs to become fully in tune with the 21st century, with a stronger emphasis on innovation, sustainability and quality.
And my key message to you today is that investment is absolutely essential for this process. This conference gathers high-level expertise from a wide range of stakeholders: EU policymakers and officials, French elected representatives, agricultural counsellors and attaches, heads of managing authorities, and representatives of COPA-COGECA and French farm unions.
And we are all here with one main purpose –to find more and better ways to foster innovation and modernisation in the EU farm and food sector by increasing access to finance.
We need to provide farmers, agri-food operators and rural entrepreneurs with the full range of financing possibilities existing under the EAFRD, so that they are in a position to compete fairly with all other economic sectors which already benefit from Cohesion policy or other EU-level financing.
Access to finance is crucial for strengthening the competitiveness and sustainability of EU farmers and rural businesses in the medium and long term.
And the risk management toolkit of the CAP needs to be reinforced to addressing the challenges faced by farmers and food businesses in this day and age.
I urge you to use today's debate as a rich source of ideas and opinions to inspire the Commission's preparation of the future CAP. As you are aware, we will publish a Communication on modernising and simplifying the CAP later this year, and the financing dimension of this key document needs to be clear, explicit and strong.
(Access to finance and financial instruments)
We need to do more, because the available public funds for grants supporting agricultural investment are limited, while the needs are greater and greater.
Like any economic sector with potential for sustainable growth, access to finance is vital for the development of the agri-food sector. This is exactly where financial instruments come into focus, through the provision of such instruments as loans, guarantees, and equity. But, I cannot emphasise strongly enough that these instruments also need to reflect the unique economic reality of the sector.
We need to recognise that investment demand in agriculture is currently far higher than that which the EU budget can provide;
We need to address farmers' needs and wants – with dedicated loan and guarantee products reflecting their specific circumstances and business cycles;
We need to cover market gaps and sub-optimal investments situations – in some parts of the EU, interest rates are still too high and collateral requirements can be significant and in some cases out of reach, especially for new entrants, including young farmers and small farms;
We need to help those farms that need to restructure or re-orient their production through investment and supported working capital;
We need to boost innovation and technological change in agriculture and agri-food to turbo-charge the sector's economic and job creation potential;
And we need to attract additional private capital, which raises the funding available for final recipients.
(Agri-market Gap in Financial Instruments)
We have studied the existing market gap closely, and the first estimations indicate that:
For short-term loans, the EU market gap for financing agriculture is currently between €1.6 and €4.1 billion;
For medium and long-term loans the EU market gap for financing agriculture is currently between €5.5 and €14.8 billion;
We will continue monitoring this gap, using different methodologies and approaches, to have a better and clearer picture.
(The Demand for Grants and the Role of FI)
We already have evidence from the current rural development programmes that the demand for investments in many Member States goes well beyond available resources; in fact in some Member States the demand for grants is two or three times higher than the funding available.
While not all projects submitted for grant financing are of the required quality, we cannot ignore the fact that this unmet demand needs financing
Financial instruments represent an alternative way to finance, at the very least, the economically viable applications, including those who have not been selected for support.
They can be combined with grants to boost the investment potential of the CAP and EAFRD even further.
Developing the FI potential is the right approach because they require good business proposals, which also sets the agricultural holding or agri-food processor on the right path to competitiveness.
Appropriate FIs could be modelled along the business investment cycle of farmers, which is extremely important in cases of crisis or for risk management purposes.
Agriculture and agri-food will continue to develop and evolve, so we know there will be an ongoing demand for funding new technologies, new products, and new market outlets. Financial instruments are the key mechanism to satisfy growing finance needs in situations with insufficient budget.
(Progress with Financial instruments Under EAFRD)
The good news is that we are approaching this challenge with the wind in our sails, as President Juncker likes to say. The development of financial instruments under the CAP and EAFRD has already made huge strides forward:
Four financial instruments are operational – Loan Funds in Estonia, Germany, Italy; and a Guarantee Fund in the Languedoc-Roussillon region of France. In total these projects will draw down a budget of €77 million from the EAFRD with expected leverage doubling that amount;
Two regions in Italy and France have already signed funding agreements and are on the verge of launching their own Loan or Guarantee Funds. This will add another €12 million from the EAFRD and a leverage of some EUR 70 million;
So, from just 6 financial instruments, of which 5 are regional, we will have €90 million in FIs under the EAFRD with more than €200 million in leverage effect!
This shows us that we are clearly on the right path.
Furthermore, in total there are 19 Rural Development programme areas in 7 Member States where financial instruments are under preparation or funding agreements are under discussion with fund managers.
From these, 8 Italian regions are currently negotiating funding agreements with the EIF for the set-up of the so-called 'Italian Agriculture Guarantee Multiregional Platform' where expectations are that the leverage effect from the portfolio of loans could surpass €1 billion
For a further 18 programmes, the decision for launching a FI is pending or its preparation is on the way.
This means that, in total, more than 30 per cent of all RDPs may have FIs programmed and implemented by the end of 2018. But we can do even more, and implementation on the ground needs to speed up if we want to capture the full potential of the 2014-2020 RDPs.
I also want to thank the EIB – our bank - for supporting us with targeted coaching to boost capacity building in Member States.
Not every farmer will opt for a loan and rightly so, but the farming sector should have the opportunity available at any time.
(EAFRD – EFSI Initiative)
In November last year we launched a specific initiative allowing for the combination of EAFRD funding with EFSI resources and EIB Group funding.
We are already working on two pilot cases in France and Poland;
I also want to remind you that 3 other pilots are available and we are searching for new candidates;
I urge the EIB Group to build on these first pilots and work closely with Member States to broaden and enrich the coverage and opportunities for our managing authorities.
And don't forget that the 'omnibus' proposal which I hope will be adopted as soon as possible will simplify rules on working capital, making financial instruments even more accessible for the purchase of animals, annual plants, and other commodities.
Let me conclude, ladies and gentlemen, by emphasising that while we are making great progress with the tools we currently have, we need to do even more to ensure that the CAP – working in harmony with other key policy and budget lines - adapts to changing circumstances and new challenges.
If we succeed in this mission, we will play our part in building a European farming and food sector which is truly modern, truly competitive, truly innovative and truly sustainable. Thank you.