Fabian Demicoli

The European Fund for Strategic Investments – an EU Commission’s Proposal

An MEUSAC core group meeting held today 27th February 2015 gave a detailed outlook on the developments upon the Juncker Investment Plan through a presentation delivered by Matthew Buttigieg, Financial Analyst within the Ministry for Finance.
The December 2014 European Council concluded that fostering investment and addressing market failure is indeed a key policy challenge. The new focus on investment will provide the foundation for growth and jobs in Europe and calls for setting up a European fund for Strategic Investments (EFSI) in the EIB Group with the aim to mobilise 315 billion euro in new investments between 2015 and 2017. 
 
The Investment Plan for Europe is based on three pillars:
  1. Mobilising private investment, €315 billion over the next three years (EFSI)
  2. Making that investment reach the real economy (through Project Pipeline)
  3. Improving the investment environment in Europe
 
The fund is to be run by the EIB group. Private investment is essential in order to inject enough financial stimulus that can help reach the substantial funding targets. The idea spins off through a €16 billion EU budget Guarantee which through the EIB’s AAA rating can be further multiplied in terms of investment potential. No extra funding has been requested from the Member States to finance the package however it is necessary that private funding is, as mentioned, attracted to the plan. The EFSI is designed to be a flexible instrument which can be combined with all other forms of EU funds. Investment platforms and national promotional institutions have a key role to ensure that the plan succeeds.
 
The investment plan is planned to be based on key structural project initiatives which would instigate private investment to switch the investment mood to a positive one. The projects would also be related to key strategic developments which would in themselves be necessary to facilitate and instigate further investment potential. An overview of the proposed project flowchart procedure was presented at the meeting. 
 
The projects would have to be consistent with EU policies and economically and technically viable. Projects could cover all sectors including development of infrastructure, investment in energy, education and training, health and ICT, as well as SMEs and mid-caps. They are to seek to maximise where possible the mobilisation of private sector capital. 
 
Negotiations are still ongoing in the European Council but the text is already stabilised and mostly in agreement. The plan requires co-decision and therefore the European Parliament’s approval is required. The way forward also involves the frontloading of resources by the EIB group. A Commission Communication is expected on State aid treatment of EFSI investments.
 
From a national point of view, there are some potential projects which have already been identified, particularly in terms of infrastructure. The private sector is to play a key role in the promotion of projects. The plan would nationally also be steered towards a manner of implementation which seeks to catalyse private investment in order to achieve the multiplier effect through the EU guarantee. The notion of the plan improves access to finance and competitiveness of SMEs by allowing investing in projects that carry greater degree of risk. 
 
GRTU will be following closely further developments of the economic plan which is being set high on the EU agenda. The Investment Plan is being given a more tangible aspect from being merely an idea. The economic stimulus of the investment package at an EU level is undisputedly a necessary step forward. Nevertheless we must ensure that Maltese and Gozitan businesses tap into the benefits of the plan in a practical and optimum level.  
 

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