Out-Law / Your Daily Need-To-Know

New EU plan to ‘kick-start’ strategic investments in infrastructure

Out-Law News | 27 Nov 2014 | 10:59 am | 1 min. read

The European Commission has announced plans for the creation of a new investment fund “to mobilise at least €315 billion of additional investment over the next three years”.

The new fund will be largely “guaranteed by public money” to support strategic investments in infrastructure, “notably broadband and energy networks, transport in industrial centres, as well as education, research and development, renewable energy and energy efficiency”, the Commission said on 26 November.

The Commission said the investment plan comprises three main strands (4-page / 640 KB PDF), including the creation of a European Fund for Strategic Investments (EFSI), the establishment of a “credible project pipeline coupled with an assistance programme to channel investments where they are most needed” and an “ambitious roadmap to make Europe more attractive for investment and remove regulatory bottlenecks”.

Taken as a whole, the proposed measures could add between €330bn and €410bn to the EU’s gross domestic product over the next three years and create up to 1.3 million new jobs, the Commission said.

The EFSI will be set up in partnership with the European Investment Bank (EIB). “It will be built on a guarantee of €16bn from the EU budget, combined with €5bn committed by the EIB,” the Commission said. “Based on prudent estimates from historical experience, the multiplier effect of the fund will be 1:15. In other words, for every public euro that is mobilised through the fund, €15 of total investment, that would not have happened otherwise, is generated.”

EIB president Werner Hoyer said: “We have ample liquidity in Europe, but we don’t have enough investments. We are faced with a crisis of confidence, so the challenge is to re-connect private investment with attractive projects. To achieve this, we need to take on more risk to encourage project promoters to launch their investments.”

Hoyer said the EFSI “will provide targeted, catalytic risk bearing capacity for economically viable investments, building on the bank’s expertise and experience in selecting and managing projects”.

In addition, Hoyer said an “investment advisory service” would be established to boost project development and preparation across Europe.

Commission president Jean-Claude Juncker, who took office this month, said: “The investment plan we are putting forward... in close partnership with the EIB is an ambitious and new way of boosting investment without creating new debt. Now is the time to invest in our future, in key strategic areas for Europe, such as energy, transport, broadband, education, research and innovation.”

A report published earlier this year (16-page / 160 KB PDF) said more investment in Europe’s energy infrastructure was needed, particularly to end “gas market isolation” in the Baltic States and connect electricity grids across the continent.