Proposals to stoke EU growth unveiled

Enabling pension funds to invest in the real economy and creating a securitisation market for SMEs are among the proposals unveiled by the European Commission to unlock long-term financing to stoke economic growth.

Other measures include developing European capital markets as well as raising awareness and facilitating the development of crowd-funding.

The Commission said that significant levels of long-term investment were needed to meet the funding requirements for Europe 2020 Strategy and the 2030 energy and climate package.

The 2020 strategy plans calls for roughly €1 trillion investment in infrastructure, transport, new technologies, innovation and energy among other areas in an effort to make Europe a leading edge economy.

Internal Market and Services Commissioner Michel Barnier said: “As the economic recovery is picking up, we must be ambitious in our support for growth.

“Europe has large long-term financing needs to finance sustainable growth — the type of growth that increases competitiveness and creates jobs in a smart, sustainable and inclusive way.

“Our financial system must regain and increase its ability to finance the real economy,” he said.

Since the collapse of the banking sector across much of the EU from 2009 onwards, there has been a huge squeeze on the amount of credit flowing to the real economy, and particularly the SME sector.

Before the crisis, EU companies raised 85% of their funding needs through traditional bank lending.

The Commission launched this initiative to explore ways of looking at diversifying the funding model across the region.

Among the proposals are easing up on capital requirements for banks and insurance firms looking to invest in SME asset-backed securities. There are also measures aimed at enabling long-term investors, particularly pension funds, to invest in the real economy.

“All European societies face a combined challenge of provision for retirement against a background of an ageing population, and of investing long-term to create growth,” said Mr Barnier.

“Occupational pension funds are at the junction of those two challenges. They have over €2.5tr of assets under management with a long-term horizon, and 75m Europeans depend largely on them for their retirement pension.

“Today’s legislative proposal will improve governance and transparency of such funds in Europe, improving financial stability as well as promoting cross-border activity, to further develop occupational pension funds as a key long-term investors.”