EU in €315bn fund launch

A funding scheme planned to give rise to €315bn worth of investment in the EU was officially launched yesterday — but amid mixed views on its effectiveness.

The European Fund for Strategic Investment proposes to provide loans to cover around 20% of the cost of infrastructural projects, underwriting their more riskier elements, to encourage private investors to take up the remainder.

It is designed to have the traditionally risk-averse European Investment Bank, which is owned by the member states, contribute to what it might otherwise consider to be unattractive projects, with funds from the European Commission’s budget underwriting a share of any potential losses.

It will effectively change the way the EIB — the world’s largest development bank — works as it will be the junior creditor, according to Dr Gregory Claeys of the Bruegel think tank.

However, he said the new scheme is largely a reshuffling of funds and a reduction in the original ambition because member states.

Ireland is one of the first countries to benefit from the fund, having been pre-chosen a few months ago for a €70m loan towards the €142m cost of building 14 primary care centres through public-private partnerships.

About €75bn of the hoped-for €315bn investment fund is earmarked for SMEs over the next four years.

A flagship project of the Juncker commission is to promote growth, given that annual investment is about 10%, or €300bn, below the long-term trend and 15% below pre-crisis levels.

There will be a web portal where projects can be promoted to attract investors, an advisory hub for those interested in accessing the fund, and the criteria will also be listed. EU structural funds can also be used in the projects.

The EIB’s usual advisory facilities will be available. The fund will have a steering board with three commission officials and one from the EIB, as well as an investment committee of eight independent experts to select projects.

The commission has pledged €16bn as a guarantee to the EIB but has just earmarked half of that. Of this €8bn, €2.2bn comes from the R&D Horizon fund, €2.8bn from the Connecting Europe fund for transport and broadband, and €3bn from the margins of the commission’s five-year budget.

The EIB will contribute €5bn from past profits to the commission’s €16bn and will borrow €21bn against this on the markets.