Monday

19th Nov 2018

Juncker's plan: Making €60bn worth five times more

  • The EIB is to lend €60bn, which is supposed to trigger up to €315bn in total investments (Photo: Forgemind ArchiMedia)

European Commission chief Jean-Claude Juncker will on Wednesday (26 November) unveil an "investment package" worth €315 billion for the next three years.

Only €60 billion will be actual loans disbursed via the member states-owned European Investment Bank (EIB) for infrastructure projects and small enterprises.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

The rest is due to come from private and public sector top-ups.

The financial engineering goes even deeper, however.

The €60 billion in loans will be raised on the financial markets based on €5 billion of the EIB's own money and a €16 billion "EU guarantee" issued by the commission.

This, in turn, is also only half real money - €8 billion from unused and reserve EU funds.

An independent "investment committee" consisting of "experts" will have the last say on each project, which will be picked from a list submitted by member states.

The experts will "validate every project from a commercial and societal perspective".

This is an attempt to avoid having unnecessary roads and airports being funded, as happened with some of the EU's structural funding schemes.

EU officials on Tuesday downplayed the risk that all of the EU-guaranteed loans might go 'sour' - going to projects that go bust.

But if they do, the EIB could call on an €8 billion "reserve”, and, possibly that EU member states would have to cough up the remaining €8 billion in the EU guarantee.

"Projects don't go bankrupt on the day they are signed and they will not occur at the same time. If there is a cash call on the guarantee, it will happen over time," one EU official said.

"The probability to call on the €8 billion in one go is infinitely small. Although I might regret having said this," the official added.

However, it is primarily "high-risk" parts of the public-private projects that this new fund will be covering, in a bid to attract public and private investors who otherwise would consider the overall project too risky.

Overall, the new initiative is projected to boost the EU economy by €330-€410 billion and to create over 1 million jobs over the next three years. This would correspond to a yearly GDP increase of 0.7 to one percent.

Economists are questioning the numbers behind the fund however.

Ronald Janssen, an economic adviser with the EU trade union movement (ETUC), told this website there are several questions surrounding the plan.

One is if the EIB board where member states are represented will approve this scheme, which, given the high-risk investments, might dent the bank's triple-A rating.

Another question is if the markets will be willing to step in and raise the remaining €240 billion.

"We have some doubts about that. If it works, all the better, but given what has been happening on financial markets, the risk aversion is still high," Janssen said.

A member of the European Court of Auditors also questioned the viability of the scheme.

“I am eager to see the details on how he will find the money for this €300 billion investment feasibility instrument, or whatever it is called,” said ECA member Igors Ludborzs.

In its last annual report, the Court found that only 37 percent of the funds from other financial engineering instruments actually went to the beneficiaries.

Meanwhile, Constantin Gurdgiev, a finance lecturer at Trinity College Dublin, spoke of "Santa Juncker".

"The idea that the EU commission is going to engage in 'risk lending' is about as probable as the idea of government-led entrepreneurship," Gurdgiev told this website.

"Career EU bureaucrats asking career member states' bureaucrats to invest in productive businesses - the initiative looks more like a redressing of the structural funds model to hit the policy fetish for 'supporting the real economy'," he added.

Long-time EU insiders also question the scheme, which was first announced as a political promise during Jean-Claude Juncker's election campaign.

"It achieved its goal, Juncker is on the 13th floor of Berlaymont [the EU commission headquarters]," one EU source quipped.

Agenda

EU to unveil investment fund this WEEK

The unveiling of a highly anticipated investment fund, a censure vote, a decision on France's budget and the visit by the Pope to the European Parliament makes next week one of the busiest since the Juncker commission began.

Katainen vague on €300bn investment plan

Tuesday's EP hearing of Finland's Katainen, one of seven new super-commissioners, shed little light on where the money for a vaunted €300bn investment plan will come from.

News in Brief

  1. Germany and France agree eurozone budget framework
  2. Austrian foreign minister: EU's Israel policy 'too strict'
  3. Soros and Kurz discuss Central European University move
  4. EU set to tighten rules on foreign strategic investment
  5. Macron repeats call for unified Europe in Bundestag speech
  6. US warns EU banks and firms against trading with Iran
  7. Merkel urged Romania not to move embassy to Jerusalem
  8. Protesters call for Czech leader to step down

Stakeholder

An open China brings opportunities to Europe

Some 60 years ago, the first major World Fair after World War II was held in Brussels. Sixty years on, China International Import Expo (CIIE), the first world expo dedicated to expanding imports, will open in Shanghai, China.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. Panic is not answer to EU's security challenges
  2. Dutch flesh out proposal for EU human rights sanctions
  3. EU cheerleaders go to Russia-occupied Ukraine
  4. EU must recognise new force for Balkans destabilisation
  5. Brexit dominates EU affairs This WEEK
  6. How the EU commission got tunnel vision on self-driving cars
  7. No-confidence calls against May put Brexit deal in doubt
  8. Key points of the Brexit deal (if it ever comes into effect)

Stakeholders' Highlights

  1. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  2. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  3. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  4. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  5. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  6. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  7. Mission of China to the EUChina: Work Together for a Better Globalisation
  8. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  9. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  10. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  11. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  12. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future

Join EUobserver

Support quality EU news

Join us