Tuesday

23rd Jul 2019

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. UK foreign office minister quits ahead of Johnson as PM
  2. AKK to boost Bundeswehr budget to Nato target
  3. Police arrest 25 after Polish LGBT-march attack
  4. Ukrainian president's party tops parliament election
  5. EU interior ministers to meet in Paris on migration
  6. Schinas nominated as Greek commissioner
  7. Sea-Watch captain hopes for change in EU migrant rules
  8. Russia willing to join EU payment scheme on Iran deal

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. As Johnson set to become PM, ministers pledge to resign
  2. Poland's PiS prepares 'failsafe' for October election
  3. Abortion Wars
  4. EU goes on holiday as new UK PM arrives This WEEK
  5. Survey: Half of EU staff 'don't know' ethics rules
  6. Von der Leyen signals soft touch on migrants, rule of law
  7. Timmermans: von der Leyen will be tough on rule of law
  8. Timmermans trolls 'idiot' Brexit negotiators

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Join EUobserver

Support quality EU news

Join us