26th Sep 2018

Doubts raised about Juncker fund on first stop of PR tour

  • Katainen has begun a one-man 'roadshow' to sell the merits of the Juncker 'investment fund' in member states (Photo:

The European Commission’s growth fund has been described as relying on a “big bet” and falling just short of “financial engineering” on its first ever promotional outing.

The harsh judgement, by a former finance minister, came as EU commissioner Jyrki Katainen began a one-man 'roadshow' to sell the merits of the Juncker 'investment fund' in member states.

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His first stop, on Monday (15 December), was Romania, one of the EU’s poorest member states, to speak to a financial sector audience.

Explaining the details of the plan, Katainen said that the commission expects the initial €21bn - from the EU budget and the European Investment Bank - to enable lending to the tune of €63bn.

This in turn is supposed to attract "five times more resources" - leading to a total of €315bn over the coming three years - while the 'first heat" on any losses will be taken by the fund.

A "pipeline" of projects - so investors know where money is needed - as well as regulatory improvements to the digital, energy and capital markets sectors are also part of the package.

But questions from the audience showed the scepticism about the project.

Daniel Daianu, a former finance minister and a board member of the National Bank of Romania, said “an enormous amount of hope is being put on this plan and it is highly welcome.”

He added, however, that while he “would not go so far as to say it is financial engineering, the leverage ratio is pretty high” and that “substantially more” public money is needed.

Daianu, who has also been a Liberal member of the European Parliament, raised doubts about whether the “risk mitigation” in the fund would be enough to persuade investors, whose risk aversion is currently “so high”.

Katainen, for his part, admitted that the plan “with not change everything” but added that it would be up to member states to make it work.

“If the private sector does not want to invest in Europe, we have to ask why. One cannot outsource responsibility on improving competitiveness to the EU.”

Bogdan Olteanu, a vice governor at the National Bank of Romania, wanted to know if there would be any screening of potential projects on political or value grounds if proposals were not in line with EU “values”.

But Katainen ruled out "political" decisions - there has been talk of picking projects so they offer a balance of member states - saying that the private sector had told him that this would mean "no opportunity to attract investment any more".

How to get a job?

The former Finnish PM also spoke to students at the Bucharest Academy of Economic Studies and invited them to ask many questions so he could "learn" from them about what is needed in Romania and what there concerns are about the economy.

Having ascertained that there were no entrepreneurs in the audience, he fielded some questions on the economy, possible policy differences between euro and non-euro countries (Romania is not in the eurozone) and on South Stream, a just-shelved gas pipeline project backed by Moscow.

But it was notable that he spent a several minutes outlining how to get a job in the European Commission after getting questions about the qualifications needed and the best route to get into the relatively well paid public service job.

Katainen’s PR trip will continue in 2015 with trips to Italy and Germany in January – he will visit all 28 member states by October next year.

Meanwhile, the European Commission is hoping to round off this year with a big political endorsement for the fund from EU leaders at their in Brussels at the end of this week.

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