Sunday

23rd Sep 2018

Polish finance minister pokes holes in Juncker fund

  • Szczurek: The former ING Bank economist said private investors might stay away (Photo: europarl.europa.eu)

Polish finance minister Mateusz Szczurek has questioned the model of the EU’s flagship investment vehicle, saying it is "underfunded" and warning that investors might stay away.

Speaking at a European Parliament hearing in Brussels on Tuesday (6 January) alongside the EU commissioner tasked with implementing the new fund, Szczurek said there is very little input money to begin with and that investors may be "crowded out" instead of being attracted by the project.

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

"I have anecdotal evidence from commercial banks that the European Investment Bank [which is to host the fund] is crowding out private investment," Szczurek, a former chief economist at ING Bank, noted.

He said the European Fund for Strategic Investments (EFSI) and the European bank (EIB) as a whole are "competing on the private market for funding”, adding that the fund’s five-fold "leverage" will be a turn-off for many investors.

When announced late last year by EU commission chief Jean-Claude Juncker, the new €315 billion investment vehicle was immediately criticised for being based on very little "real" money - €21 billion in guarantees from the EU budget and the EIB.

The start-up capital is to be used by the EIB to raise €63 billion to pay for risky infrastructure initiatives, clean energy, and IT projects, and to attract extra private and public investments to reach the €315 billion figure.

For each euro the EU chips in, Juncker promised there will be €15 in top-ups from other sources.

But even the commissioner in charge, Jyrki Katainen, is sounding increasingly cautious.

"According to the EIB’s recent data, they could raise another five-fold in investments, but you can't guarantee it," Katainen said at Tuesday’s parliament event.

He noted that the EIB - a triple-A rated investment bank controlled by national governments - has in the past managed even greater money-raising feats.

But he said initial ideas to leverage the €63 billion eight-fold were unrealistic, noting that he insisted on "a factor of five instead of eight, to maintain the credibility” of the proposal.

National contributions

For his part, the Polish minister said the under-funding problem can be solved if member states are given guarantees their contributions to the fund will not be counted as part of the national deficit in terms of EU budgetary discipline.

The commission has indicated it might do this, but only if the contribution actually triggers an excessive deficit procedure - an EU penalty for going over three percent of national GDP.

The Polish minister said that while the rules underpinning the euro need to be respected, they have become "unenforceable in bad times”.

"We see countries ignoring it and getting away with it. This is unacceptable. The way to do it would be via capital contributions to EFSI and then strict enforcement [of the deficit-and-debt rules]”.

Katainen noted the fund is designed "so it doesn't need any member state contributions”, although he added it would be "very good" if they did chip in.

He said the commission had considered making access to the fund conditional on member states implementing structural reforms, but in the end it abandoned the idea.

On the fund’s governance, the Polish minister also said it would be "useful" to have as many countries on board as possible so that they can “avoid free-riders" - countries who want to tap the fund but not chip in.

But the commission is keen to avoid political meddling in the selection of projects and says they should be picked by a panel of independent experts.

The issues remain open because the commission has yet to put forward the legislative proposals setting up the Juncker vehicle.

The draft bills are due later this month, with the aim of getting the fund up and running in mid-2015.

Better alternatives

But the Poland's concerns were echoed by private sector delegates at Tuesday’s event.

The commission is hoping that global pension funds will be among the investors taking part in the EU scheme.

But Angelien Kemna, the chief financial and risk officer with APG, a Dutch-based firm, warned: "We're a global pension fund. Europe is nice, but if it doesn't get its act together, we’ll go elsewhere”.

“For us, too risky infrastructure is not interesting. We have better alternatives”.

Airbnb agrees to clarify pricing for EU

The justice commissioner says the accommodation-rental website will better inform users about prices, and about the legal status of their 'hosts'. Facebook, however, could face sanctions if it doesn't comply with EU rules.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  2. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  3. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  4. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  5. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  6. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  7. IPHRCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  8. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  9. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  10. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  11. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  12. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow

Latest News

  1. Brexit and MEPs expenses in the spotlight This WEEK
  2. Wake-up call on European Day Against Islamophobia
  3. Sound of discord at 'Sound of Music' Salzburg summit
  4. Salzburg summit presses for bigger Frontex mandate
  5. UK's post-Brexit plan 'will not work', EU says
  6. Airbnb agrees to clarify pricing for EU
  7. Libya keeps coast guards rejected by the EU
  8. EU divisions on menu at Salzburg dinner

Stakeholders' Highlights

  1. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  2. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  3. Mission of China to the EUChina: Work Together for a Better Globalisation
  4. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  5. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  6. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  7. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  8. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  9. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs
  10. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  11. FIFAGreen Stadiums at the 2018 Fifa World Cup
  12. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development

Join EUobserver

Support quality EU news

Join us