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10th Dec 2022

Ministers reach political agreement on Juncker plan

  • EU finance ministers have agreed their position on the commission's €315bn investment fund (Photo: Belvoir Army Engineers)

Finance ministers have agreed their position on the EU’s flagship investment fund at a meeting in Brussels on Tuesday (10 March).

The fund is based on a €16 billion in guarantees from the EU budget and €5 billion from the European Investment Bank which the EU executive believes can generate a total of €315 billion over the next three years.

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Despite the misgivings of several ministers, including the Dutch and German governments, ministers have agreed to set up a steering board to decide the strategy and risk profile of the fund, alongside a nine-person expert committee which will decide which projects to fund.

"It is clear now that all the member states share the same view with the commission that we need investment,” said EU jobs commissioner Jyrki Katainen.

The fund has been billed by the commission as a key tool to kickstart the EU’s weak economy although its aim of a 1:15 leverage ratio has been greeted with scepticism by a large section of the business community.

Meanwhile, most of the EU budget funding comes from redeploying existing funds earmarked for the commission’s Horizon 2020 and Connecting Europe programmes, which focused on research and innovation projects and transport and energy infrastructure, giving fuel to critics who say that the plan merely involves repackaging existing projects.

Under the scheme, if projects make losses the publicly funded portion would be the first in line to suffer a financial hit, seen as a way to attract private investors.

The commission is targeting pension funds and insurance companies - which have long-term investment needs and plenty of resources - as being logical partners for infrastructure schemes in the transport and energy sectors which will inevitably take a number of years to complete.

The EU executive had offered governments incentives to invest in the programme by stating that any extra funds provided by national treasuries to bolster the fund’s lending capacity would be given favourable treatment when calculating their debt and deficit levels.

Governments have refused to put their own public money into the pot, but the national development banks of Italy, France, Germany and Spain have agreed to put money aside for projects pledging a total of €25.5 billion between them.

The commission wants to have agreement on the fund between MEPs and ministers by June in order to start directing money to projects in the second half of this year.

In the European Parliament in Strasbourg, meanwhile, MEPs agreed legislation to set up European Long-term Investment Funds (ELTIF) aimed at making it easier for pension funds and insurance companies to invest in businesses or projects.

ELTIFs focus on increasing private sector investment in infrastructure projects. They are also seen as a first step towards harmonising Europe’s capital markets by reducing the reliance of businesses on bank lending.

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