The Strategist

The EU Launched a Mechanism to Support Risky Projects

07/22/2015 - 16:23

The authorities of the European Union have signed the latest agreement, necessary for creation of the European fund for strategic investments - a mechanism for implementing the European investment plan in the sum of € 315 billion. EU expects to restart the post-crisis economic growth with the support for investments.

© European Union, 2015
© European Union, 2015
EU formally established the European fund for strategic investments, EFSI, target amount of € 315 billion. The package of documents on the establishment and management of EFSI was signed in Brussels by European Commission President Jean-Claude Juncker, the deputy head of the European Commission Jyrki Katainen and President of the European Investment Bank Werner Hoyer. The package includes three documents describing the management of the Fund, its funding and the use of funds.

- The agreement’s preparation demanded a record short time - only six months. For 25 years, we have never seen such a rapid and concentrated legislative process, - said Mr. Hoyer after the signing of the documents.

In fact, the fund's capital will amount to € 21 billion: € 16 billion from the EU budget and € 5 billion by the European investment bank (EIB, owned by EU governments, investment projects worth € 500 billion in the assets). EFSI’s mechanism implies its participation in risky investment projects - for this, fund will be allocated a three-year state guarantee from the EU budget in amount of € 8 billion (€ 5 billion - by reducing EU budget grants for research and € 3 billion - from the budget reserves of the European Union). Other € 8 billion from the EU budget will form a mechanism to ensure compensation for the first losses - it assumes that the guarantee will cover start-up costs of private investors in the event of failure at the start of the project.

- Investments - this is what EU is missing today, their levels today are 15% lower than in 2007, - Jyrki Katainen said after signing the documents. He also expressed confidence that "this project is an important step to restore economic growth and employment in Europe." Nine EU member states have already announced their contribution they will make to the European investment plan through their development banks.

- The European Investment Bank has been working closely with these national development banks, - said Mr. Katainen. For now, UK made the maximum contribution in EFSI’s draft package (€ 8,5 bn.) , other states’ contributions are estimated at an average of € 8 billion. China's participation in the EFSI has also been discussed - flow of investments in the amount of up to € 10 billion in mid-July was linked by the authorities China with the possibility of getting greater access to European markets for Chinese technology companies.