Milan, 15/09/2014 (Agence Europe) - During their informal meeting in Milan on Saturday 13 September, European finance ministers looked at what levers could be used at European and national levels to stimulate private sector investment.
The discussions were based on the ideas of the Italian, Polish and Franco-German presidencies but did not lead to any concrete decisions being made. They were aimed at setting the scene for guiding principles that the European Council could send to the Junker Commission. In the three months following its inauguration, the Commission will be expected to introduce an investment plan estimated to be worth €300 billion for a three-year period.
The European Commission and the European Investment Bank (EIB) were, however, invited to put forward concrete ideas for the October Ecofin Council in Luxembourg. This initial report from the two European institutions will focus on “the practical measures that can be taken” and “the profitable investment that are justifiable”, explained the acting president of the Council of the EU, Pier Carlo Padoàn. The debates covered the idea of providing the EIB with a task force that can identify projects and bring them into line with existing public investment banks, explained the French minister Michel Sapin, for whom the EIB, is not just a financial instrument but also a source of expertise.
The Italian minister, Pier Carlo Padoàn, said that there is a shortfall of investment in Europe. European Central Bank (ECB) vice president Vitor Costâncio described the extent of this phenomenon: the average level of investment in Europe is currently 20% less than the 2007 level.
According to the Italian minister, the resources available will mainly come from the private sector, with public resources acting as a lever effect. Commissioner for Economic and Monetary Affairs Jyrki Katainen immediately picked up on these words and explained that there is much more money in the private sector than in the public sector, although he did promise that there would be a limited use of the EU budget. Sapin said that there is no dichotomy between public and private investment, saying we want private investment, which is at a level that is too low, to be able to recover its cruising speed. He added that it will be perhaps useful in specific and reasonable circumstances to have investment from the public sector.
Action in the political sphere will therefore consist in creating private investment friendly conditions. This will be done, if possible, by facilitating the access of European companies to non-banking capital because banking intermediation still accounts for 70% of financing to the real economy. Underlining the importance of introducing structural reforms, Padoan referred to the “mini bonds” that helped 26 SMEs to leverage €1 billion in capital in the two months following their start-up. Costâncio advocated regenerating the European securitisation market, while the ECB perfected its assets-backed securities (ABS, see other article) plan. In its Green Paper on long-term investment presented last March, the European Commission mooted the idea of using private savings through the creation of a European savings coupon and proposed revising the directive on pension funds (see EUROPE 11048).
The Spanish minister, Luis De Guindos, said that the future Junker Commission's investment plan was essential. According to De Guindos, this plan should reflect two priorities: investing as a means of completing the single market in sectors such as energy and transport; and establishing a close link with the structural reforms that Eurogroup is strongly advocating (see EUROPE 11154). (MB)