Brussels, 19/11/2014 (Agence Europe) - On Wednesday 19 November, the Liberal group at the European Parliament presented its concept of a plan which has the capacity to make €700 billion available in investment, mainly from private sources, with the European Commission pulling out all the stops to get its own initiative presented, probably before the end of this month (EUROPE 11199).
“Only a major initiative can bring the economy back to life. Without creating further debt, but attracting private investment and using the potential resulting from an open European market”, said the President of the ALDE group, Belgium's Guy Verhofstadt.
The Liberals suggest the creation of a European Investment Fund (EIF) with the aim of raising €700 billion, possibly under the auspices of the EIB. This fund would be guaranteed by the member states, in a procedure which will ensure credit conditions and refinancing costs which will be attractive to private investors. The fund would invest in viable projects of a pan-European or purely national nature, but with a genuine economic impact. The granting of funding would be subject to two conditions: the states in which a project was to be implemented would be obliged to apply the structural reforms laid down in the socio-economic policy recommendations made to them by the European Council, and their national budget for the following year would have to have received the Commission's positive assessment.
The ALDE group stresses the importance of selecting projects which bring a tangible return on investment. In order to attract unused private funds, the public sector would be first in line to bear any materialisation of risks. This would mean that the riskiest proportion of an investment would be guaranteed by the member state or states benefiting from a project, to the tune of 8% of total funding in the form of 'junior' debt, with the next equivalent proportion to be guaranteed by the EP, with a 4% stake to be guaranteed by the EFSM (a mechanism managed by the Commission and which raises funds on the markets by using the EU budget as leverage). The remaining 80% of the investment would be funded by the private sector, through 'senior' bonds enjoying optimum protection.
It is worth noting that under the Liberal proposal, the private investments mobilised via this EIF and realised by households and SMEs would benefit from tax breaks. These would be covered by the bonds issued by the EIB at a level of €200 billion. This programme will be voluntary for the member states, but subject to the same conditions of compliance with the European budget rules.
At a sectorial level, the Liberals refer to the completion of major infrastructure projects in the usual sectors: energy, transport, telecommunications. The EIF would also invest in social projects, particularly social housing and youth employment schemes. In parallel to the creation of the EIF, the ALDE reiterated its call for an agenda conducive to business creation, increased competition and the definitive completion of the single market in the sectors referred to. (MB)