Brussels, 28/04/2015 (Agence Europe) - In a special report published on Tuesday 28 April, the European Court of Auditors (ECA) says that financial instruments (loan and guarantee funds) have so far been unsuccessful in the field of rural development.
This is mainly because they were overcapitalised and did not fulfil their potential in terms of the desired leverage and revolving effects. The legal framework for 2014-2020 has the potential to improve these instruments, but obstacles to their more extensive use remain, says the ECA in short.
“At a time of fiscal constraint on public budgets, achieving more investments with less money is of key importance. Financial instruments have a potential to improve the use of scarce public resources by providing funding for more investments with the same budget, but our audit results suggest that it will be a considerable challenge to achieve the desired impact”, commented Kersti Kaljulaid, the ECA member responsible for the report.
At a meeting with a few journalists, Kaljulaid said: “We found that these financial instruments were not at all popular. The member states put in place eleven guarantee funds and three loan funds between 2009 and 2014. By the end of 2013, the EU states and the EU had invested some €700 million through these funds. There was overcapitalisation of €370 million at the end of 2013. The total amount of these loan and guarantee funds could have been provided with capital of €50 million paid into the funds. In reality, some €420 million were invested” (our translation).
For the new programming period (2014-2020), the Commission wants member states to commit themselves to at least a two-fold increase in their use in key investment areas. There is hope that during this period these instruments will become more popular. Kaljulaid spoke of initiatives launched by the Commission and the EIB. “And the Commission has made changes to the regulatory framework to promote these financial instruments”, she said.
Financial instruments are meant both to attract additional public and/or private capital (leverage effect) and allow the initial allocations of funds to be recycled (revolving factor). The ECA concludes that they did not work as expected in this regard. Furthermore, neither the Commission nor the member states introduced appropriate monitoring systems to provide reliable data to show whether the instruments had achieved their objectives effectively.
For the 2014-2020 period, the ECA found that persistent overcapitalisation and the risk of a continued dependence on grants were amongst the possible remaining obstacles to a more extensive use of these instruments.
The ECA recommends that better incentives should be given for member states to set up financial instruments for rural development and stimulate demand from farmers or other beneficiaries (for instance by setting a certain share of the available budget for rural development aside for financial instruments and making them more attractive than grants). The effectiveness of financial instruments should be improved for the 2014-2020 programming period, for instance, by setting appropriate standards and targets for leverage and revolving effects, the ECA says. (Lionel Changeur)