The European Association of Long-Term Investors (ELTI) considers that a single fund to build on the example of the Juncker investment fund by offering a public financial guarantee based on the budget of the European Union would help to increase the economic impact of this budget and make the long-term investments the EU needs, particularly in the social sector.
“National Promotional Banks and Institutions share the view that the current fragmentation of programmes supporting the same beneficiaries or sectors hinders their impact. The single guarantee fund could contribute to providing both a streamlined architecture and a greater risk diversification”, the European network states in a position paper published at the end of March and intended as a contribution to the reflection on an increased use of financial instruments through the post-2020 multi annual financial framework.
The organisation, whose members include institutions such as Bpifrance and KfW of Germany, lists the desired characteristics of the future EU Investment Fund, which will take over from the European Fund for Strategic Investments (EFSI) (see EUROPE 11924), the financial arm of the Juncker investment plan which the Commission is currently working on (see EUROPE 11974).
Covering a risk level at least equivalent to the current period, the post-2020 EU budget would have to intervene to absorb the first losses a project may make and cover the 'junior' tranches held by the partner managers of the fund. The fund would be called upon to facilitate the combination of subsidies, structural funds, financial instruments and resources such as contributions from the National Promotional Banks. Furthermore, decentralised technical assistance will be a key element in providing owners with the capacity to bring their projects to fruition.
The network calls for direct access for the National Promotional Banks to the future EU Investment Fund. However, this direct access should be available only to national institutions found to be eligible following a specific analysis.
As for the governance of the fund, this should be based on fair rules between partner managers. These partners should be selected through open calls for contributions and be represented on a steering committee. A group of independent experts would be responsible for determining the pricing of the fund.
Finally, a single set of rules would govern the functioning of the EU Investment Fund. These rules would take inspiration from market rules and be flexible enough to adapt to market changes and local specifics.
The ELTI document is available at: https://bit.ly/2qdaiAb . (Original version in French by Mathieu Bion)