The EU’s current investment fund, also known as the Juncker Plan, is being reworked to create a single mega-fund called InvestEU.
The European Commission put forward a proposal on the new fund in June, noting that investments in the EU are picking up but more investments are needed. The Commission proposes pulling together up to 14 existing financial instruments under a single rule book and 13 assistance services under a sole advisory hub making financial instruments easier for member states to use and freeing up more money for investment.
“By pooling together the existing instruments [we] can achieve 15 percent more investment,” European Commission Vice-President Jyrki Katainen said, while explaining the new fund.
The new fund will be the direct descendent of the Juncker Plan, which was established in 2014 in the aftermath of the financial crisis to mobilise public and private capital for investments in the EU. InvestEU is expected to mobilise 650 billion euros in additional investment across the EU over a 7-year period, the Commission says. The Commission also calls for the new fund to provide a 38 billion euro guarantee to support investments.
The funding will focus on four key policy areas: sustainable infrastructure; research, innovation and digitisation; small and medium-sized enterprises (SMEs); and social investment.
One of the biggest differences between the Juncker Plan and InvestEU will be the regional dimension that the latter incorporates. InvestEU will be managed by the Commission and the European Investment Bank Group, along with the support of national and regional banks and other local partners. The Juncker Plan had faced criticism for its alleged lack of a regional dimension.
While the new fund is sure to place more emphasis on local investment needs, many southern EU countries have already benefited greatly from the Juncker Plan on a local level.
Greece, Portugal and Spain have some of the largest EFSI (European Fund for Strategic Investments – the heart of the Juncker Plan) relative to GDP. In April, the European Investment Fund and the National Bank of Greece signed three guarantee agreements worth 640 million euros to improve access to finance for SMEs in Greece, all three of which benefited from the support of the EFSI.
Greece has already been approved for 2.6 billion euros in EFSI financing and is expected to procure 10 billion euros of investment related to the fund, according to the European Investment Bank. The funded projects include three new wind farms in Viotia in Central Greece, high-speed broadband across the entire country, and Greek agri-food expansion abroad.
Portugal has also already been approved for a little more than 2 billion euros in EFSI financing, with an expected total investment of 6.1 billion euros. A large portion of that investment is, like in Greece, going toward cleaner energy. In June 2017, the European Investment Bank granted a 29 million euro loan to finance the expansion of natural gas distribution networks to new areas in the north of the country. The agreement was made possible by the EFSI through the Juncker Plan.
In Spain has also received similar funding, proportional with its larger GDP. The country has already been approved for 6.5 billion euros of EFSI funding, an expected 33 billion in investment related to EFSI, a significant portion of that investment going towards clean energy. The European Investment Bank recently signed a 50 million euro loan for a wind farm project in Spain that will build nine new wind plants with a total capacity of 300MW.
InvestEU is looking to build on these already highly successful Juncker Plan projects by making the investment process more streamlined and generating more money for investment. The four focus areas of the new fund will benefit countries that have, at a national policy level, placed heavy focus on sustainable development, as well as those who boast a high number of SMEs and digital and social startups. It will also assist those countries who have not yet begun investing in these areas to start doing so.
“InvestEU Programme is a win-win exercise for the world of innovation, for the SMEs and for social investment,” said Luca Jahier, President of the European Economic and Social Committee, the EU consultative body representing social partners.
However, there does exist some criticism about the new fund, mainly coming from environmental NGOs. They argue that sustainability targets are focused only on infrastructure investment, with little explanation as to how sustainability will be ensured. They also point out that there is no explicit guarantee that investments will not go toward fossil fuels. These are aspects that will need to be ironed out as the fund takes shape over the coming year.
Looking at the past projects financed under the Juncker Plan, it seems that even without these explicit guarantees, the new fund will work toward a cleaner energy environment in line with the Paris Agreement goals on climate change.