Ivan Ebejer

Economist, European Commission Representation in Malta

Doubling down on investment

Friday 23rd September 2016

In her last blog post, Elena Grech, Head of the European Commission Representation, outlined the main thrust of the Investment Plan for Europe. Now, I would like to present the main findings of the stocktaking exercise one year after the Plan's launch, and give some pointers on the task ahead.

To recap, Europe's significant post-crisis investment gap signals a market failure – not in liquidity but investors' risk-bearing capacity. Therefore, the objective of the European Fund for Strategic Investment or EFSI – the Plan's financing arm – is to trigger a virtuous spiral, increasing investor confidence and reducing the risk associated with investment decisions. Indeed, the fund set up jointly between the European Commission and the European Investment Bank has an initial pot of €21 billion. By acting as a first-loss guarantee, the fund is expected to draw in private money which should unlock at least €315 billion in additional investment over the next three years.

Two other equally important features define the Investment Plan. First, a single point of entry to a wide range of advisory services managed by the EIB to assist public and private promoters, including SMEs, in getting projects off the ground was set up. Maltese promoters looking to finance their projects can directly contact the advisory hub. Smaller projects can be grouped together in Investment Platforms or, in the case of SMEs, can be helped by financial intermediaries. The establishment of a National Development Bank would go a long way towards this end. In addition, the Commission launched an online portal with a view to bring investors and public or private project promoters together in one website aimed at increasing worldwide visibility to opportunities available across Europe. Maltese companies seeking private investors for their projects can do so through the European Investment Project Portal. The Plan's third pillar involves stepping up action to remove barriers that hamper investment.

One year since its launch, the Investment Plan is bearing fruit. The latest figures show that thanks to EFSI, real investments of more than €115 billion are expected to have been triggered in both SMEs and infrastructure projects, spanning 26 Member States. SMEs have already benefited from the Investment Plan much more than expected. So far, the EIB has approved 192 SME financing agreements benefiting more than 200,000 SMEs and mid-caps across Europe. One example is a dental surgery in the Czech Republic which received an EFSI-backed loan to invest in the latest technology for their business.

The Commission is also making sure that investors and project promoters know how best to combine the different available EU funds and that especially smaller projects know how to set up Investment Platforms to benefit from EFSI. These kind of synergies between EU funds are already taking place. In France, a fund was set up to combine resources from structural funds, private investor capital, finance from France’s national promotional bank, EIB finance and support from the EFSI. The platform provides risk financing to projects fostering a low-carbon economy.

More broadly, the European Commission is helping to break down barriers to investment and to improve the general business environment in Europe. A wider Single Market Agenda through many initiatives is underway, including lowering capital charges for insurance companies investing in long-term infrastructure, enabling easier access to venture capital and making it easier for service providers to expand to other Member States and creating a Digital Single Market.

Looking ahead and based on the success so far, the Commission already announced that it will propose a reinforced EFSI which will continue beyond the initial three-year period. One of the biggest success stories of EFSI has been financing to SMEs. It is the Commission's intention to scale up the SME component of EFSI, already under the current framework. Moreover, the Commission will take steps to further simplify and remove legislative and other obstacles to the combination of EFSI support and EU structural funds.
Europe has the potential for reaching ever stronger and sustained growth. After all, five Member States rank in the top ten of the World Economic Forum's Global Competitiveness Index. Investment is a key ingredient in ensuring growth, together with a sustained rise in living standards. The Investment Plan is supporting the long-term success of the EU by getting Europe to invest for jobs and growth.

Roberta Lepre

Dr Roberta Lepre is a lawyer and CSR consultant.

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