Investment plan for Europe
- to mobilise €315 billion of additional investment until 2018
- to ensure that investment meets the needs of the real economy
- to improve the investment environment
The investment plan for Europe aims to mobilise at least €315 billion in private and public investment until 2018. Its goals are:
- to boost investment
- to increase competitiveness
- to support long-term economic growth in the EU
The plan was proposed by the European Commission in November 2014, following the European Council's call in June 2014 for the low levels of investment in the EU to be addressed in order to boost growth and employment.
Investment plan for Europe: three pillars
The investment plan for Europe involves three main elements:
- a European fund for strategic investments
- ensuring that investment finance reaches the real economy
- improving the investment environment
1. European fund for strategic investments
The fund was established as a managed account within the European Investment Bank (EIB) in 2015. It uses public funds to mobilise additional private investment and gives credit protection to the financing provided by the EIB and the European investment fund (EIF).
One of the fund's functions is to take on some of the risk borne by the EIB, which will therefore be able to invest in riskier projects. The EIB's participation is expected to attract private investment to such projects.
The European fund for strategic investments (EFSI) focuses on investment in a broad range of sectors, including infrastructure, energy, research and innovation, broadband and education. The fund is also ready to support small and medium-sized businesses (mostly via the European investment fund).
The fund currently consists of a €16 billion guarantee from the EU budget and €5 billion from the European Investment Bank.
The fund - the €21 billion - is expected to achieve an overall multiplier effect of 1:15 and thus generate up to €315 billion in total investment. This means that €1 of public money used by the fund is expected to generate €12 from private investors and €3 from the EIB. The exact multiplier effect is different for each project.
New proposal on the EFSI
In December 2016, the Council agreed its negotiating position on a new proposal for a regulation that prolongs the term of the fund until 31 December 2020, and introduces a number of technical improvements to the fund and to the European investment advisory hub.
In addition to the extension of the fund's term, the key changes to the EFSI agreed by the Council include:
- an increase in the investment target to €500 billion
- an increase in the EU budget guarantee to €26 billion (of which €16 billion will be available for guarantee calls until mid-2018)
- an increase in the European Investment Bank's contribution to €7.5 billion (from €5 billion currently)
In addition, improvements aim to ensure that the fund's support covers as many EU countries as possible, that it finances a wider range of sectors than before, such as agriculture, forestry, fisheries and other parts of the bioeconomy as well as climate-related action.
It would also cover sectors eligible for EIB support in less-developed transition regions. Improvements also include provisions on transparency.
The Council will begin discussions with the European Parliament on the final version of the draft regulation when the Parliament agrees on its negotiating stance.
2. Ensuring that investment finance reaches the real economy
The European investment project portal and a European investment advisory hub have been established to help investment finance reach the real economy.
The hub provides technical assistance and support. It bundles together the existing EIB technical assistance programmes and provides additional advisory services for cases not covered by the existing programmes.
The project portal will help potential investors to find information about each project and investment opportunities.
In December 2016 the Council agreed its negotiating position on a proposal to introduce technical improvements to the European investment advisory hub.
The proposal aims to make it easier for the European investment advisory hub to provide more targeted technical assistance services at local level across the EU. It also aims to make it easier to combine EFSI financing with support provided by other sources of EU funding, including European structural and investment funds.
Capital markets union
The capital markets union initiative aims to integrate further the capital markets of the EU member states
3. Improving the investment environment
The aim is to boost investment by improving the business environment and easing access to finance, particularly for small and medium-sized businesses.
The overall objective is to remove barriers to investment and create simpler, better and more predictable regulation in the EU, especially in infrastructure sectors, where investments span several years or decades.
To help improve financing conditions in the EU, the plan envisages the creation of a capital markets union to reduce fragmentation in the financial markets and increase the supply of capital to businesses and investment projects.
In December 2016 the Council adopted conclusions on a number of issues affecting investment in the EU, as identified by the Economic Policy Committee. The conclusions should feed into the recommendations to the member states under the European Semester, the EU's policy monitoring process.
In the Council
6 December 2016: the Council adopted its negotiating position on the new proposal on the EFSI, which would extend the fund's lifespan until 2020 and increase the fund's investment target to €500 billion, the EU budget guarantee to €26 billion, and the EIB's contribution to €7.5 billion. The agreement allows the Council presidency to negotiate the final law with the European Parliament once the latter adopts its negotiating position.
20-21 October 2016: the European Council called on the Council to agree on its negotiating position on the new EFSI proposal in December 2016, taking into account the independent external evaluation that is expected in November.
September 2016: the Council started working on the Commission proposal for a regulation extending the duration of the European fund for strategic investments as well as introducing technical enhancements to the fund and the European investment advisory hub.
12 July 2016: the Council reviewed the work that has been done on removing barriers to investment - the third pillar of the investment plan for Europe. The Economic and Financial Committee (EFC) has identified three areas where steps could be taken by the member states: insolvency frameworks, access to funding and cross-border synergies, particularly in network industries. The Council asked the EFC to continue its work on the subject and will discuss it again at a future meeting.
25 June 2015: the Council adopted the regulation on the European fund for strategic investments (EFSI), following approval by the European Parliament on 24 June. The EFSI regulation entered into force at the beginning of July 2015.
28 May 2015: the Council and the European Parliament reached a provisional agreement on the draft EFSI regulation.
23 April 2015: the Council and the European Parliament started negotiations on the final version of the EFSI regulation.
10 March 2015: the Council adopted its negotiating position (the general approach) on the draft regulation.
19 January 2015: the Council started working on the Commission proposal for an EFSI regulation, issued earlier that month.
18 December 2014: the European Council gave its backing to the investment plan for Europe.
Setting the EU's political agenda
In June 2014, the European Council adopted a 'strategic agenda' of five priority areas for EU action
Why is more investment needed?
For a number of years investment levels in the EU have been significantly lower than the pre-crisis levels recorded in 2007.
The low level of investment is considered to be one of the reasons why economic recovery in the EU, and especially in the euro area, has been slow. In addition, persistently weak investment may have a negative impact on long-term growth and competitiveness.
Boosting investment is one of Europe's strategic priority areas for 2014-2019, as set out in the strategic agenda for the EU. It is also one of the EU's economic policy priorities, together with structural reforms and fiscal responsibility.