EU Investment Plan update: European Investment Bank ready to ramp up investment in the EU

03 August 2015

Article by Robin Wilkinson, National Assembly for Wales Research Service

European flags flying in front of the Berlaymont Building in Brussels
Image from Flikr by Xavier Häpe. Licensed under the Creative Commons.

In June 2015 the European Parliament voted through the Regulation for the European Fund for Strategic Investments (EFSI), one of the key strands of EU Commission President Juncker’s plan to stimulate investment in Europe (for background detail on the Investment Plan, including broad eligibility criteria for the EFSI, please see an earlier blog post, 05 December 2014). With the agreement of a further package of measures in July, the Commission hopes that the EFSI will be in place within the European Investment Bank and dispensing funding to projects by September, as originally planned.

What does the EFSI agreement look like?

The European Commission originally published a legislative proposal to create the EFSI in January. These proposals have gone through the ordinary legislative process which requires agreement between Council and European Parliament. Parliament voted through the compromise agreement  on 24 June 2015, which was then adopted by the Council of the EU the following day.

The Commission had originally proposed that EU funding would mostly come by redeploying grants from the Horizon 2020 programme (research and innovation) and the Connecting Europe facility (transport, energy and digital networks), as well as unused margins in the budget. This proved to be a controversial area in discussions.

As part of the deal, the Council and the Parliament agreed to increase the share of financing coming from unused margins, in comparison with what the Commission proposed, in order to reduce contributions from Horizon 2020 and the Connecting Europe facility (CEF).

During the negotiation process, MEPs secured a strengthened role for the European Parliament, which will now be involved in the appointment of key people to run the EFSI, and in monitoring the Fund’s success.

The compromise text also includes more details on the eligibility criteria projects should meet to get EFSI support, and the areas that will be prioritised for support. The Commission has always stated that investment taking place under the EFSI should be additional to the usual activity of the EIB, but this concept is fleshed out considerably in the final text.

The final text also states that the EFSI Steering Board shall “adjust the project mix as regards sectors and countries, on the basis of an ongoing monitoring of the developments of market conditions in the Member States and of the investment environment”. Although the Commission has previously stated that EFSI support will not be subject to any sectoral or geographical quotas, this text suggests that these factors will, to some extent, come into play when the EIB makes investment decisions.

What else has the Commission done to get the Investment Plan up and running?

In July the Commission announced a further package of measures in order to get the Investment Plan up and running. These included:

  • The publication of a Communication on the role of National Promotional Banks (NPBs) in supporting the Investment Plan. NPBs are banks that carry out development or promotional activities under a mandate from a Member State.
  • Confirmation that the projects pre-financed – or “warehoused”, to use EU-jargon – by the EIB will receive the backing of the EFSI guarantee. Last December the European Council invited the EIB to “start activities by using its own funds as of January 2015”, pending the adoption of the EFSI Regulation. None of these pre-financed projects are in the UK.
  • Final arrangements to launch the European Investment Advisory Hub (EIAH). The EIAH will provide advice to people looking to develop projects for investment in the EU.
  • Deciding on the main elements of the European Investment Project Portal (EIPP). The EIPP will be a web portal where EU-based project sponsors seeking financing can promote their projects to potential investors.
  • The delegated act for a Scoreboard of indicators which the independent Investment Committee will use when deciding whether a project proposal fits the criteria to receive backing from the EFSI.

How much has the UK Government contributed?

Since the launch of the Investment Plan, a number of Member States have announced contributions to the EFSI. The latest of these was the United Kingdom, which recently announced its intention to make £6 billion (or €8.5 billion) of UK guarantees available to co-finance EFSI infrastructure projects in the UK. This is the largest contribution yet announced by a Member State. So far, other contributions have been announced from Germany (€8 billion), Spain (€1.5 billion), France (€8 billion), Italy (€8 billion), Luxembourg (€80 million), Poland (€ 8 billion), Slovakia (€400 million) and Bulgaria (€100 million).

How can Welsh projects get funding?

In June 2015 Members of the Assembly’s Enterprise and Business Committee visited Brussels and Luxembourg to discuss opportunities for Welsh projects under the EU Investment Plan. Members met with officials from the European Commission, the UK Government and the European Investment Bank.

Investment Bank officials stressed that people with project proposals do not need to go through an intermediary government, but can contact the EIB directly to discuss funding options. Projects do not have to “apply” specifically for EFSI support: it is simply an extra funding option that gives the EIB more flexibility when working with project sponsors.

Commission and UK Government officials made it clear to the Committee that there is strong political will for the EIB to be less risk averse and ramp up its investments across Europe. The EFSI is an example of this will being put into action. The challenge will be, however, for the EIB to act on this desire without losing the AAA credit rating that is crucial to its operation.

In July 2015, the Minister for Finance and Government Business met with  the EIB Vice President in Luxembourg to discuss how Wales can benefit from the Investment Plan, both through financing for Welsh projects from the EFSI and expert advice for project sponsors from the EU Advisory Hub.

As mentioned above, the EIB has pre-financed a number of EFSI-style projects, without waiting for the other EU institutions to formally agree the EFSI.  The central message the Committee received from EIB officials was: people with project proposals should speak to them now. The EIB has received the political direction, and the various administrative steps are being taken to formally establish the EFSI. The EIB is ready and willing to help put Juncker’s Investment Plan into practice.

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