Germans Bash Juncker Offer of Votes at Investment Fund

Corrected

Germany, supported by the Netherlands and Portugal, criticized the European Commission’s plan to let national governments buy votes on investment strategy at President Jean-Claude Juncker’s flagship growth fund.

German Finance Minister Wolfgang Schaeuble said during public debate in Brussels on Tuesday that Juncker’s 315 billion-euro ($358 billion) initiative shouldn’t allow nations to acquire voting rights by chipping in extra cash. Portugal’s Maria Luis Albuquerque shared his view, while Dutch Finance Minister Jeroen Dijsselbloem questioned whether the fund even needed its own oversight board.

“Why do we need this heavy, heavy design of the new governance?” Dijsselbloem asked during the debate at the European Union finance ministers’ meeting in Brussels. “The EIB has great experience and expertise in executing this kind of instrument. So why do we actually need a new steering board?”

Under Juncker’s proposal, nations or outside investors would be able to join the steering committee for the European Fund for Strategic Investments if they add to the 21 billion euros in seed money provided by the European Investment Bank and the Brussels-based commission. Schaeuble and other critics said that would give an unfair advantage and weaken the fund in the eyes of investors.

Boosting Growth

The EU has hailed the investment plan as a way to uphold its budget rules while also spurring the economy, which is threatening to hold back global growth this year. The International Monetary Fund last week cut its global outlook, citing Europe’s economic weakness and below-target inflation as one of the main drags on the world’s growth.

No nation has so far offered to augment Juncker’s investment plan, which must be approved by governments and the EU Parliament to move forward. Last week, Juncker called on Finland to be the first to contribute, and the commission has promised that any capital pledges won’t trigger budget sanctions.

EU Vice President Jyrki Katainen told ministers the fund won’t be politically influenced when selecting projects. He said the plan includes a “firewall” between the steering board and the committee of investment professionals that will select which projects get money.

Excluding Governments

Schaeuble said any move to seat nations on the steering board would cause problems.

“We are not in favor of national additional contributions to the fund,” Schaeuble said in the public debate. “Member states should refrain from being represented in the steering board and capital contributions should not entail voting rights.”

Poland endorsed the commission proposal, saying that the plan needs more resources to be effective and that it makes sense to give donors a bigger voice. Poland and Slovenia also raised concerns that EU state-aid rules could cause problems for projects seeking the new fund’s support.

Slovakian Finance Minister Peter Kazimir said many nations think the investment program doesn’t need national contributions to move forward, since it’s designed to attract private investors. He urged the commission to clear up state-aid rules before the program starts.

State-Aid Rules

EIB President Werner Hoyer said the competition constraints had the potential to cripple the program if left unresolved. The EU has to approve large government subsidies to make sure they don’t give any one company an unfair advantage over its rivals.

“If most of what we have on our minds and you have in your project proposals falls under the category of state-aid regulation, then we can forget about a considerable part of the proposals that are on the table,” Hoyer said. “Then I don’t believe that 315 billion can be achieved.”

Spanish Economy Minister Luis de Guindos said the EU can’t afford to let the initiative get bogged down. He called for “more clarity” on the plan and its terms of participation, as well as speedy work to reach a deal.

“Everybody is mindful that we have created very high expectations and that it would be extremely harmful to disappoint them,” Guindos said.