EU Backs Investment Plan With Pushback on Help for Hardest HitRebecca Christie and Rainer Buergin
European Union finance ministers agreed to press ahead with a proposed 315 billion-euro ($338 billion) investment plan, while reminding crisis-hit nations that it won’t offer them special assistance.
The investment fund, EU Commission President Jean-Claude Juncker’s flagship effort to jumpstart growth, won a green light from ministers at Tuesday’s meeting in Brussels. This paves the way for discussions with the European Parliament, as policy makers target a final deal by June.
Germany, the Netherlands and the U.K. led calls for the plan to resist political influence so the fund could seek out projects that are most deserving of help. In contrast, Hungary and other eastern European nations called for a less centralized approach, while Greek Finance Minister Yanis Varoufakis said the plan should acknowledge the “dramatic lack of credit” in countries hit hardest by the crisis.
EU Commission Vice President Jyrki Katainen said the plan must resist pressure to steer help to needy regions or nations. Such quotas are “exactly what we have wanted to avoid” when designing how the plan could offer loans or guarantees to spur private investors, he said.
“It’s up to the member states to create the right certainty and surrounding for investment,” Katainen said. “No-one can co-finance investment if there is no private company who would like to invest in some particular country.”
Juncker’s plan envisages using 21 billion euros of EU seed money to mobilize 15 times as much investment in cooperation with private investors. To gain financing help, projects must show private-sector backing and evidence that they will offer a return on investment.
Germany, France and Italy have each said they will contribute 8 billion euros to the investment plan through their national promotional banks, with another 1.5 billion euros pledged from Spain. Katainen said more countries are looking at participating through similar channels.
“The politics of this is ugly but the Juncker plan is about the EU investment gap and for this you cannot avoid the big and strong countries,” said Guntram Wolff, director of the Brussels-based Bruegel think tank.
The investment plan may be caught between calls to boost demand and to meet infrastructure needs, Wolff said. The stronger countries also may merit receiving a larger share of the plan’s funds as a way to push back against deflation and pave the way for new growth.
“If it is about European infrastructure, then the return on rails and roads in France and Germany may be higher than building another bridge to nowhere in Portugal,” Wolff said. “However, some funding should go to the weak periphery countries if they accept a good governance as the need for a demand stimulus is high.”
Hungary, Poland, Croatia, Bulgaria, Romania and the Czech Republic offered a joint statement calling for more regional technical assistance, and they asked for the EIB “to take into account the differences between member states and regions during the implementation of the investment plan.” No country opposed moving ahead with the plan at Tuesday’s meeting.
To succeed, the Juncker plan will require “viable” projects that attract private investors, German Finance Minister Wolfgang Schaeuble said.
It also must move quickly to be of help during the downturn, said Jeroen Dijsselbloem of the Netherlands. He said if talks with the European Parliament get bogged down, the plan won’t be ready in time to run counter to the economic cycle but could instead fuel the next boom.
“We need it quickly,” Dijsselbloem said. “In the talks in the parliament, we have to be careful that the instrument doesn’t become politicized after all.”
EIB President Werner Hoyer said there are a sufficient number of projects for the investment plan to meet its goals. He said the Luxembourg-based bank will offer lower-than-normal fees to support the project, while also awaiting clarification from the commission on how it will apply state-aid rules.
The Brussels-based commission will aim for a “light touch” when it considers how to apply the competition rules, Katainen said. “The important principle is that all the projects from all the member states will be on the same level,” he said in a press conference after the meeting.
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