Juncker’s €315bn investment plan: a signature success or a flight of fantasy?
Anna Sonny, 28 November 2014
EU Commission President Jean-Claude Juncker has unveiled a shiny new plan to stimulate Europe’s stagnant economy. Juncker’s €315bn (£249bn) plan is designed to attract private capital but so far it has attracted a lot of scepticism from various MEPs and economists.
The €315bn figure certainly sounds impressive – but this figure is the dream; there is little ‘new’ money being invested in the scheme, mainly because there isn’t any to spare, and also because Germany has insisted against it, and is staunchly against any borrowing. Instead, €16bn, left over from unspent bits of the EU budget such as funds for infrastructure and R&D – along with €5bn from the European Investment Bank (EIB), will be seed money for a new European Fund for Strategic Investment; this is hoped to translate into more than €60bn in loans and guarantees, which, provided everything goes to plan, should generate €315bn in investment pledges from the markets.
Critics point out that the factor needed to turn the €21bn euros into €315bn is a very optimistic 15 – but defenders of the deal, such as Wernen Hoyer, president of EIB, point to the EIB’s capital increase back in 2012, where national governments poured in €10bn euros, resulting in an alleged €180bn of investment.
National governments are also being encouraged to invest into the scheme to make the €315bn figure even higher; any contributions made will not be counted as public spending in the EU budget – so national governments can spend to stimulate Europe’s economy but not their own, which is a big ask for countries like France and Italy, who are having to make huge cuts in order to keep in line with EU debt and deficit targets.
Current eurozone figures are bleak, with growth stalling below 1% and unemployment creeping over 11%. The plan is supposed to kick off mid-2015. Just this week, Juncker faced a no confidence vote over a Luxembourg tax scandal that he presided over during his premier; he survived but the vote made for an awkward start to his tenure. The Pope’s recent diagnosis of the European Union as aged and tired shows that it will take a lot to whip up enthusiasm amongst an increasingly eurosceptic Europe. Will this new scheme be Juncker’s much-needed signature success or a flight of fantasy?
Juncker unveiled his plan in the European Parliament with the announcement that ‘Christmas has come early,’ but with all the risk involved, it’s a bit early to be making such grand declarations.