Juncker’s Investment Plan in desperate need for trust and funds from public and private investors

“You got to look for some more money to chip in my Investment Fund”, Mr Juncker would be probably saying here to Francois Hollande. From left to right, Jean-Claude Juncker, President of the European Commission and Francois Hollande, President of France in a meeting in Spain earlier this month (EC Audiovisual Services, 04/03/2015).

Last Tuesday the EU Finance ministers gathered in Brussels to decide for the fate of Juncker’s Investments Plan. The news is quite promising for EU Investments since all ministers agreed to support this Plan by setting up the European Fund for Strategic Investments (EFSI).

Italy also announced its contribution by pledging to invest 8 billion euros. Thus, it became the fourth country after Germany, France and Spain to practically engage to this long-term project.

It should be mentioned at this point, that France already took 2 more years of extension to cut its budget deficits within the EU guidelines, something that passed almost unnoticed during ECOFIN’s meeting.

A good start

Everything went well for the European Commission (EC) and especially for its president, Jean Claude Juncker. regarding his plans to bring investment and growth back to the bloc with the 315 billion euros Investment Plan in 3-year time period.

European Commission’s Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, stated for this success: “By reaching an agreement on the Regulation for a European Fund for Strategic Investments (EFSI) in less than two months, Member States deliver on the commitment they have taken at the European Councils in October and December last year. This also shows that Member States are serious about getting citizens back to work and the European economy back on a sustainable growth path.”

Pierre Moscovici, Commissioner for Economic and Financial Affairs, also supported this Plan by voicing that investments are needed to revive the sluggish EU economy and bring back its lost glory from pre-2008 times where investment was 15%-20% higher than it is now.

4 countries to invest in EFSI but…

The EU member states don’t seem to fully trust what the benefits would be for each and every country separately in order to put their money in the EFSI. This point led the first four countries to invest funds via their national developments banks and thus promote investments at domestic and not EU-level as was the original idea.

Particularly Germany and France were the first countries to invest 8 billion euros each to this Plan while Spain came third with 1.5 billion euros. The surprise came from Italy which decided to enter this project by adding another 8 billion euros, competing the two biggest European economies.

But it doesn’t sound logical a country like Germany to invest the same amount of money as France and Italy which are economies that do not grow to the extent the first does; on the contrary they tend to shrink. Is it because the grounds of this Plan are just setting up and Germany will raise its contribution later as this project evolves or the biggest EU economy doesn’t want to risk its public funds to support poorer and developing EU countries? After all, the money that were invested will be redirected to projects within Germany and not to member states that truly need infrastructure, research & development, education, health care provisions and many other basic servives.

Looking up for private investments

Jyrki Katainen is currently on a tour around Europe in order to promote the Investment Plan to as many people as he can and bring money to the EFSI. He will stay in France for 2 days (12 & 13/03) where he tries to persuade local businesses, government and also students for the usefulness of this project.

Portugal, Cyprus, Holland, Bulgaria and Hungary are going to be his next stops and the aim is to visit all 28 EU countries by October 2015 and hopefully return to Brussels with lots of money in his suitcase.

France’s extension

The EU Finance ministers gave “grace” of two more years to France to lower the budget deficit below 3% of GDP; the third extension the country is granted since 2009. France saved about 4 billion euros from imminent fines by the European Council since is not yet in line with the Stability and Growth Pact.

Something that was actually expected after the talks between the Council of the EU from one side and France and Germany from the other at the end of last year. The latter played significant role in the decision of the Council but now France is called for extra fiscal efforts which means implementation of more structural measures.

Will France be able to “fight” the budget deficits and bring them down? One this is for sure; the French government will do its best in order to lower them below 3% by 2017 because at the Hexagone they know very well that they will not be given a fourth chance, even if Germany is again on their side.

QE & Investment Plan

The implementation of the Quantitative Easing (QE) in combination with the Investment Plan for Europe are capable of returning growth and investments in the bloc and bust the economy. QE started with the best omens for everybody (except Greece that is left out in the cold) and especially for the Southern countries that wanted an immediate injection of liquidity.

However, Juncker’s Investment Plan needs time to start and to fully deploy to the real economy. Even then, it will still need lots of efforts to be able to gather all the public and more so private investments in order to bring more wealth and jobs in the Old Continent.