EU investment plan may be a day late and a euro short
By Paul Taylor
PARIS (Reuters) - The European Union's vaunted investment plan, due to be formally blessed by the bloc's 28 leaders at a summit this week, may be a day late and several euros short to revitalize a stagnant economy.
Because of Europe's mountain of public debt, the initiative outlined by European Commission President Jean-Claude Juncker contains no new public money and relies on financial engineering to turn 21 billion euros in existing EU and European Investment Bank funds into a putative 315 billion euros in project funding.
Whether it can revive sagging public and private investment will hinge largely on the choice of shovel-ready infrastructure projects that boost Europe's growth potential, and on the way that national contributions are treated by the EU bean counters.
Investment in the 28-nation EU in 2013 was on average 15 percent below pre-crisis levels, according to an EU task force report, with a plunge of more than 60 percent in the worst affected southern countries.
There is much debate about whether the slump is mostly due to weak demand, tight credit conditions, an absence of economic reform or a lack of business confidence, but EU governments agree that something must be done now.
The Juncker plan, due to be up and running in mid-2015 and last three years, will focus on "viable investments of European significance" mostly in transport, energy and digital networks, as well as research and development.
Juncker has promised "favorable treatment" for countries that take equity stakes in the planned European Fund for Strategic Investment when the EU authorities calculate budget deficits, which must be below 3 percent of national output.
Polish Finance Minister Mateusz Szczurek told a conference of the Council for the Future of Europe last week no government would pay into the fund unless it was guaranteed that money invested would not be counted against its deficit. Continued...