The $375 billion Europe wants to invest but doesn't have

Sun Nov 16, 2014 9:07am EST
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By Jan Strupczewski

BRUSSELS (Reuters) - New European Commission President Jean-Claude Juncker is preparing a 300 billion euro ($375 billion) investment plan he will present as a cornerstone of efforts to revive an ailing economy.

But history suggests the program risks becoming an exercise in financial engineering rather than a conduit for the new money the region needs to help boost output and create jobs.

A flagship project of the new European Union executive, the investment scheme is due to be unveiled before Christmas. It is still being finalised and few details have been made public.

If all the money it promises is raised and spent, it could provide the 28-nation EU with roughly an additional 0.7 percent of GDP in investment per year over three years.

"It is significant," said Carsten Brzeski, economist at ING bank in Frankfurt. "You would expect some kind of a multiplier effect from investment on jobs and purchasing power and it would increase the growth potential. The downside is that public investment can take years before it gets started."

But even more than "when?", the big question hanging over the plan is "how much?".

The 300 billion euros is an overall target for both the public and private money that the Commission hopes to mobilize.

The Commission itself does not have any money and is funded through annual EU budgets that must be balanced.   Continued...

European Commission President, Luxembourg's Jean Claude Juncker addresses a news conference at the European Commission headquarters in Brussels November 12, 2014.  REUTERS/Stringer