BREAKING NEWS

Now Reading:

EU funds help risk-averse investors to boost employment in Europe


real economy

EU funds help risk-averse investors to boost employment in Europe

Uncertainty is the new normal for us all. Maithreyi Seetharaman spoke with the European Commission’s vice president in charge of investments, and the commissioner of regional affairs, to talk about one way they suggest Europe can help create jobs by giving confidence to risk averse investors.

The plan? To get risky projects that need money to combine grants given by the European structural and investment funds (ESI Funds) with loans from the European Fund for Strategic Investments (EFSI).

The idea? That as the EU is taking on more risk, the projects it is backing are also worth the private sector’s money.

But unless you are an EU bureaucrat, you may not know the difference between these two very similar sounding funds, or it may be the first time you have even heard of them. So, lets get you up to speed



Crash course

  • Bob needs money for his project that will help his local area create jobs and growth, so he approaches the managing authority of his government.
  • It evaluates and approves Bob’s plan if it fits the national plan for the industry, or region the country wants to grow.
  • The government can now take a national plan with many projects like Bob’s to the European Union to tap into the European structural and investment funds (ESI Funds).
  • They have been given 454 billion euros from the EU budget to help countries fill gaps in public investments with grants from the five different funds under the ESI Funds umbrella.
  • The government’s managing authority and the European Union reach an agreement and manage the funding, together, on the overall national plan.
  • The government tops up the grants from the ESI Funds and manages the money for individual projects like Bob’s.
  • A second fund, called the European Fund for Strategic Investments (EFSI),gives loans and EU financial guarantees to individual projects, so Bob can apply directly.
  • Because it is not a national grant or state aid, Bob and investors like him must pass strict lending criteria, but once approved, they get the money to start.
  • The EFSI acts like a guarantor for the feasibility of Bob’s project, helping him and others who have similar risky projects, to attract more private investors.



Maithreyi Seetharaman, Euronews:
“I’m joined now by Corina Cretu, the Commissioner for Regional Policy, the woman managing the massive budget of the structural and investment funds. And, of course, Jyrki Katainen, European Commission Vice-President for Jobs, Growth, Investment and Competitiveness.

“What kind of track record have we seen of structural funds and also of EFSI in actually creating jobs?

Corina Cretu:
“We have an evaluation of what we did with funds for 2007-2013. More than one million jobs were created and I talk now about direct jobs, but of course it can multiply two or three times when we talk about indirect jobs. And we work together to maximise the impact of the fund that we have for 2014-2020, over 600 billion we have for all 28 countries.”

Jyrki Katainen:
“When we adopted EFSI we assessed equation that EFSI’s impact on job creation would be something like 1.3 million new jobs. International Labour Organisation (ILO) says that its impact will be 2.1 million new jobs.”

Maithreyi Seetharaman, Euronews:
“Well on that note, it’s an appropriate time to probably bring in an expert. Our first question is from research scholar Grégory Claeys at the think tank, Bruegel."

Grégory Claeys:
“Can you please explain why regional funds and EFSI funds should be combined given they have very different objectives and very different geographical distribution?”

Corina Cretu:
“It is true that our regulations are different. We already introduced during the review of multi-annual financial framework some changes to make this blending much more easier. Also in cohesion and simplifying cost option and we are working together for the post 2020. The idea is to make much more simpler.”

Jyrki Katainen:
“Everybody knows that Greece is SME-driven economy and tourism is playing a crucial role. SMEs can not get financing from the banks because banks have their own difficulties with the non-performing loans, for instance. We could establish platforms, investment platform for Greek SMEs operating in tourism sector where structural funds could provide some capital, EFSI could provide some capital, some private investors could provide some capital and then EFSI can provide some long term, relatively cheap loans for SMEs.”

Maithreyi Seetharaman, Euronews:
“Do you think there is a problem in synergy there?”

Jyrki Katainen:
“It is just according to common sense to blend different financing sources.”

Corina Cretu:
“Of course we have long term, but when its risky it’s a much more solid ground for the investors, for the private investors to come in, having also EFSI, cohesion policy and private investors – it’s a guarantee for them that it’s a strong and solid project.”

Maithreyi Seetharaman, Euronews:
“Are we going to see reductions in the kind of projects or the kind of sectors that get funded by structural funds?Universities, for example.”

Corina Cretu:
“We will invest with priority research and innovation, digital. And we’ll slow down with infrastructure. We know that it is a need especially for Central and Eastern Europe because connection it is very important issue but also we should go hand in hand also for these regions with innovation.”

Jyrki Katainen:
“If I should bet something, I would say that the big chunk of majority of structural funds will remain as grant-based financing also in the future. But, also at the same time I would bet that there are more financial instruments, because sometimes it is more efficient way to use EU or public resources.”

Maithreyi Seetharaman, Euronews:
“I think that’s an interesting point at which I can bring in yet another expert. Mathias Dolls from the Centre for European Economic Research (ZEW) in Germany.”

Mathias Dolls:
“Is there long term vision for the EFSI for the time period after 2020? It has been argued, for example, in the Five Presidents’ Report that the EFSI could be developed to become a stabilisation mechanism for the euro area. Is that a viable option?”

Jyrki Katainen:
EFSI is not the optimal, because automatic stabilisers, for instance, in member states level means unemployment benefit schemes. When unemployment is rising, subsidies are playing a bigger role. In other words it is stabilising the situation. To some extent we could see that if EFSI is a permanent tool for our member states, then it could address the market failure in less developing countries. I wouldn’t exaggerate the role of EFSI as an automatic stabiliser, but it may play some role in the future.”

Maithreyi Seetharaman, Euronews:
“What does 2017 hold for investment conditions in Europe?”

Jyrki Katainen:
“All the uncertainty which we can see coming from outside Europe, or sometimes even from within, is poison for investments. So, we want to underline the importance of rule-based world economy. Rule-based trade is a way to carve on globalisation, is the way to improve investment environment. This is what we are standing for.”

Corina Cretu:
“I think European Union, as Jyrki said, will remain a main actor in the world with what we will achieve.”

Maithreyi Seetharaman, Euronews:
“On that note, I’d like to thank the two of you for addressing a rather complex topic.”

Every story can be told in many ways: see the perspectives from Euronews journalists in our other language teams.

Auto-Translated

real economy

Is Europe in the mood to invest in itself?