The European Union’s executive is proposing a 315-billion euro ($380 billion) investment plan to boost the bloc’s flagging economy, a scheme whose success will depend on leveraging 21 billion euro in guarantees and seed money to attract private funds.
European Commission President Jean-Claude Juncker on Wednesday said that the long-awaited plan would not increase debt and would be based on EU guarantees to entice private sector investment in education, transport, the digital economy and the environment.
Mr. Juncker estimated that every euro invested in the three-year scheme could generate investment of about 15 euro. Europe’s economy has been struggling to grow since it emerged from recession over a year ago, partly because many governments are still cutting back on spending to reduce debt. The European Central Bank has offered economic stimulus, but says it can only do so much, and that investment needs to pick up.
Mr. Juncker’s plan aims to do that, though a lot will depend on its effectiveness.
“Europe is back in business,” Mr. Juncker told the European Parliament in Strasbourg, France. “We are offering hope to millions of Europeans disillusioned after years of stagnation.”
The proposal will now be discussed by the 28 EU leaders at the December 18-19 summit.
Under the plan, a European Fund for Strategic Investments will rely on 21 billion euro ($26.5 billion) in guarantees from the EU budget and the European Investment Bank. It will be used to offer loans worth over 60 billion euro ($75 billion) to stimulate investments of at least 315 billion euro.
Mr. Juncker said the fund was necessary to jump-start Europe’s economic engine, since investors on the continent were wracked by uncertainty. “Investors lack confidence, credibility and trust,” Mr. Juncker said.
The EU said there was plenty of liquidity in the market but investors were looking for the right projects.
Investment levels in the EU are down some 430 billion euro ($540 billion) compared with 2007, before the financial crisis exploded. And while investment is back on the rise in the United States, Europe is lagging behind.
EU Vice-President Jyrki Katainen said that “we need just enough money to get the motor running.”
