European Commission President Jean-Claude Juncker presented a plan today to leverage some €300bn of largely private new investment in the European Union, saying it was time to kick-start growth without adding to public debt.
Underlining the need to maintain efforts at structural reforms of aging economies and pare back debt and deficits run up during the financial crisis, the EU’s new chief executive told the European Parliament in Strasbourg that his plan would be the third leg of a strategy to get Europeans back to work.
“Europe needs a kick-start and today the Commission is applying the jump leads,” said Juncker, a conservative former prime minister of Luxembourg who took office this month.
He acknowledged criticism of the plan for lacking a major component of new public spending. EU officials say the Union is setting aside just 8 billion euros to help provide 21 billion of capital for a special fund, managed with the European Investment Bank, that they believe can trigger 315 billion euros of investment over the next three years.
But, insisting that the EU was not just “moving money around”, he said that adding to public debt would not help, Juncker said: “We don’t have a money-printing machine. We need to attract money to make it work for us.”
He believed Europe was in an “investment trap”, where private investors were hesitating to commit funds despite being awash with liquidity, some of it provided by the European Central Bank as it tries to stave off deflation.
By providing guarantees to absorb the initial risks of key projects that could improve Europe’s infrastructure, Juncker said the EU could draw in more private investment.
The 315 billion euros was not a cap on the ambitions of the European Fund for Strategic Investment, he said. Governments and others will be able to contribute to its capital.
He assured researchers and others whose grant funding may be affected by a shift in the EU budget toward capitalizing the EFSI that they would not lose and could benefit from more investment generating further funding.
After Juncker spoke, the president of the European Investment Bank, Werner Hoyer, told lawmakers his institution was ready to work quickly to get money flowing. Hoyer acknowledged that “this is not the silver bullet” for Europe’s economic woes, but it was a useful part of EU strategy.
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