By Alastair Macdonald
BRUSSELS (Reuters) – The EU aims to ensure more of its EFSI investment fund is lent in poor member states as well as offering more of it to small firms and using it to promote energy efficiency, European Commission Vice President Jyrki Katainen said.
In an interview as the EU executive gave details of tweaks to the European Fund for Strategic Investment, now expanded in size and duration, Katainen defended EFSI against criticism that nearly all lending in its first year went to richer countries but said poorer ones would now get more help in making requests.
Referring to the results of evaluations of EFSI’s first year, he said that proportionate to the smaller economies of the EU’s ex-communist eastern members, results were not so skewed.
While on that basis Spain and Italy were still big beneficiaries of EFSI loans, borrowing in the Baltic states and Bulgaria was as high or higher relative to their GDP.
Nonetheless, borrowers in poorer countries wanting to pitch projects would be getting more technical assistance from the European Investment Bank and the Commission, which guarantee a core of EFSI money in order to draw in private cash to reach a target of 500 billion euros ($530 billion) over five years.
“We have to pay attention to geographical allocation to making sure that all the member states and their private sector can use EFSI as much as need be,” Katainen told Reuters. “And there we have to raise awareness and also put emphasis on technical assistance, especially in cohesion countries.”
Those poorer states receiving “cohesion” funds from the EU budget to bring their economies up toward Western standards would particularly get help in structuring projects in order to “blend” both their free grants from Brussels with EFSI loans.
Advice also focuses on managing public-private partnerships and avoiding competition between existing sources and EFSI. Among the assessments made of the first year, EU auditors and an outside study commissioned from EY raised questions over how far EFSI was not simply replacing existing sources of funding.
The European Court of Auditors criticized the expansion of the Fund and questioned evidence that it has drawn in private investment which would not otherwise have been made. But Katainen insisted it had “crowded in” private money to Europe and estimated that the initial 315-billion-euro, three-year EFSI program could create some 1.2 million jobs.
A second new element in the Commission’s revision of EFSI, Katainen said, is that a set minimum of its capacity should be targeted at investments which improve the EU’s progress toward meeting its carbon-reduction targets to fight climate change.
“Environmental-related investments should benefit at least 40 percent of the financial capacity of EFSI,” Katainen said, noting that climate-friendly investing was already a goal of the project but that it had hitherto lacked a firm target.
That would include specifically energy-generating projects using renewable sources, for example, but also industrial investments that improved the energy-efficiency of production.
Thirdly, the share of the fund dedicated to small and medium-sized businesses will rise from 25 percent, reflecting strong demand in the first year.
Some 380,000 small firms should benefit from EFSI funding, Katainen said, through some 230 arrangements between the Fund and banks which pass on the financing via customer loans.
He highlighted an Internet portal the EU has set up to allow international investors to see projects they might want to invest in and said this “online dating service” had been notably successful in drawing Asian money into Europe.