Critics are calling the EU Commission's investment fund a sleight of hand, utopian, voodoo magic. Unfortunately, they may be right. The EU Commission has to change course, says Bernd Riegert.
In the eyes of EU Commission President, Jean-Claude Juncker, the most important projects are job creation and the revival of the European economy. That, at least, is how he formulated it when he took office in 2014. And this was why, a year and a half ago, the Commission invented the "European Fund for Strategic Investments," which was supposed to release 315 billion euros in fresh investment in new industries, preferably in the weaker EU member states.
But then the refugee crisis came along and overshadowed every other topic in Brussels. For quite a while the EFSI super-fund crawled along beneath the general threshold of perception. Now, though, the EU commissioner responsible for it and the fund's leading salesman, Jyrki Katainen, has had to justify himself before the European Parliament. What he delivered was very far from the marvel that was promised.
For every euro of equity capital put in the fund by the EU, private investors were supposed to contribute a further 15 euros. The proverbial lever. So far, this promise has not been kept: The leverage is currently at a factor of 7.8, i.e. half that. In theory, projects worth 100 billion have been launched, but only a few have actually been implemented. Many of the investment plans are just unallocated projects that would have been realized even without Juncker's fund. Many of the projects support state infrastructure in the more prosperous member states – freeways in Germany or the Netherlands, for example. That really wasn't the intention of the sea change in investment policy that Juncker's fund was supposed to bring about.
In parliament, there was criticism from all sides. People spoke of "voodoo" magic and unrealistic promises. Even the Conservatives, who usually support Juncker, harbor considerable doubts as to whether the Commission president's plan will actually succeed.
The EU Commission can't admit this, of course. The inflated mega-fund has to be a success, and that's all there is to it. Perhaps the Commission is still deceiving itself, but many economic experts are dismissing the Juncker fund, and saying it cannot achieve its ambitious goals. The problem facing the weak EU states is not lack of access to cheap money, but a lack of really sensible projects offering added value for Europe.
When the refugee crisis no longer dominates the headlines and the Brexit fuss has finally died down, EU citizens will again take a closer look at the EU Commission's magic tricks, and Brussels will need very good answers as to why it is sticking unwaveringly to its peculiar plan. This European project would benefit from greater credibility, more modesty, and a stronger sense of reality. The EU Commission has now announced that it intends to extend the Juncker fund beyond the three years originally planned. This is something it really needs to reconsider very carefully.