EU Commission chief Jean-Claude Juncker is to present a new plan to the European Parliament that is aimed at reviving the EU economy. Instead of creating new debt, he wants to reallocate funds and lure private investors.
On Wednesday, European Commission President Jean-Claude Juncker is scheduled to present the European Parliament in Strasbourg with a new plan, dubbed the European Fund for Strategic Investment (EFSI). The 315-billion-euro ($390 billion) package aims to jumpstart the EU's ailing economy by attracting investment back to Europe after years of recession.
Under the EFSI, the European Union and the European Investment Bank (EIB) would guarantee 21 billion euros in capital, with the EU financing 16 billion euros with its own budget and the EIB providing the remaining 5 billion euros.
The backing of the EU and the EIB are expected to draw a 15-fold investment by private entities, according to the European Commission's estimates.
Juncker wants to then inject the estimated 315 billion euros into infrastructure projects that would bolster multiple sectors in the 28-nation bloc, including transportation, energy, small business, youth employment, education and broadband data connections. The EU Commission estimates that the EFSI would create 1 million jobs.
The EU has struggled with high deficits, high unemployment and a lack of growth in recent years. Despite signs of recovery from the recession, investors continue to view Europe as too risky for investment, further hurting countries where governments have had to cut spending multiple times to reach EU budgetary goals.
'A cloud number'
The announcement of the EFSI on Tuesday drew both support and criticism from experts outside of the EU.
OECD chief economist Catherine Mann noted that it made sense for the EU to re-engineer its funds to draw investors.
"The 315 billion is like a cloud number, it's up in the clouds. There's much more limited actual cash on the table," Mann told Reuters news agency. "But to the extent that it can catalyze private investment, that's actually better."
However, others pointed to the plan's feasibility.
The European Commission plan "[focused] to hard on big headline numbers," economist Reinhard Cluse at UBS in London told the AFP news agency.
"These have relied on significant 'crowding in' of private resources, which has often failed to materialize," he said.
Juncker must gain both the approval by the European Parliament and from the governments of each member state before the EFSI can be implemented.
kms/nm (AFP, Reuters, dpa)