Gold Rush

Juncker's Billions up for Grabs

Juncker's Fund dpa
Everyone wants a hand-out from Juncker.
  • Why it matters

    Why it matters

    E.U. president Jean-Claude Juncker wants each of the member states to contribute to an investment fund to increase growth and jobs. Government leaders like the new investment plan but may balk at dipping into their own pockets.

  • Facts

    Facts

    • Jean-Claude Juncker’s new European Fund for Strategic Investments (EFSI) will kick off with €21 billion ($25.7 billion) from the E.U. budget and the European Investment Bank.
    • It is intended to stimulate growth in Europe, speeding up economic recovery by financing hundreds of projects in the member countries
    • Mr. Juncker wants to use the capital to leverage investments of €315 billion in infrastructure, research projects and innovative companies over the next three years.
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  • Audio

    Audio

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Last week the European Commission’s president Jean-Claude Juncker appealed for financial support from member states for his growth initiative’s investment fund.

However, the 28 government leaders who meet in Brussels on Thursday and Friday may not be too inclined to fulfill his wish.

“I need more than just words, I need money too,” Mr. Juncker said.

He wants the leaders to top up his new investment fund with billions from their respective state coffers.

Mr. Juncker’s plan says that contributions to the fund would not be counted as part of national budgets, many of which are in breach of tighter deficit rules imposed by Brussels.

Individual national contributions to Mr. Juncker’s fund would be an unlikely outcome of this week’s meeting, a high-ranking E.U. diplomat said.

If that is the case, there will be no change for the time being to the figures Mr. Juncker presented on November 26, for  the new European Fund for Strategic Investments (EFSI) will be endowed with €21 billion, or $25.7 billion, from the E.U. budget and the European Investment Bank (EIB).

Every E.U. state will want to secure as big a piece of the pie as possible and continue to pursue individual national interests.

Mr. Juncker wants to use the capital to mobilize investments of €315 billion in infrastructure, research projects and innovative companies over the next three years. He promised the European Union’s gross domestic product would increase up to €410 billion and create 1.3 million new jobs.

The 28 E.U. member states approved the plan on Thuesday, but only in principle.

The billions that Mr. Juncker has displayed in his shop window have whetted appetites. That in turn raises numerous questions: Who is in charge of the investment fund and who decides about the financing of individual projects? How is the money to be split up between the E.U. member states? Will certain sectors, the digital economy for example, be given preferential treatment? Could other sectors such as controversial nuclear power be totally excluded?

There won’t be any answers to these questions at this E.U. summit. Government heads want more time, so they will bounce the ball back to the E.U. commission.

The executive branch is to submit a proposal in January 2015 about the new fund’s structure, according to a draft summit declaration obtained by Handelsblatt. The draft says that by June at the latest, the European Union – meaning  member states and parliament – should decide on the fund’s structure, so it can be launched.

The decision-making process isn’t expected to run smoothly. Every E.U. state will want to secure as big a piece of the pie as possible and continue to pursue individual national interests.

The first country to show its hand was Austria. The government in Vienna warned that under no circumstances should Mr. Juncker’s fund be used to finance nuclear power plants. It demanded the inclusion of a specific guarantee in the summit declaration.

Austria, like Germany, has turned its back on nuclear power. Other E.U. states, however, are focusing more than ever on nuclear power stations – and have been quick to submit relevant applications for financing from Mr. Juncker’s fund.

There have been enquiries regarding three new nuclear power stations with a total value of about €46 billion from Britain.

An E.U. commission task force has identified a total of about 2,000 projects that could be supported, including a number of nuclear power plants.

There have been enquiries regarding three new nuclear power stations with a total value of about €46 billion from Britain.

Poland wants money for two nuclear power stations and has applied for €12 billion of credit. Funding applications have also come from Latvia, the Czech Republic, Romania, Slovakia and others.

Nuclear power is not the only bone of contention. Debate is expected about whether each E.U. state’s share of the investment fund should correspond to the share of the E.U. budget it receives. The E.U. commission, Germany and France are opposed to such a plan, but smaller countries will possibly insist on it.

There is also resistance to the commission’s plan to let EIB officials decide on the awarding of funds. In this way, Mr. Juncker aim to make sure only economically viable projects are funded. Germany’s government supports the idea, but other E.U. states want more political influence on the selection of projects.

 

Ruth Berschens and Thomas Ludwig report for Handelsblatt from Brussels. To contact the authors: berschens@handelsblatt.com, ludwig@handelsblatt.com

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