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'Christmas has come early': Jean-Claude Juncker has a €315bn 'kickstart' for Europe

But will Ireland get any money from a plan already criticised for being “scant on detail”?

European Commission president Jean-Claude Juncker
European Commission president Jean-Claude Juncker
Image: Christian Lutz/AP/Press Association Images

Updated at 3.53pm

JEAN-CLAUDE JUNCKER wants to apply the €315 billion investment “jump cable” needed to revive flat-lining European economies.

The European Commission head this morning took the wraps off a long-awaited plan to sink more money into the region through a new investment fund which it hopes will help prise open the wallets of private backers.

“Europe needs a kickstart and today the commission is providing the jump cable,” Juncker told the European Parliament.

I promised to present an ambitious investment package by Christmas. Today Christmas has come early.”

Some €21 billion in European funding will be used as the launchpad for the scheme, but Juncker said the overall effect on the economy should be worth 15 times that figure – about €315 billion over the next three years.

The European Investment Bank (EIB), the European Union’s official investment wing, will come up with €5 billion of the startup cash, while the commission will earmark another €8 billion from its existing funds to guarantee its share of the finance.

Meet the European Fund for Strategic Investments

The scheme, named the European Fund for Strategic Investments, will involve the government financiers sharing some of the risk with private-sector banks and other backers in a bid to lure them into lending.

We need to send a message to Europe and to the rest of the world: Europe is back in business,” Juncker said.

European Union member states like Ireland won’t be tapped for more money to fund the plan, although the region’s leaders will still need to sign off on the proposal next month before it goes live. Officials are hoping for a mid-2015 launch date.

The eurozone, in particular, has struggled to come back to life after the GFC with its biggest economies, France and Germany, both barely dodging recession this year. Both governments and the private sector have been reluctant to invest since the crisis first took hold.

unnamed Source: European Commission

Meanwhile the region-wide unemployment rate still sits in double digits and has barely shifted in the past 12 months.

But the plan has already been dismissed in many quarters as being “too little, too late”. RBS analysts, in a note to investors, said the plan could be nothing but a “levered pea-shooter” that added cash to the system without boosting growth.

So who will get the money?

Officials from both the EU and EIB will draw up a list of possible projects for the fund after getting ideas from member states.

The commission said the new fund’s focus would be on infrastructure – particularly broadband and energy networks, as well as transport, education, research and renewable energy.

SMEs and mid-sized, public companies were expected to get about €5 billion from the cash pool – an amount which it was hoped would be worth more like €75 billion once the full scope of the investment from all public and private sources came together.

The balance, €16 billion, was set aside for “long-term investments” in major projects.

unnamed (1) Source: European Commission

Once a list of potential recipients has been put together, officials will decide the winners based on those most likely to get private investment and how far down the pipeline the projects are.

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Plan ‘scant on detail’ for Ireland

Sinn Féin MEP Matt Carthy said more clarity was needed to decide if the plan had potential to help Ireland.

Sinn Fein Ard Fheis Sinn Féin MEP Matt Carthy, right Source: Laura Hutton/Photocall Ireland

“Today’s announcement was scant on detail as to how this fund will work in practice and particularly, how peripheral economies such as Ireland will be in a position to benefit from such a fund,” he said.

There is a genuine concern expressed by many that today’s announcement is nothing more than the latest instalment in a three card accounting trick and it very much remains to be seen if the investment plan announced today will provide the genuine stimulus required to create jobs and stimulate investment across the European Union.”

 

Good headline, now down to work

Fine Gael MEP Mairead McGuinness said the money could be used to invest in “green infrastructure” – like walkways and greenways, but the challenge was to come up with proper proposals for the funds.

Young Fine Gael Meetings Fine Gael MEP Mairead McGuinness Source: Sam Boal/Photocall Ireland

“The headline will sound great, but underneath that headline countries have a lot of work to do to come up with concrete plans that will actually deliver,” she said.

Because what we want is investment that will deliver growth and jobs and will actually make countries better – that’s the key to success.”

READ: Juncker now wants to end tax loopholes his country rubber-stamped for years >

READ: Ireland will have the largest economic growth in the EU in 2014 (and 2015 and 2016) >

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About the author:

Peter Bodkin  / Editor, Fora

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