Analytics, EU – Baltic States, Financial Services, Good for Business, Innovations, Markets and Companies, Modern EU, Technology

Financial instruments, compared to grants, attract more private and public resources to complement the initial public funding and can be reinvested over several cycles.

The ESI Funds framework for 2014-2020 provides more flexibility, clarity and possibilities to use financial instruments.

First, the scope for the use of these instruments has been widened to investment areas ranging from SME support, energy and resource efficiency, digital technologies, sustainable transport, research and development, and innovation.

Second, the new framework brings new standardised, "off-the-shelf" financial instruments, for which the terms and conditions are pre-defined, and designed for a swift roll-out.

During 2014-20 financial period, the Commission is encouraging the EU states to double their European Structural and Investment (ESI) Funds investments used through financial instruments, such as loans, equity and guarantees, in line with the objectives of the Investment Plan.

Regional Policy Commissioner Corina Crețu underlined that new financial instruments are expected to be an efficient way to invest in new ideas, businesses and in the talent of EU citizens while using less public resources.

The EU financial potentials are huge and aimed at mobilizing private capital; they should be fully exploited when investing the ESI Funds.

In Lithuania the investment climate is going to be improved: in 2014 there were 42 % of companies with investment-driven intentions; in 2015, there already about 70%.  

Only in Latvia the trend is the opposite: about 39% of companies in 2015 have been anxious for innovative investments; even in 2014 the figure was a bit higher – 48%.  

Investment into new goods and services is the main driving force for 46 % of SMEs in Lithuania, 36 % in Estonia and 26 % in Latvia.

Intentions to change the existing business structure are different in the Baltic States as well (in % of interest): 11 % in Estonia, 5 % in Lithuania and 3 % in Latvia.    

As to the main directions and sectors for investment, 80% of companies in Estonia would like to invest in hotels and restaurants (with a due attention to new products and services). In Lithuania, the main directions are ICT, industrial development and energy resources; in Latvia, it is ICT, leisure services, as well as industry and energy.  

Three instruments to assist startups

The "off-the-shelf" financial instruments, which are already compliant with the ESI Funds Regulation and state aid rules, are designed to increase the take-up by the EU states of revolving financial support rather than traditional grants, and to combine public and private resources.

Three instruments of this sort already exist: 1) a risk-sharing loan, based on the sharing of risks between public and private resources; and 2) a capped guarantee instrument, where public money acts as guarantee against default inside a bank's loan portfolio.

Both instruments aim to provide SMEs with better access to finance.

The third instrument is a renovation loan, for energy efficiency and renewable energy projects in the residential building sector.

The  Commission is launching two new instruments:

·         A co-investment facility to provide funding to start-ups and SMEs. This support will enable them to develop their business models and attract additional funding through a collective investment scheme managed by one main financial intermediary. Total investment combining public and private resources can amount to up to €15 million per SME. In the 2007-2013 period, SAS JEREMIE in the French region of Languedoc-Roussillon was an example of such a co-investment facility, using European Regional Development Fund (ERDF) resources to attract private capital and invest in high-tech SMEs in the region.

·         Urban development funds will support sustainable urban projects, in public transport, energy efficiency or the regeneration of urban areas, for example. Projects must be financially viable and part of an Integrated Sustainable Urban Development strategy. Total investment combining public and private resources can amount to up to €20 million per project. The support will take the form of a loan fund managed by a financial intermediary, with ESI Funds resources and a contribution of at least 30% from private capital. Such an Urban Development Fund has been developed in Pomorskie, Poland, in the 2007-2013 period.

The fi-compass action

Over €20 billion from the ESI Funds are planned to be used through the EU 2014-20 financial instruments. The Commission has been providing assistance to Managing Authorities and other stakeholders, especially through the launch, in January 2015, of the online platform "FI- compass", in partnership with the European Investment Bank. This platform provides practical know-how and learning tools on financial instruments. 

The fi-compass has been the first in a series of actions, covering a 7-year commitment between the Commission and the EIB. The fi-compass advisory platform provides the EU states and their managing authorities (as well as microcredit providers) with support and learning opportunities for developing financial instruments for growth.

 The fi-compass advisory platform is being complemented during 2015-16, with the ‘multi-regional assistance’ initiative bringing together managing authorities and financial institutions. This initiative would support the potential use of financial instruments in investment priority areas that are shared by regions from at least two different EU states.

See the BC’s publication in:

eng/editors_note/?doc=14276&ins_print

The Commission encourages member states (as well as regional and local authorities) to make extensive use of innovative financial instruments for the EU 2014-20 financial programming period in key investment areas such as SME-support, energy efficiency, information and communication technology, transport and R&D support.

Reference: European Commission, Speech by Vice-President Katainen at the launch of FI-Compass, Brussels, 19 January 2015, in:

http://europa.eu/rapid/press-release_SPEECH-15-3480_en.htm?locale=en

More information on changes in the 2014-20 financial framework regarding the use of the ESI Funds through financial instruments is available at this web link:

http://ec.europa.eu/regional_policy/en/funding/financial-instruments/2007-2013-changes/

Other web links for finances for startups:  

= Financial Instruments and Cohesion Policy:

- On DG REGIO's website; - On the EIB website;

- Implementing act establishing the first three "off-the-shelf" financial instruments for ESI Funds investments; and

- Implementing act establishing the two new "off-the-shelf" financial instruments; - Annex;

“Commission launches two new financial instruments to boost investments in start-ups and sustainable urban development”, Brussels, 11 July 2016, in:

http://europa.eu/rapid/press-release_IP-16-2448_en.htm