Editor's note

International Internet Magazine. Baltic States news & analytics Friday, 29.03.2024, 06:00

Investing in growth: EU instruments for use in the Baltics

Eugene Eteris, BC, Copenhagen, 06.06.2016.Print version

The EU goes several ways to activate growth: through pushing forward the “banking union”, through “new blood” in the capital markets and by the strategic investment plan. The latter is just one year old but expected to be a good platform for economic development. The Baltic States can use all these opportunities to streamline their economies.

During the last five years (and most actively since the end of 2014), the EU has strengthened regulation and supervision of the banking sector. Radical overhaul of EU's regulatory and supervisory framework for banks is described in the Baltic Course (see here and in the fourth volume of “Modern EU Policies: Integration in Action’s publication series on “banking union through EU policies and legislation”(Baltic-course.com).   

 

Other EU initiatives to stimulate growth are analysed through the European semester (see “European semester: further coordination for growth”; and through the EU financial services’ reform on the Baltic-course.com.  

 

It seems however that all the mentioned initiatives had not been enough: the Commission in spring 2015 inaugurated a new “instrument” – the European Fund for Strategic Investments (EFSI) and the Investment Plan.

 

And quite recently, the European Investment Project Portal (EIPP) has been launched as an online platform bringing together European project promoters and investors.   

 

The Commission is aware of the EFSI’s ambitious future and intends to extend it even beyond 2018 as the Investment Plan and the EFSI had been of great help in creating jobs and triggering investments in the real economy.  

Achievements to date

The Commission together with the EIB achieved a lot during the last year: their efforts supported innovative energy projects, healthcare centres, urban development and high-speed broadband, to name a few. Among numerous positive examples are:

 

= about 150,000 SMEs in Europe have had access to new financing;

= the Commission has created a hub which provided advisory services and technical support to project promoters;

= a new portal for promoters was launched to showcase their projects worldwide to investors. However, there is more to be done: the single market must be continuingly and the EU-28 unique member states’ “market place” must remove existing barriers to investment.

 

The European Fund for Strategic Investments (EFSI) being the heart of this Commission's Investment Plan is managed by the EIB Group; it helps to deliver on mobilising at least € 315 billion in additional investments in the member states’ real economy by mid-2018. The EFSI provides a first loss guarantee, so that the EIB has been able to invest in more projects, sometimes riskier projects, and to invest sooner than without the EFSI.

 

Overall, the EFSI is already active in most of the EU states and is expected to trigger € 100 billion in investment with the approvals given so far. The SMEs have benefited particularly from the EFSI so far; the EIB and the Commission will increase their local outreach to encourage more EFSI activity in the EU states.

See: http://europa.eu/rapid/press-release_IP-16-1933_en.htm.

 

It is here that the Baltic States’ planning authorities can be more active both in learning from other member states and using available EU liquidity. 

 

Besides, on 1st June 2016, the Commission officially launched another element of the Investment Plan, the European Investment Project Portal (EIPP). It is an online platform bringing together European project promoters; the Portal will increase the visibility of projects to invest both across Europe and abroad.

New EU investment hub

Another recent investment instrument –the European Investment Advisory Hub (EIAH) – provides technical assistance and tailored advice to private and public project promoters. The Hub has already dealt with more than 160 requests. Being a promising project, the Commission and EIB are working on making the advisory services more local and closer to those companies that should benefit. Here, the Baltic States authorities must be more open to other countries’ experience.

 

In February 2016, the Commission issued guidance on how European Structural and Investment Funds (ESI Funds) can be combined with the EFSI to enable more investment:  a first set of projects is already benefiting from this combination in practice which will be further simplified.

Investment’s plan third pillar

Finally, the Commission has taken a number of steps to improve the business environment and financing conditions, which is regarded as the 3rd pillar of the EU’s Investment Plan. Initiatives here, for example, include lowering capital charges for insurance and reinsurance companies. Insurers told the Commission that some of the Solvency II rules were keeping them from investing in infrastructure, and now this obstacle has been removed. The Commission will evaluate whether it is appropriate to lower bank capital charges for infrastructure exposures in a similar way, taking into account discussions on capital treatment of bank exposures.

 

To facilitate venture capital investment in Europe, the Commission will also propose some changes to the venture capital regulatory framework.

 

The Commission will provide further clarity and review the relevant guidance for accounting aspects of public-private partnerships. To offer further legal certainty to investors as regards the financing of infrastructure, the Commission has provided practical guidance on what constitutes “state aid”.

Creating business-friendly environment

Recent Communication on Delivering the Single Market Agenda outlines many directions the EU member states can use to create a business-friendly environment while encouraging innovation and investment.

 

This work ranges from creating a Digital Single Market (i.e. by making the market without borders for services a reality) to simplifying VAT rules, to improving access to venture capital for start-ups and to investing in skills.

 

The Commission is also working with the European Investment Fund (EIF) to establish a Pan-European Venture Capital Fund-of-Funds that would combine public finance and private capital for additional stimulus and scale for new companies.

 

Here again, the Baltic States also have to be more active and continue their structural reforms to remove bottlenecks and red-tape which act as a barrier to investment.

The EFSI future

The Commission proposes the following way forward:

 

·         Reinforced EFSI will continue beyond the initial three-year period to address remaining market gaps and failures and continue to mobilise private sector financing in investments crucial for Europe's future job creation, growth and competitiveness, with strengthened "additionality". The Commission will present legislative proposals in autumn 2016 to extend the duration of the EFSI, bearing in mind the scarcity of budgetary resources.

·         One of the biggest success stories of the EFSI has been the strong interest and participation by intermediary banks across the EU to provide finance to SMEs, through the so-called EFSI SME-window. This will be scaled up quickly, under the current framework, for the benefit of SMEs and mid-cap companies in all EU states. The Commission will work with the EFSI Steering Board to use all the existing possibilities under the EFSI Regulation to reinforce the EFSI-SMEs window.

·         The combination of EFSI support and ESI Funds will be further simplified and legislative and other obstacles to such combinations removed.

·         The Advisory Hub will be enhanced to be able to work more locally and to enhance its work with National Promotional Banks.

·         Establishing Investment Platforms will be further encouraged, with strong engagement from the Commission, the EIB Group, National Promotional Banks and other relevant actors; this is particularly important for small projects.

·         Energy efficiency is one of the most successful sectors under the EFSI. The EFSI will continue to contribute to the development of the market for sustainable/green projects, by encouraging the development of a green bond market in Europe.

·         The EU states should also establish clear priorities, prepare concrete investment projects with the help of the Advisory Hub – in particular on cross-border projects – and structure their projects in an optimal way to ensure a greater use of financial instruments. In the context of the European Semester process, the EU states should implement the country-specific recommendations to address national barriers to investment.

 

As is seen, there are plenty of Commission’s initiatives to activate growth in the member states: now it’s the Baltic States’ turn to join these initiatives.  





Search site