EU's Katainen to go to Netherlands to raise money for investment fund

During his visit to the Netherlands next Tuesday, European Commission vice President Jyrki Katainen is expected to take the European Union (EU)'s 315-billion-euro investment plan one step forward.

"We expect the European Fund for Strategic Investment (EFSI) to be up and running by September, and already by the summer, a small number of small and medium-sized companies and infrastructure projects to benefit from pre-financing from the European Investment Bank (EIB)," the EU's high official in charge of jobs, growth, investment and competitiveness told Xinhua in an interview prior to his visit.

In the Netherlands, Katainen is to meet with Prime Minister Mark Rutte, Minister of foreign Affairs Bert Koenders as well as Finance Minister Jeroen Dijsselbloem, who is also chairman of the Eurogroup. He will also address business people, investors, representatives of the banks and of the local authorities during a conference organized by the European Commission on the EU financial instruments.

The EFSI, the flagship project of Jean-Claude Juncker's European Commission aimed at reviving the continent's economy without piling up more debt, is believed to be at the top of his agenda.

FUND-RAISING STILL LOW

After four months of campaigning in Germany, Croatia, Spain, France and other member states, doubts remain over the possibility of the EU's ambitious investment plan to attract enough funds.

Only five countries have announced contributions up until now, with France, Germany and Italy each promising 8 billion euros, Spain promising 1.5 billion and Luxembourg 80 million.

The Commission expects more countries to follow the leading five, "most likely through their national promotional banks", and the Netherlands is expected to join the group of contributing countries, a source from the Commission told Xinhua.

Dutch officials told Xinhua that the Netherlands supports the EU Investment fund and the government is currently "examining possibilities in close cooperation with several organizations and local authorities".

But the Netherlands does not have a national promotional bank, or national investment bank, which could be used as a vehicle to finance the Fund as was the case with the other five contributing countries.

Dutch Finance minister Jeroen Dijsselbloem declined to make a comment on the issue to Xinhua. For the Netherlands, final decisions are not taken yet and the discussions are still ongoing, according to source from his ministry.

Dutch members of the European Parliament (MEPs) as well as many other MEPs have disagreed with the European Commission's move to provide the Fund with an 8-billion-euro backstop drawing from existing funds within the EU budget, such as the Horizon 2020 research program.

Moreover, MEPs have put forward about 1,400 amendments to the Commission's EFSI project, threatening to delay the legal approval of the Fund.

CONFIDENCE

However, Katainen appeared confident. "I am very happy with the swift progress that is being made on the legislative process for the regulation of a European Fund for Strategic Investments, which is at the heart of the investment plan for Europe," he told Xinhua.

The EFSI has been unanimously approved by the EU finance ministers at the beginning of March, but the European Parliament needs to finalise its report and the Committee vote is scheduled for the 20th of April.

"After that, negotiations between the co-legislators can begin, with a view to final adoption in June," said Katainen.

The EFSI plans to generate some 315 billion euros of largely private new investments between 2015 and 2017 by providing a core fund of 21 billion euros in capital and first-loss guarantees from the EU budget (16 billion) and the EIB (5 billion).

This seed money is expected to attract up to 15 times the initial funds from private investors and improve the level of investment in Europe that stands 15-20 percent lower than before 2008.

Some 240 billion euros of the European package are for long-term investment projects, in energy, infrastructure, broadband and telecoms in particular, areas that are also high on the investment agenda of the Netherlands.

The remaining 75 billion euros will finance small and medium-sized businesses. EU officials estimate that the plan will create 1.3 million new jobs.

HIGH RISK PROJECTS

Katainen's trip to the Netherlands also includes a visit to "YesDElft!", an incubator in the city of Delft co-financed by the European Regional Development Fund. There the high EU official will be introduced to ongoing projects as well as to future projects that could be eligible for funding from the EFSI.

"The new fund will act as risk guarantee for projects. It aims at sharing the private investors' risk and encouraging them to buy into Europe. We want to reach where private money would not go on its own", explained a member of Katainen's cabinet while visiting the Hague.

The EFSI would differ from the existing European Investment Bank system by its ability to target high-risk investments, also by prioritizing peripheral euro zone countries that are considered high-risk by investors.

A committee of experts will help these countries enter projects that could ultimately entice international private investors. "They must prove their projects' added value to investors, who are willing to take the risk," the EU expert said.

On the list of projects submitted in December by EU governments, there are almost 2,000 projects worth 1.3 trillion euros. "Only a very small number of these projects, around 60, are eligible to be backed by the Fund," according to the EU official.

According to EU sources, European governments are fearful of not having their projects chosen, while eastern member states are wary of favouritism toward western countries. The EU expert, who is working close with Katainen, dismissed such fears and stressed that there are no quotas relating to countries or sectors.

"We don't know the projects yet. The final choice is up to the private sector investors," he said.

After the Netherlands, Katainen will continue his road-shows to Bulgaria, Hungary, Greece and Luxembourg. He aims to visit all 28 EU countries by October 2015. The former Finnish prime minister will also visit non-EU countries to promote the EU Investment Plan later in the year. Enditem