News Analysis: Juncker plan to trigger 82-bln-euro investment, impact still unclear

The European Union (EU)'s investment plan, launched 18 months ago to create jobs and boost ailing EU economies, is running ahead of targets, but economic experts are still not convinced the EU economy will get much of a push.

Following new project approvals on Tuesday, the European plan for investments or the so-called Juncker Plan named after European Commission President Jean-Claude Juncker, is expected to trigger over 82.1 billion euros (about 93 billion U.S. dollars) in EU countries, of which over 47 billion euros in the area of small-and-medium-sized enterprises (SMEs)' financing, according to figures released by the European Commission and the European Investment Bank (EIB), the bloc's long-term lender.

The Juncker plan aims to mobilize 315 billion euros to finance large infrastructure and support SME businesses over three years. A total of 75 billion euros investment volume is expected to be triggered by the European Investment Fund (EIF) focusing on SMEs.

"We are running ahead of our targets as guarantees offered under the investment plan are in high demand by the private sector in Europe," said Pier Luigi Gilibert, chief executive of the EIF.

"New agreements are expected to unlock additional investments in the coming months," Gilibert told Xinhua while visiting the Netherlands earlier this month to promote the plan among possible investors.

Under such an agreement, a new 200 million euros fund called the Dutch Venture Initiative II (DVII) is expected to stipulate together with private parties investments of around 1.2 billion euros to SMEs in the Netherlands.

"Additional funds will be soon released under a new financing instrument designed to enable more lending to SMEs and small midcaps,"the EIF chief said. He expects eight countries to make use of the newly launched SME Initiative Securitisation Instrument (SISI) by the end of 2016.

However, economist Sebastien Villemot at the French Economic Observatory (OFCE, Sciences Po) expressed concerns over how much new money will be pumped into the economy.

"It is difficult to assess whether projects chosen by the plan could not have been financed through other means. It is also not clear how much more private money has been actually generated," said the economist.

The French economist described the commission's leverage projection as "a bit high". Under the EFSI umbrella public financing is intended to generate a 15-to-1 multiplier effect, yielding a 315-billion-euro fund in all by leveraging base capital of 21 billion euros jointly funded by the EU (16 billion euros) and the EIB.

So far the EIB has approved 57 projects which represent a volume of financing of 7.8 billion euros. The EIF's total financing under the European Fund for Strategic Investment (EFSI), the main pillar of the Juncker plan, amounts to 3.4 billion euros. The Paris-based economist questioned whether these volumes will finally lead to a total of 82 billion euros investment, following the multiplier effect.

Villemot also noted that the Juncker plan should have been implemented earlier and with larger fund. In comparison with the stimulus plan implemented by the Obama administration in 2009, to be effective, the Juncker plan "should be significantly larger in size as it has been launched very late in the crisis," he said.

Daniel Gros, director at the Brussels based Centre for European Policy Studies (CEPS), raised questions over the real role of the Juncker plan in many projects that have already been approved.

"Many projects have been approved, but they would have qualified for financing and be implemented even without the Juncker plan," he told Xinhua. For example, the Midland Metropolitan Hospital in the United Kingdom, which is supported by the EFSI, was planned any way as part of a wider reorganization to health and social care.

Additionally, the CEPS director blamed Europe's investment plan for failing to meet two of its key elements -- emphasis on strategic cross-border investment projects and focus on the South of Europe and the countries worst affected by the crisis.

Some examples of projects under the EFSI include investing in renewable energy in Denmark, modernizing a steel plant in Italy, implementing new technologies at a paper mill in Finland, and creating an investment platform for increasing energy efficiency in households in France. According to information released by the European Commission the energy sector seems to be particularly active.

"Not only is there lack of cross-border investment, many projects financed by the plan are implemented in economically advantaged countries, like Germany, Denmark or the United Kingdom," said Gros.

So far, not a single large infrastructure project has been financed in Greece. The crisis-hit country has only benefited around 30 million euros in financing by the EIF. A second agreement involving just around 30 million euros for SMEs is expected to be concluded in the coming weeks, according to figures Xinhua obtained from the EIF.

Pim van Ballekom, vice president at the European Investment Bank, explained that the bank does not have targets per country or per sector. "It is the quality of the project which matters," he told Xinhua.

According to van Ballekom, the bank reached a record investment of 84.5 billion euros last year.

"With the Juncker plan we hope to do more or less the same amount over the coming three years to generate in total around 240 billion euros in investments," said the EIB vice president. (1 euro = 1.13 U.S. dollars) Endit