EU Proposes $380B Investment Plan 11/26 06:28
The European Union's executive is proposing a 315-billion euro ($380
billion) investment plan to boost the bloc's flagging economy, a scheme whose
success will depend on leveraging 21 billion euros in guarantees and seed money
to attract private funds.
BRUSSELS (AP) -- The European Union's executive is proposing a 315-billion
euro ($380 billion) investment plan to boost the bloc's flagging economy, a
scheme whose success will depend on leveraging 21 billion euros in guarantees
and seed money to attract private funds.
European Commission President Jean-Claude Juncker said Wednesday that the
long-awaited plan will not increase debt and will be based on EU guarantees to
entice private sector investment in education, transport, the digital economy
and the environment.
Juncker estimated that every euro invested in the three-year scheme could
generate investment of about 15 euros.
Europe's economy has been struggling to grow since it emerged from recession
over a year ago, partly because many governments are still cutting back on
spending to reduce debt. The European Central Bank has offered economic
stimulus, but says it can only do so much, and that investment needs to pick up.
Juncker's plan aims to do that, though a lot will depend on its
"Europe is back in business," Juncker told the European Parliament in
Strasbourg, France. "We are offering hope to millions of Europeans
disillusioned after years of stagnation."
The proposal will now be discussed by the 28 EU leaders at the Dec. 18-19
Under the plan, a European Fund for Strategic Investments will rely on 21
billion euros ($26.5 billion) in guarantees from the EU budget and the European
Investment Bank. It will be used to offer loans worth over 60 billion euros
($75 billion) to stimulate investments of at least 315 billion euros.
Juncker said the fund was necessary to jump start Europe's economic engine,
since investors on the continent are wracked by uncertainty. "Investors lack
confidence, credibility and trust," Juncker said.
The EU said there was plenty of liquidity in the market but investors were
looking for the right projects.
Investment levels in the EU are down some 430 billion euros ($540 billion)
compared with 2007, before the financial crisis exploded. And while investment
is back on the rise in the United States, Europe is lagging behind.
EU Vice President Jyrki Katainen said that "we need just enough money to get
the motor running."
He insisted the plan would not rely on creating more public debt, which
already stands at some 90 percent of gross domestic product in the EU. He said
the seed money from the EU budget would be coming from the funds which were now
badly used and will be redirected.
"Either we continue business as usual with traditional grants and loans, and
that is as far as the money goes," Katainen said. "Or we use our budget the
most efficient way - to support riskier borrowing and create a larger lending