'Fund for Strategic Investments' could be model for next EU budget

The EU i's new investment fund may prove to be a model of how the EU intends to spend part of its budget in future.

The European Fund for Strategic Investments (EFSI), which formally began operations on 1 January 2016, supports projects by providing guarantees, which is expected to reassure other lenders.

By making €21 billion in guarantees available, EU commission chief Jean-Claude Juncker i thinks his brainchild will stimulate a total of €315 billion of investments, to be used to kick-start the bloc's ailing economy.

The plan, known as the Juncker fund, is “the starting point of a new way of designing the EU budget,” said Wilhelm Molterer, the fund's managing director as of 1 January.

The fund is operated by the European Investment Bank (EIB) and the European Investment Fund (EIF). Molterer, as the EFSI's managing director, will be on the EIB staff.

After a press conference on Thursday (14 January) by his boss, EIB president Werner Hoyer, Molterer briefly spoke to this website about his new job, and the change of thinking the Juncker fund heralds.

“It is the starting point of changing towards a new world, using financial instruments instead of grants,” said Molterer, who was EIB vice-president from 2011 to 2015.

“This will have an impact, I'm pretty sure also for the mid-term review, but at least - if we are successful - for the new MFF 2020 onwards.”

'MFF' is the Multiannual Financial Framework, the EU's budgetary planning tool in which longer-term priorities are laid out.

The current MFF, which covers 2014 to 2020, will be subject to a mid-term review at the end of this year.

Molterer's assessment echoed a remark made by Hoyer earlier on Thursday.

“The sensational reform of the Juncker plan basically consists of the fact that we move from subsidies and grants to guarantees and loans,” said Hoyer.

Molterer will chair meetings of the fund's investment committee, which will check if projects that the EIB wants to fund through EFSI match the criteria set-up in the regulation.

These criteria will ensure that the fund only takes on projects that would not have received funding through traditional means, said Molterer.

Those who visit the bank to promote a project are "rational", noted Molterer.

"All of them know exactly what the market conditions are. If they have access to finance from the commercial banks... [they are] happy to go [there],” said the former Austrian MP.

“Because you have to understand also, as a promoter, there are additional requirements. For instance if and when it comes to the question of transparency issues - that's something.”

According to Molterer, another consequence of having an EFSI loan is that the EU's Court of Auditors i may execute an evaluation.

“This is not the case if they go for a classical private financing. A rational promoter will approach the EIB just if and when it makes economic sense,” said the Austrian, who was educated in economics and social sciences at the University of Linz.

“Nobody will access EIB if it is more expensive … We are not there to replace market participants. We have to offer added value.”

Molterer is appointed for three years.

“In my contract I do have an opportunity for another three years - if I am interested, and if the Juncker plan is prolonged.”