STRASBOURG (AFP) - New EU Commission chief Jean-Claude Juncker unveiled Wednesday an eagerly awaited 315-billion-euro (S$511 billion) investment plan to “kickstart” the economy, saying it would show the world that Europe was back in business after years of crisis.
Juncker said the proposal, which must be approved by European leaders at a summit in December, would mix an investment fund with a scheme to match new projects with private money.
“Europe needs a kickstart and today the commission is providing the jump cable,” Juncker told the European Parliament in Strasbourg, France. “We need to send a message to Europe and to the rest of the world: Europe is back in business.”
The new European Fund for Strategic Investment will be funded to the tune of 21 billion euros, but Juncker said its work will have a net effect on the economy of 15 times that, about 315 billion euros.
The plan is the cornerstone of Juncker’s five-year agenda to revive the EU’s moribund economy, which has failed to grow since the financial crisis and is mired in mass unemployment and near-deflation.
When he took office on Nov 1, Juncker had promised to unveil the plan by Christmas so that it could be up and running as soon as possible amid renewed global concerns over Europe.
“I promised to present an ambitious investment package by christmas. Today Christmas has come early.”
The former Luxembourg prime minister rejected criticisms that the fund contains no new money and only re-engineers existing funds.
“I often hear what we need is so called fresh money but what I believe we need is a fresh start and fresh investment,” Juncker said, speaking mainly in English. “The money we are putting forward today comes on top of what already exists.”
The run-up to the announcement has been dominated by a controversy over tax breaks offered by Luxembourg to major international firms when Juncker was premier.
Juncker faces a confidence vote in the European Parliament on Thursday after eurosceptic lawmakers filed a motion against him, but he is almost certain to survive.
As expected, overall responsiblity for the three-year plan will fall to the European Investment Bank (EIB), a little-known EU institution based in Luxembourg that is often criticised for its lack of ambition.
The heart of the problem in the 28-nation bloc is a drastic lack of investment, which remains way off pre-crisis levels, in stark contrast to the United States and despite unprecedented stimulus measures by the European Central Bank.
The plan is designed to attack the investment problem head-on, but with the added challenge to do so without more public spending, with most EU countries already paralysed by high deficits and mountains of debt.
“The amounts are lower than we hoped, but we felt that coming in recent weeks,” an EU diplomat told AFP on condition of anonymity.
In essence, the plan uses existing cash from both the EIB and EU to feed an investment fund that will be tasked with financing private-sector driven projects. But economist Reinhard Cluse at UBS in London said that EU investment plans “focus too hard on big headline numbers”.
“These have relied on significant ‘crowding in’ of private resources, which has often failed to materialise,” he said, before the final details of the plans emerged.
A list of projects is currently being drawn up by EU and EIB officials, with the input of member states. Officials hope the fund can be operational by mid 2015.
Once up-and-running, a team of financial experts at the new fund will help decide projects, mostly based on their level of advancement and the likelihood to draw in private investors.
Tensions were high ahead of the plan, with EU member states at odds over the final amount and the balance between public and private spending.
Economics Affairs Commissioner Pierre Moscovici warned last month that the plan should be convincing.
Otherwise “this will seem like a trick, recycling, and therefore a flop,” he told AFP.