To many, it sounded like a fairy tale: you take a bit of money, invest it wisely and within three years it will have multiplied 15 times over. Yet this is exactly what the European Investment Bank Group and the European Commission set out to do as part of their plan for economic recovery after the worst financial crisis since the late 1920s. With the Investment Plan for Europe, also known as the Juncker Plan, they promised to trigger EUR 315 billion of additional investment in the EU by mid-2018. The key to fulfilling this promise was a EUR 21 billion guarantee programme, the European Fund for Strategic Investments (EFSI).
Time has passed, hundreds of projects have benefitted from EFSI support and the plan has turned out to be a success: in July 2018, exactly three years after EFSI came into being, the EIB Group surpassed its initial goal. But what can EUR 315 billion do for a continent? Here are some answers to that question. They also explain why European legislators decided to extend EFSI to EUR 500 billion by 2020.
EUR 375.5 billion investment mobilised
EUR 70.4 billion financing approved
More than 1 000 operations
To benefit 858 000 small and medium-sized companies
Public interventions are often associated with excessive red tape. One key to the success of EFSI is its efficient governance structure, which is responsive to constant changes of the markets. EFSI beneficiaries follow the same procedures in place for a traditional EIB loan. If the project meets the EFSI criteria, it is presented to a group of eight independent experts, the Investment Committee. This group decides if the project qualifies for backing by the EU guarantee, ensuring the investment does indeed add value to what would have happened without taxpayer assistance. An independent evaluation of the initiative found that the burden on EFSI beneficiaries was generally modest.
Investing where there are gaps, not following country or sector quotas, is one of the guiding principles for EFSI. To make best use of scarce resources the initiative needs to be market- driven rather than shepherded by politicians picking beneficiaries around a conference table in Brussels or other European capitals. A thorough assessment by EIB experts and members of the independent EFSI Investment Committee guarantees that the financing goes to viable, yet often challenging projects with true added value for Europe.
Between 2007 and 2013 the EU experienced a massive decline in investment. One of EFSI’s main objectives is to stimulate investment, especially from the private sector. Enabling the EIB Group to take higher risk in a project, the initiative shortens the gap between what private investors may consider economically viable and unviable. With great success: two thirds of the expected investment mobilised by EFSI come from private sources. This represents almost 40 per cent of the estimated investment gap in 2017.
All across the EU different sectors suffer from investment gaps. Still, some countries are in higher need of investment than others. Even though no country quotas apply, EFSI backing has benefitted predominantly the regions hit hardest by the crisis: measured in relation to the size of the economy, Greece, Portugal and Spain have, for a long time, featured among the top ten in expected mobilised EFSI investment – as have Estonia, Bulgaria and Poland. In addition, calculations of the EIB and the EU's Joint Research Centre point to the fact that the direct impact on jobs and GDP-growth is particularly pronounced in crisis-hit countries.
Often, EFSI-backed projects are highly innovative, undertaken by small companies without a credit history, or they pool smaller infrastructure needs by sector and geography. Supporting such projects required the EIB Group to develop new financing products. From venture debt with equity features to investment platforms, investment at proof-of-concept phase or in payment-by-result schemes, products are evolving to meet the changing needs of specific clients, sectors or countries. Not only has this changed the DNA of the bank, it also revolutionised the way Europe finances its priorities.
Since its launch, hundreds of projects have benefitted from EFSI and all of them contribute to making our continent more social, green, innovative or competitive. The examples below give a glimpse of the many things that EFSI helps flourish.
Every month the EIB Board of Directors approves new EFSI projects. A comprehensive list of those projects is available here. The Bank’s subsidiary for financing small businesses, the European Investment Fund (EIF), publishes a separate list of operations that benefit from EFSI. The map to the right assembles a selection of signed operations. Both, lists and map, are updated after every Board meeting.
The process to obtain EFSI financing is largely the same as for a traditional EIB loan. There is only one additional step: once a project is proposed for support under the Juncker Plan, a group of eight independent experts, the Investment Committee, checks if it fulfils the EFSI eligibility criteria.