The EFSI Legacy: The importance of ambition

Wilhelm Molterer

EFSI shows the importance of ambition. This high level of ambition—aiming for €315 billion and then for €500 billion—really pushed everybody into making it happen. The effort was so fantastic, even among those who were rather sceptical at the beginning. If you look at the forecasts based on the coronavirus crisis response, you will see that the level of ambition for pushing the European economy might be even higher than it was for EFSI. But if you want to do something big, then you have announce something big.

A wider range of financial products and services offered by the European Investment Bank Group to support businesses and other beneficiaries that could not be supported before EFSI. The knowledge and expertise built up during the past five years with EFSI will be available for the future, either with new guarantee instruments or the EIB’s own risk capacity.

Gordon Bajnai, Investment Committee

The fundamental concept of the EFSI programme works because it consumes very little public money compared to the multiplier impact. But it only works if you can maintain the balance between how the private sector evaluates these projects with how public administration wants to focus on protecting public money. That’s a very fine balance. It’s crucial going forward with InvestEU that we are able to keep this balance of independence between the public and private sectors. I have worked on both sides and you need an honest broker in the middle to make the system efficient.

The guarantee and the private sector multiplier can be a very good way to stimulate Europe out of its coronavirus recession. The framework is there, the institutional structure is there. The product only needs to be adapted to the crisis situation.

Increased transparency and improved public communication on projects and their impact

There will be better articulation of “additionality” and focus on areas of market failure or suboptimal investment situations in all future EIB projects, explaining why the EIB is engaging in the project and how the Bank makes a difference, using terminology that is accessible to third parties (including the Bank’s own Management Committee).

Thierry Deau, Investment Committee

Don’t wait until the end to carry out impact studies—that’s an important factor in this kind of programme. There should be tools to manage deployment and measure impact immediately as you go along.

There’s some timidity in communicating on what these things bring. They are the backbone of what Europe can do. Even in my own country, would people even know what EFSI has done for them? I’m not sure. Measuring the impact should be thought of as the economic programme is prepared and having the tools to measure and communicate on this impact is important.

Deepening the “group approach” of the European Investment Bank and the European Investment Fund in activities, reporting and communication

Projects and people

European Investment Fund invests in France’s first academic spinout fund, backing Angelita Rebollo’s cancer research

In her laboratory at Université Pierre et Marie Curie near the banks of the Seine in central Paris, Angelita Rebollo has developed a technique for blocking specific functions of proteins that turn a healthy cell into a cancerous one. The treatment could help people with a range of illnesses, though initial results suggest it will first be used to treat ovarian cancer and severe types of breast cancers. While chemotherapy causes numerous side-effects by destroying many healthy cells, Rebollo’s targeted therapy kills only the cancerous cells.

Her research into the topic started 17 years ago in Madrid and led her to found a company, PEP-Therapy, with a number of other scientists working at prestigious French research institutions. The company name comes from the molecules at the heart of Rebollo’s research—cell-penetrating and interfering peptides—and the company’s role is to convert this scientific breakthrough into a medicine that can save lives. “The reason we created the company was to take the research from the bench into the hospital,” says Rebollo. “The objective is to develop a molecule that will help many, many people.”

PEP-Therapy received €1 million of support from Quadrivium 1, the first French investment fund to provide seed funding for life sciences and digital technology projects that start out at—or are linked to—a dozen French academic research institutions. It’s a model that was pioneered by US universities and has been taken up in the UK. It hasn’t been done before in France. “It has been challenging to introduce this concept to France,” says Philippe Tramoy, the Quadrivium 1 partner who manages its life sciences portfolio. “We’re the first one, so everybody is watching us to see if this is something they can follow.”

The European Investment Fund provided Quadrivium 1 with a €20 million injection that was backed by the EFSI guarantee.

The economics of scientific research are not lost on Angelita Rebollo. After all, she left her post in Madrid because funds for research were scarce in Spain and she settled in Paris only after stints in Germany and Belgium. “Quadrivium’s investment helps us pay for the development stages,” she says. “We needed funds to find this molecule—this molecule which will hopefully save lives.”

Wilhelm Molterer

The main message is to let the market speak. If, as a policymaker, you say you want to have policy targets, such as climate and cohesion, that’s fine. Because this is something policymakers have to say. Fine. But stay away from the concrete proposals, from the concrete projects. Let the professionals do their work.

The next piece of advice would be that if you have scarce resources—and taxpayers’ money is always a scarce resource—do the utmost to achieve the highest impact out of every single euro. This is not to criticise grants. We need grants for basic research or culture or social affairs. But we have much more room for using financial instruments and combining their strengths with the firepower of budgetary instruments. We are still not where we could be, but the current situation and the difficult years ahead for the European economy might force everybody to go even further than we did with EFSI. But we do have to take the lessons of EFSI into account.

One of the lessons is keep it lean, keep it independent when deciding on the guarantee, use the capacities of banks—during the whole due diligence process—and use the capacity of the budget, meaning that you should dedicate budget money to this journey.

We should not forget that EFSI was an instrument to tackle a specific crisis situation. Today we are in a new economic cycle. COVID-19 has caused unprecedented economic shocks and the EU needs bold action to get economies moving again, preserve jobs and recover confidently.

The two main points with any stimulus programme are to ensure that we have the right instrument in place and the flexibility to adapt the programme to the evolving economic situation. We live in dynamic times. If we set up a programme that will last five or seven years, we have to be prepared to change. Flexibility is key, because crises will emerge unexpectedly. Look at COVID-19 —EFSI had to respond. Within a month, we moved funding from one pocket to another to develop crisis response measures for COVID-19 and provide urgent liquidity to businesses that were in trouble.