Following a proposed regulation regarding the European fund for strategic investments (EFSI), on the 10th of March the Council agreed on its negotiating position with regards to this proposal. The Presidency is now able to initiate discussions with the European Parliament on behalf of the Council as soon as the EP has outlined its own position. Ideally, an overall agreement is reached by June so that new investments can begin from as early as mid-2015.
The EFSI will support initiatives across various spheres, including transport, energy, broadband infrastructure, education, health, research and risk finance for SMEs. The absence of any sectorial or regional pre-allocation will allow these projects, as long as they are socially and economically viable, to focus on addressing market failures. The fund will be established within the European Investment Bank (EIB) through and agreement between the Commission and the EIB and is set out to add further value and reinforce ongoing EU programmes and traditional EIB activities.
Funding
The Council agreed on the allocation of €16 billion from EU budget and a further €5 billion from the EIB. In addition, a guarantee fund that would be gradually increased to €8 billion (i.e. 50% of total EU guarantee obligations) by 2020 would be set up so as to facilitate the payment of potential guarantee calls. EU funding for the EFSI would be sourced majorly from the reallocation of grants from the Horizon 2020 programme (research and innovation) as well as the Connecting Europe facility (transport, energy and digital networks) in addition to stray margins in the budget.
The EFSI presents favourable conditions to private investors who take part through a first-loss liability that increases their risk-bearing capacity. Third-party investors, including member states and their promotional banks would also be able to partner with the EFSI in the co-financing of projects either on a project-by-project basis or through investment platforms.
Governance of the Fund
As agreed by the Council, the EFSI would be governed by a two-tier structure comprised of a steering board and an independent investment committee. On one part, the steering board would be in charge of the overall strategy, investment policy and risk profile of the fund, as well as adopting investment guidelines regarding the use of the EU fund for the investment committee to implement. In order to steer away from impartiality and political influence, the board member can only be selected from within the Commission and the EIB and the numbers would be reflective of the institutions' size of contributions in the form of cash or guarantees. Furthermore, decisions on the board would be reached by general consensus.
On the other part, the independent investment committee is responsible for selecting projects to receive EFSI support. It would consist of eight independent experts and one managing director, all together accountable to the steering board. On the committee, decisions would be reached by simple majority. It is important to note that any project supported by the EFSI structure would still require the approval of the EIB.
Identifying new projects
The proposed regulations allows for the set-up of a "European investment advisory hub" as a supporting entity in the identification, preparation and development of projects across the EU. Furthermore, a "European investment project directory" would be established in order to boost investors' awareness of existing and future projects. According to the Commission's "investment plan for Europe" published in November 2014, the EFSI is a core compound of this plan.
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