The agreed compromise involves extending the EFSI in terms of both duration and financial capacity, mobilising at least half a trillion euros of investments by 2020. It also introduces a number of operational improvements to take account of lessons learned from the first year of implementation.
"Europe is facing many challenges today and the need to boost investment is one of them. We need to play our part”, said Peter Kažimír, Slovak minister for finance and president of the Council.
"Today's agreement means that we are delivering on one of our top priorities, in line with the Bratislava roadmap agreed in September. It is also a crucial step in the right direction", he said. "I am confident that a bigger, smarter and more effective EFSI supported by a well-functioning capital markets union is a right path to take."
Talks will start with the European Parliament once the Parliament has agreed its negotiating stance.
The Commission considers that the EFSI is achieving its objectives and that maintaining a scheme to support investments is warranted. It notes that three evaluations of the EFSI, including an external, independent evaluation, concur on its success so far and on the need to reinforce the initiative.
Investment conditions have improved in the EU since the investment plan was launched. Economic confidence is returning and the plan is already delivering results. Established in mid-2015, the EFSI is on track for attaining its €315 billion target in additional investments by mid-2018.
For SMEs, it is delivering well beyond expectations. Projects approved by November 2016 are expected to mobilise €154 billion in total investments, covering 27 member states, and to support over 376 000 SMEs.
The Council agreed that efforts should be continued and private investment should be attracted to the maximum extent possible.
The compromise provides for:
- an extension to the lifespan of the EFSI until 2020;
- an increase in the investment target to €500 billion;
- an increase in the EU budget guarantee to €26 billion (of which €16 billion will be available for guarantee calls until mid-2018);
- an increase in the European Investment Bank's contribution to €7.5 billion (from €5 billion currently).
The compromise also includes technical enhancements in the light of lessons learned from the first year of implementation.
These relate in particular to:
- enhanced geographic coverage;
- additional sectors to be covered: agriculture, forestry, fisheries, aquaculture and other elements of the bioeconomy, as well as sectors eligible for EIB support in less-developed and transition regions;
- strengthened climate-related actions, with the aim that at least 40% of EFSI financing contribute to climate action;
- the additional nature of investments: it is made even clearer that EFSI projects should address sub-optimal investment situations and market gaps;
- provisions on transparency;
- the 'European investment advisory hub', providing more targeted support to member states with difficulties in developing projects.
The EFSI operates within the EIB, under an agreement between the EIB and the Commission. Any project supported by the EFSI must be approved by the EIB.
Encouraging private investments
The fund is aimed at encouraging private investor participation in a broad range of new investment projects. To do this, it takes on part of the project risk through a first-loss liability. Currently building on €16 billion in guarantees from the EU budget and €5 billion from the EIB, the aim is to achieve a multiplier effect of 1:15.
Projects currently cover transport, energy and broadband infrastructure, education, health, research and risk finance for SMEs. The EFSI targets socially and economically viable projects without any sector-specific or regional pre-allocation.
The fund has a two-tier governance structure:
- a steering board, composed of members from Commission and EIB, which sets the overall strategy, investment policy and risk profile of the fund;
- an investment committee, composed of 8 independent experts and a managing director, which selects projects for EFSI support.
Agreement was reached at a meeting of the Economic and Financial Affairs Council.
The regulation requires a qualified majority for adoption by the Council, in agreement with the European Parliament. (Legal basis: articles 172, 173, 175(3) and 182(1) of the Treaty on the Functioning of the EU.)