A Special task force on investment in the EU, comprising Member States, European Commission, European Investment Bank was led by both the Commission and the EIB, including EU Member State representatives. Created in September and mandated to identify actions to boost investment, this initiative was welcomed by EU leaders in October, requesting a report on the occasion of their next European Council meeting in December.
On 9th December this task force published a report showing significant potential for investment in Europe, identifying around 2,000 projects across Europe worth some €1.3 trillion of potential investment. Projects will now be assessed to determine which will make the cut and receive financing under Juncker’s 315 billion investment plan.
CESI welcomes the proposals to boost growth and employment, having warned against mechanic and blind austerity measures for years and having highlighted the role of public investments to boost recovery. However, both the report of the Task force and the projects submitted by Member States to be financed under the new European Fund for Strategic Investments (EFSI) raise some questions:
Little social investment
The investment plan focuses too much on infrastructure and misses out the importance of providing social investment. If Member States need funding for training centres for example, they also need funding to build up effective training programs. Social investment is also a means of boosting economic growth. A recent study from the OECD shows that inequality is bad for economic growth.
Lack of public funding and the threat to public management of public services
There is a distinct lack of public funding supporting the €315 billion investment plan. The leverage effect of the initial €21 billion is more than uncertain. A growth pact initiated in 2012 by then European Council President Herman Van Rompuy was supposed to levy up to 120 billion. The Pact reached only €60 billion.
Public-private partnership (PPP) is back. In the list of projects submitted, not only hospitals and prison facilities are proposed under PPP, but also many projects dealing with water supply and waste management are proposed, not to mention energy or transport. These are all services of general interest which need to remain accessible to all citizens.
Past experiences have shown that there are risks associated with PPPs whose primary goal is not to create value for money for the taxpayer, as stated in the report from the Task Force. The same report mentions the term “PPP” 30 times, for the most part to promote it as an alternative financing tool. Commenting on the return of PPP, CESI Secretary General Klaus Heeger said, “if public-private partnerships are able to speed up the rate at which projects are completed, they are more costly for taxpayer in the long run.”
Inappropriate criteria for evaluation
The criteria for selecting projects, on the basis of EU added value, economic viability and value, how quickly a project can get up and running and the potential for leveraging other sources of funding, there is not mention of the ecological and social sustainability of projects in the long run.
The president of the EIB also indicated during the press conference following the meeting of the Finance Ministers on 9th December, that projects would be submitted to external expertise to assess the quality of the project. Commenting on these plans, CESI President Romain Wolff, who specializes in tax affairs, said “after the #Luxleaks scandal, I hope that the assessments on projects are fully independent and will not be conducted by one of the Big 4 audit firms. Member states and relevant stakeholders also need their voices heard in this process.”