27 January 2015

Wall Street Journal: Germany and Poland differ on extra contributions to Juncker fund

German finance minister Wolfgang Schäuble said he didn’t believe governments should invest in the €315 billion investment fund proposed last month by European Commission president Jean-Claude Juncker to spur sluggish investment in Europe.

But at least one European finance minister believes the fund is doomed to fail without significantly more official money being pumped into it.

“We are not in favor of national additional contributions to the fund,” Mr. Schäuble told his fellow European Union finance ministers during a public session in Brussels.

The fund, dubbed the European Fund for Strategic Investments, is meant to leverage up €21 billion of money from the European Investment Bank and the commission’s own budget to create more than €300 billion of new investment. The commission has already identified some 2,000 projects worth €1.3 trillion in potential new projects that could be financed by the fund.

But others including Poland’s finance minister Mateusz Szczurek – who last September proposed a fund of up to €700 billion to get investment going – reckon the project is doomed without a big injection of extra government cash.

“One crucial difference” between the plan he outlined and Mr. Juncker’s “is there isn’t that much money in the Juncker Plan,” Mr. Szczurek said to a small group of reporters in Davos late last week.

It’s not just that the headline numbers are different – though that is important. “The real difference is in the leverage and the fact that it dooms the current plan as it stands without member states’ contributions … to projects that are financeable by the private sector alone,” he said. “This is why we’ve agreed with the European Commission’s call for additional member-state contributions,” he said.

As it stands, the fund will not be able to finance “economically and socially viable projects that Europe needs to finance but that are not that easy to repackaged to provide a quick cash flow, ” he said.

Mr. Schäuble said Germany supported the Juncker fund. But it preferred to invest alongside the fund rather than in it. Berlin was looking to make an additional €8 billion available through KfW, the German development bank for so-called “project platforms,” he said.

The project platforms would be linked to the investment fund, but in contrast to direct capital contributions into the fund, they leave governments more control over what their money will be spent on. The project platforms will each have a specific focus, for instance improving electricity grids between Germany and France, or building natural-gas interconnectors between certain countries.

Full article on Wall Street Journal (subscription required)

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