EU urges investment and reforms as key to growth

Cyprus and Greece have been urged to make use of the recalibrated investment tools offered by the European Union.

“The multiannual financial framework (MFF) is not the medicine that cures all the wounds, but it can have a big impact if the priorities are right,” European Commission Vice President Jyrki Katainen told the CNA.

The former Prime Minister and Finance Minister of Finland, outlined the future successor of the European Fund for Strategic Investments (EFSI).

“The InvestEU fund is built on the experience of EFSI, so what we want to do now is to create a more simple investment vehicle than what we had.”

“We want to pull together under one fund all centrally managed financial instruments - we had 14 actually - and the reason why we want to pull all of them together is to make it easy for all those who want to use financial instrument to apply.” He said the current structure was “quite a jungle”, constructed in good faith, but it created a fragmented and “messy” situation.

“So once EFSI expires at the end of 2020, we build a new fund with the experience we gathered from EFSI and we put in all the guarantee schemes, loan facilities and equities under one roof and regulation, so it is simpler for the end beneficiaries.” Katainen said pulling resources together, creates efficiency gains.

“So, we expect to get 15% more investment just by reforming the way we use the resources.”

“The third element is that we want to open the EU guarantees to multiple financial institutions.

The EIB will remain the main implementing partner, but the door is open for national promotional banks, EBRD type organizations. We want to increase and encourage innovation on regional and national level.”

“There is a novelty that allows Member States to allocate a part of EU structural funds in order to benefit from leverage effect.

For instance, if one country puts 10 million of structural funds in the InvestEU fund, they can get much more financing for their own country, in investments, than just using the initial amount.”

He said Cyprus was lagging behind on EFSI usage and could do more to take advantage.

And being at the bottom of the list had nothing to with the island’s size, because classification is per GDP.

“Malta is such a small island and in Luxemburg they may not have that many investment needs, but in Cyprus for some reason, we have not managed to encourage local businesses and authorities to look at the opportunities of EFSI.

I could imagine that SME financing is one thing that Cyprus could and should use more.”

The official said Member States have to reform all the time because the “world around us is changing”.