'The Juncker-plan must become more well-known'
The investment plan that now bears his name is one of the most important projects of the President of the European Commission, Jean-Claude Juncker.
The commission's vice-president Jyrki Katainen and the President of the European Investment Bank (EIB) Werner Hoyer are the driving forces behind it and explained to the Luxemburger Wort's Laurent Schmit why the European Fund for Strategic Investments (EFSI), as the main component of the Juncker Plan, could become a model for the entire EU budget.
Mr Katainen, Mr Hoyer, the Luxemburger Wort has recently reported on two small Luxembourg-based companies that have benefited from the Juncker plan through an intermediary. Neither of them knew where the money came from. Do you have a communication problem?
Jyrki Katainen: We really need to make the Juncker plan more well-known. I do not know the two cases, but many potential beneficiaries have never heard of EFSI. Overall, however, the plan works much better than many originally thought.
Werner Hoyer: Not just the Juncker plan, but hardly anyone knows the EIB. The Luxembourgers know, of course, that there is an old building in Kirchberg and ten years ago a new one was added. Rarely do they know that it is by far the largest multilateral bank in the world. It goes beyond the EFSI: citizens doubt the EU, so we have to tell positive stories. These include the EIB.
Luxembourg is one of the countries least benefiting from the Juncker Plan. Should the government do more?
J.K.: The government can help make the EFSI more known to private investors. However, given the high growth in Luxembourg, it is usually more appropriate to use EFSI resources elsewhere. Nevertheless, nothing can be ruled out: Luxembourg wants to be more active in the ICT sector, and the EFSI could lower the financing costs of risky projects. The Juncker Plan was supposed to close a gap in investments after the financial crisis. Is that successful? W.H.:Yes, the plan has somewhat closed the gap. Together with Jean-Claude Juncker, we designed the plan here in Kirchberg when he was still a candidate for the post of President of the Commission. We estimated the annual lack of investment at €700 billion annually. With the Juncker Plan we wanted to reduce this sum by about 100 billion a year. We have certainly succeeded. But the Juncker Plan also aims to reduce regulatory hurdles. Finally, there is a consultative body that helps countries and investors to develop good projects. The bad news: The gap has grown, as new goals have been added, for example through the Paris Climate Agreement.
Is it not a contradiction that the recently announced second phase of EFSI will remain at 100 billion a year? J.K.: The Juncker Plan is not a cure-all. The program helps to carry out projects that carry a lot of risks. But what is more important is what the Commission does, such as modern trade agreements. These measures will have a much greater impact than the EFSI. It is, of course, more attractive to have money on the table, but we should focus on improving market conditions.
W.H.: The best thing that could happen to the European economy is that it no longer needs the EFSI. The plan has profoundly changed the EIB, but it must remain the exception.
Where are the funds for the second phase of the plan coming from?J.K.: In part, we are restructuring the funds of the EU budget. A part comes from the EIB and we reduce the amounts deposited for risks, as these are shown to be too high. W.H.:The EFSI is a guaranty, which is basically a safety net. However, most of the money comes from the capital market. This is what we need, be it in the European economy, or in development cooperation. Public money will never be enough, it will always need the private sector. Through the EFSI, we have learned that the traditional grants can be supplemented by guarantees and credits.
After Brexit, there will be a big hole in the EU budget. Is the EFSI model of guarantees a way to achieve the same with less?J.K.: Yes, partly. The EFSI has shown that we can achieve the same results by using financial instruments instead of grants. However, these instruments are not always useful in all cases, and there will be more traditional grants from the EU budget. What is clear, however, is that the EU needs to focus more on financial instruments in order to achieve its employment or sustainability objectives.
Through the Juncker Plan the EIB has grown a lot including the number of employees. Is this a continuing trend?
W.H.: No, even if we are recruiting in specific areas - for example, in risk control. The bank has grown significantly: 55% of the employees were not here when I became EIB President six years ago. We must first digest this growth.
What do you want to improve in the second round of the Juncker Plan?
J.K.: 40% of the projects are designed to meet the climate requirements of the Paris Convention. Geographically, we want to find the right balance, so use the money where the markets are the most restricted. We are already succeeding. This is one reason why there will be fewer Luxembourg projects.
One criticism is that there are hardly any cross-border projects ...
J.K.: This is actually problematic. One example is electromobility, where the European added value would be to enable it across borders. There are some cross-border projects, but we need more.
It was also criticised that some projects that were financed would have also been achieved without the EFSI. Was that so?W.H.: Says who? This prejudice is simply wrong. The criticism came when there were very few projects.
Jean-Claude Juncker has already announced that he would not run for a second term in office. Will the "Juncker" plan continue after 2019? J.K.: The EFSI is linked to Jean-Claude Juncker, which is good because it gives the whole thing a face. Behind this, however, is a new concept. The Juncker Plan is a revolution in how EU funds are used. I am sure that the idea will survive if there is further need for it.
Mr. Hoyer, you are one of the fathers of the Juncker Plan. Your second term begins next year. So will you continue to look after this "child" or is there some truth to the Berlin rumors that you will have a role in the future government? W.H.: I love my work and am very happy that the EU finance ministers have given me their trust for six more years. The Berlin rumors are an honor, but they have no substance. And why should I leave Luxembourg? (Laughs)
(By Laurent Schmit, translated from German by Barbara Tasch)