Daniel Gros (The Centre for European Policy Studies)
Last week, Jean-Claude Juncker presented the investment plan which should increase public investment from €21 billion to €315 billion over the next three years. It is a reaction to the so-called investment gap which currently amounts to €300 billion. The investment package is aimed at infrastructure which, however, covers only 10 percent of investment in Europe.
Primarily, it is necessary to bear in mind that the ‘investment gap’ originated from an incorrect assumption which ignored the demographic decrease of population in Europe. Confirming the fact are the abundant and futile investments which emerged before 2007. It would be utterly unwise to do any such calculation with the pre-2007 value of invested sums.
Most interesting is the origin of the €21 billion. While €5 million are to be provided by the European Investment Bank, it remains to be determined in what form. The €16 billion should be taken from the EU budget. Half of this sum will be taken from the estimated reserves and the other €8 billion will acquire the European Commission by cutting down research projects and the funds earmarked for the Connecting Europe Facility.
The large projects funded by the ‘Juncker plan’ could, for example, fall into the category of cross-border interconnectors for electricity and gas. These investments, like many others which are related to infrastructure, do not suffer from financial problems. The obstacles usually originate from political decision-making, when politicians overly support domestic energy players and thus hamper the efforts to connect the energy networks.
The created investment plan devised by the Juncker Commission constitutes only a desperate attempt to create an illusion of a large financial package which, in fact, does not have a sufficient space for maneuvering. It evokes the two-year old plan ‘Growth Initiative’ of whose €120 billion was spent very little. From a PR perspective, it is a sound political promise which could, nonetheless, prove to be dangerous in the long term. The plan will not bring much benefit to Europe except a short-lived media attention.
(The study can be downloaded here)