We can create jobs and disrupt negative trends
Challenging times call for us to rise to meet them with new thinking. With innovation. With vision. We have to foster growth and the well-being of our citizens. And we have to cooperate with our neighbours to support their own growth, stability and well-being. The European Union is setting an example. At a time of growing needs and shrinking resources, the EU has had to come up with new ways to make public funding stretch further. We have presented an overall review of the EU budget that frees up an additional €6.3 billion (Dh25.8bn) in financing for priority areas by 2020, making the budget more flexible and cutting red tape for small and medium enterprises and non-governmental organisations. Most importantly, we have extended one guarantee fund for job-creating investments in Europe, and we are launching a new one in our neighbourhood and in Africa.
The Investment Plan for Europe – often known as the Juncker Plan – and its European Fund for Strategic Investments have been a turning point in our collective response to the economic crisis. Faced with tough constraints, public funding was insufficient for job creation. There was no shortage of private cash available, but it needed to be released. Together with international financial institutions, the new fund has provided a guarantee to private investments and directly supports small to medium enterprises, or SMEs.
We had used financial instruments before, but it had been more like dipping a toe in the water. This was jumping in at the deep end: a €16bn guarantee from the EU budget, complemented by €5bn of the European Investment Bank’s capital, to trigger more investment. The plan has proved to be a success story. In just one year it is expected to reach more than 200,000 SMEs. We are proposing to deliver at least half a trillion euros in investments in five years with a bigger focus on sustainable investments and cross-border projects.
Just as importantly, we are applying the same principle outside our continent, launching a new External Investment Plan. If we look at Europe's neighbourhood, we can see regions with huge potential that are being held back by war, poverty, lack of infrastructure and weak governance. Millions of young people are looking for better opportunities. In their quest to realise their dreams, many risk their lives making perilous journeys to get to Europe. Others become easy targets for the propaganda of terrorist groups.
The EU can disrupt these negative trends by stimulating growth and creating jobs in our wider region. European companies employ hundreds of thousands of people around the world, providing many with an opportunity to succeed in their home country, and contribute to addressing one of the root causes of migration. These investments are sound foreign policy. But for private companies to move to a new country or expand an existing activity, they need protection from financial and legal risks, as well as from instability.
This is where the External Investment Plan comes in. Based on a €1.4 billion guarantee from the EU budget, it aims to leverage more than €40 billion in investment in our neighbourhood.
That is more than the EU currently invests in aid worldwide every year. And it could be doubled if our member states match the EU contribution. The European Fund for Sustainable Development will guarantee private investors against the risks they face when they start a business in developing countries. This guarantee will not only promote single projects but also larger “investment windows” in strategic regions or sectors.
This “one-stop shop” will encourage investors, from both Europe and our partner countries, to channel their proposals and to gather information on the incentives. The External Investment Plan will provide technical assistance to enhance the quality, the number and the sustainability of projects. The European Commission, the European Investment Bank and other international financial institutions will work hand-in-hand to deliver a swift and business-orientated screening of projects.
Implementation on the ground will come with strong backing from the EU and its partners. The EU can provide global assistance and work to improve the overall business environment in each specific country. Investment will be accompanied by policy dialogues and capacity-building activities. Our action will be coordinated and joined-up, in the spirit of our global strategy for foreign and security policy.
The External Investment Plan takes our aid policies to the next level. As we step up our financial commitment to sustainable development we need the private sector to get on board. We already agreed to do this when we helped broker the Addis Ababa Action Agenda and the Sustainable Development Goals. Together with our partners in Africa and in our neighbourhood we can help young people achieve their potential, while creating new opportunities for European companies. A new chapter in European development policy has just begun, as part of a wider drive to make the best use of EU funds, at home and abroad.
Federica Mogherini is high representative of the EU for foreign affairs and security policy and vice-president of the European Commission. Kristalina Georgieva is vice-president for budget and human resources of the EC. Jyrki Katainen is vice-president for jobs, growth, investment and competitiveness of the EC
Published: September 20, 2016 04:00 AM