The threat of a deflation spiral in Europe is calling for immediate action to support demand and boost public/private investment. While the announcement made in July 2014 by Jean-Claude Juncker, the new Commission President, to inject€ 300 bn in the European economy has raised expectations, few concrete proposals have been made so far on how to mobilize these funds. Against this pressing background, this note suggests the creation of a true European Investment Fund, in order to operationally flesh out the future Commission’s investment plan, while reconciling the contrasting risk appetites of Member States. Its originality rests on the mobilisation of multiple resources and of various financial techniques. These features, when combined, increase the fund’s firepower while allowing flexibility in its use.
The memo argues in particular, through concrete quantified examples, that a true European Investment Fund could be used as a pivotal capacity to:
- Pool currently fragmented resources, both private (from individuals through a European Savings Book, from private investors through direct participation) and public (national and EU budgets, European Investment Bank, European Stability Mechanism);
- Develop a multi-instrument European investment strategy (through debt instruments, equity investments, venture capital, project bonds and other forms of project financing).
This investment capacity should not be seen as an exclusive tool to boost demand in Europe. It should not only respect the EU fiscal surveillance rules, but also be complementary to other structural measures that are needed both at European and national levels (especially in the areas of trade, competition, social/labor and tax laws) in order to achieve a more complete internal market and restore confidence into Europe’s capacity to once again be a growth engine.