It is not a silver bullet or a magic wand, but rather should be thought of as a jump lead or a watering can, said Jean-Claude Juncker, President of the European Commission, when formally announcing his flagship €315 billion investment plan in Strasbourg on Wednesday.
Researchers were anxious to hear details of the €2.7 billion which the scheme will gut from Horizon 2020, the EU’s research budget, but Juncker denied his plan would mean cuts to R&D spending.
“I know some of you are worried about the impact on the research and infrastructure allocations,” he said. “Every euro from these programmes paid into the [new] fund creates €15 for those very same research and infrastructure projects. We are not just moving money around, we are maximising its input.”
The League of European Research Universities (LERU) bashed the plan as a “fairytale diversion” that relies on financial engineering, saying, “It should be clear for the EU institutions and the member states that Horizon 2020 is not a lemon which can be squeezed according to the flavour of the day.”
"Money diverted from Horizon 2020 could in theory lead to more private research and innovation investments and outcomes,” said LERU. “In practice however we all know this is unlikely to happen, as money will be diverted to quick-win projects that may please politicians and citizens but that will not invest in Europe's future.”
The Commission’s research directorate is understood to be still considering which budget lines the money will be taken from.
“This is still being worked out as part of the overall legislative process to get the fund up and running,” confirmed Lucia Caudet, a spokeswoman for Carlos Moedas, Commissioner for Research.
It may be January, when the European Commission will draw up the legislative proposal for the plan, before precise details are made public, she said.
Juncker’s pump priming European Fund for Strategic Investment pledges €21 billion of EU money that will in theory leverage in almost €315 billion of venture capital and private funds in a complex financial brew. The shopping list of investments consists mostly infrastructure projects, such as expanded energy grids, research facilities and broadband networks.
Quality of projects and investments
Some expressed concern the plan will crowd out private investment or worse, produce dud projects. “How do we make sure the plan is a watering can and not a government flood?” queried Syed Kamall, leader of the UK Conservative party-led European Conservatives and Reformists bloc in the European Parliament. “Or an irrigation system that never gets switched on?”
The head of the European Investment Bank, Werner Hoyer, which will house the fund, admitted some projects may fail, but defended the overall scheme. "You can do plain vanilla, with low risk, but then you don't generate a lot of business. We must go into higher risk," he said.
After speaking to investors in London, Jyrki Katainen, Commission Vice President for Jobs, Growth, Investment and Competitiveness, who has been asked to do a roadshow to sell the fund, said the problem was not so much the lack of cash for investments, but rather a lack of visible and viable projects in which to invest.
A "transparent projects pipeline”, which the Commission has promised to upload to a dedicated website, is meant to fix this. In total 1,000 project ideas have been sent to Brussels already by governments, Katainen said, and will be released online soon.
Having spoken to companies and investors, Gianni Pittella, a politician and leader of the centre-left Socialists and Democrats group in the European Parliament, said the noises he is hearing are positive. “I think we’re moving into a new era, away from the austerity dogma of the last few years,” he said.
Similarly, Markus Beyrer, Director-General of BusinessEurope, the association representing European business, said people need to take an optimistic attitude towards the proposal. “If this was proposed in the US by President Obama, there would be momentum behind it, but too often we in Europe suffer from a glass-half-full outlook,” Beyrer said.
The far-left and right members of the European Parliament felt Juncker over-hyped the plan and engaged in too much financial alchemy. Patrick O’Flynn, a member of the UK Independence Party, denounced the plan as, “€20 billion wrapped up as €315 billion. It’s not Christmas-come-early, it’s a turkey,” he said.Details on EU investment plan here