New EU investment vehicle takes shape

An outline agreement has been reached on the EU’s next seven-year investment scheme, InvestEU, a €38 billion loan fund which will merge 14 existing EU instruments under one roof, to provide finance for sustainable infrastructure; research, innovation and digitisation; small businesses; and social investment and skills.

The fund, which will run between 2021 and 2027, proposes to earmark €11.25 billion worth of loan guarantees for research and innovation. How this will be organised depends on final budget agreements.

The plan is part of a continuing shift in Brussels from subsidies and grants to a loans-based approach aimed at providing guarantees to private investors. The full European Parliament and the Council must still formally approve the InvestEU plan.

Brussels claims InvestEU can deliver total investment of €650 billion. It will guarantee higher-risk projects, managed by the European Investment Bank (EIB) and other banks. A steering board composed of officials from the Commission, EIB and other partners will oversee the programme.

With the EU taking the first or early losses from bad investments, private investors are expected to come with the lion's share of the money.

Werner Hoyer, head of EIB, said the fund would provide “an important complement to EU grants” and would “make efficient use of scarce public resources to mobilise private investment.”