European Investment Plan: Opportunities for German Companies

© Fotolia/Franz Pfluegl

The European Fund for Strategic Investments (EFSI) which was decided in June 2015 is the key element of EU Commission President Juncker's investment plan. It has resulted in investments of over 26 million Euro for major, medium and small enterprises in Germany. The EFSI has now been extended until 2020.

The EFSI was originally scheduled for 4 years and was supposed to mobilise up to 315 billion Euro for the real economy until 2018. However, this target has already been exceeded. Moreover, the investment initiative was expanded in September 2017: In the broader context of extending the European investment plan, the EFSI has been extended until 2020 and stocked up to 500 billion Euro. So far, more than 400.000 small and medium-sized enterprises (SME) and larger firms have received financing - directly through EFSI or through EFSI-backed schemes of national commercial or promotional banks. While this may not be a catch-all solution to solve the pervasive lack of investment in Europe, it constitutes an important attempt to mitigate its effects. The investment plan is an important signal to support infrastructure and investment and consequently growth and prosperity. The medium- and long-term development of productivity depends to a great extent on these future investments.

Projects of over 26 billion Euro in Germany

At present, the European Investment Bank (EIB) has co-financed 88 projects in Germany alone, with a volume of around 6.4 billion Euro. Taking the initial funding as well as direct, indirect, and induced effects into account, the total volume of investment is likely to be around 26.4 billion Euro. The German list of projects includes numerous innovations, ranging from new medical technology to combat brain tumours to space and modern printing technology. The reduction of CO2 also plays an important role.

EFSI-funds are market-oriented financial instruments. The EIB gets active in those cases where other public or private banks are unable to deal with the risk profiles of some investments. Therefore, the EFSI is particularly relevant for those countries where the banking sector is still recovering from financial crisis. In particular, member states with shaky financial markets were able to profit significantly from the EFSI. Directly and indirectly, these investments ensure orders for German export oriented companies. Since the German financial market has already recovered, financing through EFSI plays a subordinate role.

General investment conditions should be improved

The European Commission and the EIB expect the investment plan to create 1.4 million jobs by 2020.Apart from these financial instruments, the improvement of the general investment condition is no less important. Here, the Capital Markets Union can play a crucial role. Furthermore, the reduction of investment barriers and overregulation is not yet completed.

Co-financing through EFSI usually takes place through private or development banks which in turn cooperate with the EIB. Advisory and information for larger projects can be found on the European Investment Advisory Hub. Ideas for Investments can be published on the European Investment Project Portal.