EU authorities are gearing up to unveil an eagerly-awaited long-term investment plan this week with the aim of investing 315 billion euros into public infrastructure projects like communications, transportation and energy over the next three years.
The plan, worth $460 billion if it reaches its target, is expected to create a million jobs and spur growth among the 28 bloc nations. This comes after concerns that Europe is tumbling into a lost decade of high unemployment and low economic growth.
The notion is that big projects would place more people to employment, and enable business to construction and other companies and their suppliers, and programs to finance small to midsize businesses. It would also make the basic underpinnings of European commerce more modern and efficient to raise the competitive status of the region in the global economy.
The plan was outlined to reporters on Tuesday prior to a formal presentation scheduled for Wednesday local time by Jean-Claude Juncker, European Commission president. The plan involves no new money beyond the existing resources of the bloc.
Instead, the plan would rely on about 21 billion euros in EU loan and cash guarantees, but bulk of the financing is assumed to come from private lenders. This expected outcome has already prompted analysts to say the initiative may only result in a marginal effect on economic growth.
Essentially, the plan utilizes existing cash from both the EU and EIB to feed investment funds tasked with financing private-sector funded projects. Officials informed the projects will have ‘real added value’ for the European economy.
Juncker assumed the presidency of the EU commission three weeks ago. Raising investment is on his priority list, and he has pledged to keep the region from entering into a period of economic stagnation as the one Japan faced.
The European Central Bank has also asked policymakers and politicians to set up public investments to complement any possible measure taken by the central bank to simulate the economy with monetary policy. Public investments have remained below levels in 2007, before the European debt crisis.
EU has the annual budget of some €140 billion a year, within a seven-year framework (2014-2020) worth around 1 trillion euros. A 2015 budget is due to be presented by the Commission next month, which is almost entirely funded by member states.
Aside the plan, the EU is preparing projects that could take shape early, as the fund will be able to provide grounds for bearing risk of starting projects.