The idea was quite simple. After a period of stagnation following the financial crisis from 2008, European Commision leader Jean Claude-Juncker introduced his newly found solution. He advocated creating a European-based fund involving private and public SMB investors in long-term innovative projects. The estimated worth of this operation was to exceed hundreds of billions of Euro. How did it work out? How much did the Polish economy gain from it? How will the new Juncker’s Plan 2.0 look like after 2020?
„There is a new, 29th country forming inside European Union – a country of unemployed citizens. A country in which young people are unemployed; a country filled with the castaways, rejects, the overlooked. I wish for this 29th country to become normal again. This is why I propose this ambitious investment program”.
This is the claim made by Jean Claude-Juncker during his European Parliament election speech in Strasbourg on July 15th, 2014. He made his promise concerned about the bad shape of the EU economy, still frozen after the financial crisis. The average GDP growth during 2010-2013 was only 1,5%, an amount making no impact on the economy. The unemployment rate had risen from 16,3% in 2010 to 18,4% in 2013. During the peak periodeven, every second (Greece, Spain) or third (Italy, Portugal) person aged 20-29 remained jobless. Recession influenced the investment level, showing a notable reduction from 22,8% to 19,6% GDP in 2009-2013, the lowest point since 2000. Because of the worsening situation, a solution boosting economic investments was sure to catch interest.
Juncker’s Plan in numbers
Juncker delivered on November 26th, 2014, introducing his investment concept to the European Parliament and Council of the European Union. His idea became known as Juncker’s Plan and had been implemented as of June 2015.
The primary goal of the first stage was to initiate additional public-private investments worth a minimum of 215 billion EURvalue. The expected outcome comprised of improving the employment rate, companies’ competitiveness and enhancing the general productivity potential – HR, knowledge and raw manpower included.
These aims were divided into three main branches.
Firstly, the European Fund for Strategic Investments (EFSI) was launched, becoming what is known as the core of Juncker Plan. The second and third branches were less complex, with the former regulating investment-related information flow Europe-wise and technical consulting for investors. The simplified European investment law and laid ground for long-term MSB funding, the main factor in the capitalist market development.
EFSI received financial support for its projects both from the European Union – 16 billion EUR – and European Investment Bank (EBI) – 5 billion EUR. The funds were secured by the EU budget, „Connecting Europe Facility” initiative and the „Horizon 2020” program.
The primary role of this generous aid was reducing investment risks and improving possibilities of new investments in two most prominent areas. The so-called first „window” included long-term infrastructure: energy, renewable power sources, broadband networks, transportation and innovations. The second focused on small and medium business enterprises.
These actions were believed to allow additional regional funding that would amount up to 315 billion EUR in three years, resulting in a multiplier effect of 1:15.
The operation was in place from June 2015 to December 2017 and was deemed a success. Up until July 2018, the value of launched investments amounted to 335 billion EUR, concluding 106% of the primary goal. According to the European Commission, about 700 thousand SMB companies received aid, creating over 750 thousand new workplaces. At the end of 2017, the post-crisis investment gap was largely reduced, mostly due to the private sector mobilisation.
In December 2017 regulations prolonging the EFIS, funding was approved. The guaranteed financial aid was also raised from 16 to 26 billion EUR of the UE funds and from 5 to 7,5 billion EUR from the European Investment Bank. Newly accumulated 33,5 billion EUR should endorse over 500 billion EUR worth of investments by 2020. Fields of interest had also been widened, including public highways, maintenance and modernisation of existing infrastructure, bio-economy and forestry industry.
How did Poland do?
Country-level investment plan coordinators should be appointed Ministers of Development. Juncker’s Plan also engaged national banks, both in European Fund for Strategic Investments (SMB window and projects up to 25 million EUR) and the consulting and technical aid departments. In Poland Bank Gospodarstwa Krajowego (BGK) was utilised. Financial support for big infrastructure and innovation projects over 25 million EUR is granted after direct negotiations of concerned parties with EBI.
During EFIS’s active years up to September 2018, over 3,523 billion EUR were gained from European Investment Bank by private and public entities, allowing for the launch of over 15,145 billion EUR worth of enterprises.
In relations to Polish GDP level, we are currently holding 6th place from all EU member countries on fund allocation effectiveness.
Up until September 2018 58 public and private sector, projects were approved in Poland. Over 3,3 billion EUR were admitted to 45 infrastructure and innovation assignments. Small and medium businesses raised 204 million EUR for financing 13 agreements. Among some of the most prominent ideas were: building the Łagiewnicka Route (93 million EUR), purchasing new railway cars by Przewozy Regionalne train transit, erecting about 1300 medium-income apartments in Poznań (33 million EUR) and modernisation and expansion of ironworks industrial broad gauge train transit lane from Sławków to Hrubieszów (29 million EUR). Apart from the transportation projects most common aid recipients were power engineering and social infrastructure enterprises.
Data mentioned above suggests that Polish companies are eager to reach for extra EFIS funding. Almost 15 years of offered grants explicitly taught businessman and public investors the aid request procedures. Poland stands on the 5th place when it comes to the number of aid-approved projects (58 country-wide), after France (153 projects), Italy (141), Spain (100) and Germany (97). The complete list of EFIS-financed initiatives can be found HERE.
Source: self-study based on European Investment Bank data.
Juncker’s Plan after Juncker
Currently running EFIS edition is known as Jucker’s Plan 2.0 in EU documentation. The third one has been introduced in May 2018 as a part of a long-term financial plan for 2021-2027. The core idea of supporting investments via loans, guarantees and other market instruments while minimising entrepreneurs’ risks remains unchanged. However, the European Fund for Strategic Investments’ name will be replaced with InvestEU Fund.
What will be modified most though are EU fund guarantee amounts within four new fields: a) balanced infrastructure; b) scientific research, innovation and digitalisation; c) small and medium businesses; d) social skills and investments. According to the European Commission’s proposal from May 2018, the guarantees shall equal 38 billion EUR, with over 15 billion EUR secured in budget reserve. It is also estimated that other financial partners (like European Bank for Reconstruction and Development and national banks) would add 9,5 billion EUR to the reserve, resulting in EC’s prognosis of 600 billion EUR worth of investments by 2020.
From Poland’s point of view, strong centralisation of these instruments will be of utmost significance. It would mean program priorities depending on EC assigned development objectives. Moreover, notable emphasis will be put on ensuring synergy between InvestEU investments and initiatives like „Connecting Europe Facility” (financing infrastructure), „Horizon Europe” (focused on scientific research) and „Digital Europe” (digitalisation activity) or other European structural funds.
It is in Poland’s best interest to encourage as many entities as possible to obtain funds from Juncker’s Plan 2.0 and the new InvestEU while they are active. Financial aids appear to be an essential factor for many regional and local enterprises, mostly in metropolitan areas.
It is difficult to predict the exact amounts of negotiated future structural funding. Popular estimations predict the aids will be lowered in comparison to the current ones though. This would mean that regional and local authorities must prepare to compete for harder to obtain funds from different sources to fuel their ongoing and future investments.
Translation from Polish: Katarzyna Wrzeciono
This publication has been cofinanced by the Ministry of Foreign Affairs of the Republic of Poland within “Cooperation in Public Diplomacy 2018” programme.
This publication reflects the views of the author and not the official stance of the Ministry of Foreign Affairs of the Republic of Poland.