The European Fund for Strategic Investment: A Tool to Bridge the Investment Gap

It was not the fault of the crisis or at least not of the crisis alone. But the economic and financial meltdown of 2007/8 and following years made the European investment gap more visible. In late 2014, when the previous President of the European Commission Jean-Claude Juncker took office, it was obvious that the continent had been living off its capital stock for quite some time and that it was in dire need of modernisation.

To spur investment and get Europe back on track the European Commission together with the European Investment Bank (EIB) designed an initiative that tasked the EIB Group to make an extra EUR 500 billion of investments available to the real economy by 2020 – the European Fund for Strategic Investments (EFSI).

EFSI is not a “fund” in the traditional sense. It is a guarantee instrument that enables and challenges the EIB Group to go beyond its standard activities in support of viable projects and to take more risks when investing in them. EFSI projects follow the same procedures as traditional EIB Group financing. If, in addition, they meet the EFSI criteria as regards the sector and additional value brought by the financing they are presented to an independent Investment Committee. This group of eight experts  decides if the project qualifies for backing by the EU guarantee.

The original goal of EFSI was to trigger EUR 315 billion in additional investments over three years. The initiative was extended to the end of 2020 and now aims to mobilise EUR 500 billion. This will be possible with the help of a EUR 26 billion guarantee from the EU and another EUR 7.5 billion from the EIB’s own resources. Spread over five years, the money will not be enough to bridge the investment gap in the EU. Still, it has the power to kick-start projects that are important for Europe’s future and that would have struggled to get suitable financing without EFSI.

Compliments of the European Investment Bank, a Member of the EACCNY