Dominique de CRAYENCOUR
Secretary general, Association of the long term investors (ELTI)
The European Parliament, the Council and think tanks have put forward proposals for developing a network of national public financing institutions structured around the European Investment Bank (EIB).
Broad consensus today exists for acknowledging that to reconcile the budgetary discipline necessary for economic and financial stability, and sustainable growth needed to create employment, it is investment– the link between short-term demand and the long-term supply – that needs to be reactivated. The current generation can no longer tolerate its number of unemployed and future generations would not forgive our sacrifying them for our well- being whether throughexcess debt or through lack of investment.
At the same time, this famous ‘growth’ cannot be the solution if it is only an increase in GDP exhausting limited natural resources. There should indeed be agreement on a measurable growth objective for well-being since it now appears demonstrated that this increases other than by the sole production-consumption of more physical goods. Investment choices must take this into account to truly gain the title ‘sustainable’.
Finally, the relevant scale to take into account for these new investments is both local and European. Local initiative is in full revival at the level of living communities and very naturally responds to an approach focused on quality of life. It lacks only a framework and general political support to develop on its own. On the other hand, whether it may be digital networks, energy or transport, innovation or human capital, the stakes are European and no other dimension would enable to manage them in a globalized world.
This allows to characterize the appropriate investments according to three complementary dimensions: they must be sup- ported by some form of economic and societal profitability, be sustainable in terms of their consumption of natural resources and European in their ambition and design. They should lastly also create sustainable employment and pave the way for entrepreneurial initiative.
How to identify, prepare and fund such investment projects?
The funding issue is at the heart of the debate since the start of the crisis in 2008. However, the main challenge appears increasingly as being the identification, promotion and preparation of a pipeline of investment projects meeting the characteristics defined above. For this, it is human resources, technical expertise and organization that we need. This expertise exists, but it is scattered and poorly used.
Whether to “pool” the funds required for project financing, or to gather essential human resources for their identification and preparation, to give effect to Mr. Juncker’s 300 billion euro plan and not just ‘repackage’ the existing for political visibility, it has become vital to change approach.
The EIB in Luxembourg does a great job, but this shows to be primarily focused on maximizing the volume of its lending. Such an approach no longer meets current needs and may even enter into conflict with the goal of subsidiarity. The huge capacities of EIB technical assistance are not exploited as they could. Its risk taking is systematically limited by capital requirements needed to meet the demands of an AAA rating.
In this context, proposals have emerged in the European Parliament, the Council and in think tanks for a network of national public financial institutions, whose mission is to promote long-term investment, to be structured around the EIB. The European network of central banks around the ECB could serve as an example to a network of national promotional banks around the EIB in the field of investment.
Whatever the more or less institutionalised form it should take, such a network would pool together considerable financial and human resources to meet the challenges of our societies at the EU-level. The synergies created should open new approaches and give a breath of fresh air to the ‘business model’ of the EIB, which has reached its limits. A whole range of financial instruments and technical assistance could be implemented to provide leverage to the limited resources of the EU budget with a scale able to meet the needs of quality sustainable growth.
1.Read artical of N. Valla en p. 35.