Juncker's '£250bn' EU rescue plan explained

The European Commission president announces a major new investment, but how much is hot air?

by Adam Gale
Last Updated: 26 Nov 2014

Ask your average UKIP or Front National voter what the red-tape strangled EU economy needs, and the last thing they're likely to come up with is a 'European Fund for Strategic Investment'. This, however, is exactly what European Commission president Jean-Claude Juncker announced to the European Parliament in Strasbourg today.

What he said

'Europe needs a kick-start and today the Commission is supplying the jump cables,' Juncker explained, in the first salvo of a veritable drenching of opaque mixed metaphors. 'No tree can grow on soil and air alone. The Investment Plan we are presenting today is the watering can.'

In case anyone was confused what he meant for some reason, Juncker elaborated, saying the Commission is responding to 'European pathologies' and keeping its 'eye on the ball of the real economy', by proposing a €315bn (£250bn) 'roadmap to make Europe more attractive and remove red take and regulatory bottlenecks'.

Yes, if you're still following this, he did say he wanted to reduce regulation and red tape. How? With a 'simplication machine', of course, reducing 28 regulatory systems to just one, in so doing helping to build a virtuous triangle, or 'omne trium perfectum'.

Well that's clear as glass then.

What he meant

Juncker's proposal is for the EU to encourage private sector investment by shouldering some of the risk in certain, as yet undecided projects. Rather than the grand €315bn with which he headlined his speech, the EU's own actual contribution is actually €21bn, all of which is to be reallocated from within existing budgets.

This money will then be used to guarantee loans from the European Investment Bank (EIB) up to €63bn, with the expectation that the private sector will naturally deliver another €252bn. Looks like this macroeconomics malarky's easy, after all.

The expected value-added appears to be that the money drawn from elsewhere in the EU budget will be better spent under this scheme (wherever that actually means) than it currently is (wherever that actually is). Importantly, it doesn't require a contribution from member states. Apart from the initial contribution to the EU budget, of course, but we'll let that slide.

Juncker was keen to point out that it didn't matter which countries the money ends up going to, as we all 'stand shoulder to shoulder'. He did outline some potential destinations, however, in a Martin Luther King inspired dream sequence.

'I have a vision of school children in Thessaloniki walking into a brand new classroom, decked out with computers,' he said, a tear very possibly forming in his eye at the thought of how happy the Greeks will be at the EU's largesse.

'I have a vision of a hospital in Florence saving lives with state-of-the-art medical equipment. I have a vision of a French commuter being able to charge his electric car along the motorway in the same way we fill up on petrol today.'

Juncker didn't mention visions of Europe escaping the 'spectre' of stagflation, a sign that perhaps he should spend more time with central bankers.

He also didn't mention the Luxembourg corporate tax-avoidance scandal, which has overshadowed his first few weeks in office, or the continent's slagging off yesterday by none other than His Holiness the Pope himself, who mourned Europe's lost inspiration and its replacement by 'the bureaucratic technicalities of its institutions', saying it was 'haggard', a 'grandmother, no longer fertile and vibrant'. Either of those would seem a good reason for a new Commission president to whip up a storm of hot air and publicity, when actually the scale of his project is relatively meagre.

The scheme should come into place in the middle of next year, following consent from the European Parliament, and will be administered by 'a team of financial experts', which should surely leave Europe's citizens content that their money is in safe, accountable hands.

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