MEPs have approved the InvestEU scheme under which the European Investment Bank will guarantee €38 billion in higher risk loans, with €11.25 billion earmarked for research and innovation.
The loans will be available to universities, companies, and public institutions like schools and hospitals, provided their projects fall within four “policy windows”, one of which is research, innovation, and digitisation, for which the programme guarantees loans up to €11.25 billion.
Of the rest, €11.25 billion is for small and medium-sized enterprises (SMEs), €11.5 billion for sustainable infrastructure, and €4 billion for social investment and skills.
Researchers will be able to combine InvestEU with Horizon Europe grants, but projects with joint funding will fall under InvestEU rules, not those of Horizon Europe.
Member states to top-up loan guarantees
The European Commission wants to see InvestEU pull in an additional €650 billion worth of investment. To help with this, the scheme will put in place an approvals process for companies to get exemptions from EU state aid rules, allowing member states to add additional loan guarantees.
Iceland, Lichtenstein, and Norway will be able to participate, as will acceding countries and those covered by the European Neighbourhood Policy. Other countries can be included if they sign an association agreement for participation in EU programmes, as with Horizon Europe.
InvestEU is not all new money, but rather merges or replaces 40 existing financial instruments deployed by the EU since the inception of the Juncker plan in 2014.
The commission expects returns on existing investments to contribute €1 billion to the provision that will back up the loan guarantees, which in the Commission’s proposal is 40 per cent of the total amount.
This means that for a total provision of €15.2 billion, €14.2 billion will come out of the EU’s next seven-year budget, the multi-annual financial framework (MFF). An additional €525 million will come out of the MFF to pay for implementation costs, such as the programme’s advisory board and a portal to connect projects to investors.
The parliament voted to reduce the loan guarantee provision from 40 per cent to 35 per cent and to increase the implementation funding to €725 million, but did not change overall amount to be guaranteed.
The amendments were put before the parliament in Strasbourg in a joint report by the budget committee and the economic and monetary affairs committee. The committees made various other tweaks to the legislation in the hope of increasing the projected investments from €650 billion to €700 billion.
By and large, InvestEU was not especially contentious and the two committees got their way.
Subsidised thin gruel
Nevertheless, a few MEPs spoke against InvestEU in a debate on Tuesday evening, which occurred just before the UK Parliament voted overwhelmingly to reject the Brexit withdrawal agreement.
Newly-independent MEP David Coburn, who until he resigned from the party in December was Scotland’s only MEP from the UK Independence Party, poured scorn on the proposals in a bombastic speech that provoked an amused smile from the presiding chair, Lívia Járóka of Hungary’s Fidesz.
Coburn complained that British businesses would be at “the back of the queue” in the approvals process for state aid exemptions, but added, “Oliver Twist was at the back of the queue for his subsidised thin gruel. Asking for more didn’t help him. But escape from a nineteenth century workhouse most certainly did.”
Financing the private sector
There was also criticism from the left. Irish Sinn Féin MEP Liadh Ní Riada argued the money should only go to supporting public investment, not the private sector. “I don’t think that private investors will look at public services,” she said.
Portuguese communist Miguel Viegas agreed. “There are social inequalities, there’s poverty in the European Union, so of course, given all of that, we get instruments for supporting companies,” he said sarcastically.
Rapporteur Jose Manuel Fernandes retorted, “Who creates jobs? Companies! Small and medium sized companies in particular,” adding, “it’s absolutely incomprehensible for those who want more employment in our economy to be against the very instruments that create jobs.”
Padding-out the research budget
The Commission’s MFF proposal for 2021-2027 allocates a specific budget of €14.75 billion for InvestEU. But it also ringfences €3.5 billion of Horizon Europe and €2 billion of the Single Market Programme, to be managed under the InvestEU fund.
This is why the Commission’s proposal for Horizon Europe itself allocates a budget €94.1 billion, while the MFF says the budget is €97.6 billion. By factoring-in another €2.4 billion for research and training under Euratom, the commission is able to trumpet a research budget of €100 billion, when the actual amount that would be available for research grants is less.
Furthermore, all of the commission’s figures are based on “current prices,” which counter-intuitively means projected future prices based on an assumed inflation rate of two per cent per year. All of these amounts are significantly less in today’s prices, and if inflation turns out to be higher than two per cent, the real value of all these sums will fall.
