MEPs adopted the new InvestEU programme, which will mobilise public and private investments and guarantees simplified access to financing. Parliament endorsed the provisional agreement reached with the Council with 496 votes in favour, 57 against and 144 abstentions.
With €26 billion (in current prices) set aside in the EU budget as a guarantee, InvestEU is expected to mobilise €400 billion to be invested across the European Union from 2021 to 2027. The new programme is part of the €750 billion Next Generation EU recovery package, and will foster strategic, sustainable and innovative investments and address market failures, sub-optimal investments and the investment gap in targeted sectors.
What is InvestEU?
InvestEU will provide the EU with crucial long-term funding by leveraging substantial private and public funds in support of a sustainable recovery. It will provide crucial support to companies, especially in view of the still ongoing crisis. It will also help mobilising private investments for the EU’s policy priorities, such as the European Green Deal and the digital transition.
The InvestEU Programme will bring together under one roof the multitude of EU financial instruments currently available to support investment in the EU, making funding for investment projects in Europe simpler, more efficient and more flexible. The InvestEU Fund will support four policy areas which represent important policy priorities for the Union and bring high EU added value: sustainable infrastructure; research, innovation and digitisation; small and medium-sized businesses; and social investment and skills.
The InvestEU guarantee amounts to €26.2 billion, with provisioning from the Multiannual Financial Framework (MFF) and Next Generation EU resources. The overall investment to be mobilised on this basis is estimated at more than €372 billion.
InvestEU: Sustainable and strategic investments
InvestEU supports strategic investments in manufacturing of pharmaceuticals, medical devices and supplies – crucial in the midst of a pandemic – as well as the production of Information and Communication Technology, components and devices in the EU.
It will also finance sustainable projects that can prove their positive environmental, climate and social impact. Those projects will be subject to the principle of “do no significant harm”, meaning they must not negatively affect the EU’s environmental and social objectives.
Furthermore, MEPs made sure that InvestEU contributes to achieving the target of spending at least 30% of EU funds on climate objectives by 2027 and that it provides support for SMEs negatively affected by the pandemic and at risk of insolvency.
Grants and loans: What the Recovery EU money will be invested in
José Manuel Fernandes (EPP, PT), lead MEP from the Budgets Committee said during the debate on Tuesday: “The EU needs public and private investments to become more competitive, productive and to boost its territorial cohesion. Invest EU brings in additional funds to turn projects that otherwise wouldn’t see the light of day into reality. Our strategic sectors, such as pharmaceuticals, should be independent. We need to help regions that suffered the most, and EU citizens deserve investment and high-quality jobs”.
Additional investments of around €400 billion
The additional investment across the European Union, expected to amount to €400 billion and the EU guarantee will be allotted to the following policy objectives:
- sustainable infrastructure: around 38%
- research, innovation and digitalisation: 25 %
- Small and Medium enterprises (SMEs): around 26%
- social investment and skills: around 11%.
Moreover, the European Investment Fund (EIF), which will contribute to the implementation of the InvestEU programme, will get an additional €375 million.
How will InvestEU support the recovery?
InvestEU is the EU’s investment programme that will play a major role in kick-starting the European economy. It will provide and attract long-term funding by mobilising private investment in line with the Union policies. This programme builds on the successful implementation of the European Fund for Strategic Investments (EFSI). It was a novel instrument focusing to relaunch investments after the past financial crisis.
InvestEU will play a particularly important role in the post-crisis recovery, as EU businesses might still struggle to access and attract necessary funding and Member States might not be in a position to ensure needed support, including for projects which require a European approach.
InvestEU will also be able to support companies affected by the crisis. There will be a possibility to provide capital support to SMEs that were not in difficulty in State aid terms already at the end of 2019, but since then face significant risks due to the crisis caused by the Covid-19 pandemic.
In addition, Member States will be able to use InvestEU as a tool to implement their recovery and resilience plans under the Recovery and Resilience Facility (RRF), if they so wish. Concretely, funds from RRF allocations may be channelled through Member State compartments under the InvestEU to help with the implementation of the Member States’ Recovery and Resilience Plans, while respecting the Plan’s milestones and targets. Like this, Member States will benefit from the EU guarantee and its high credit rating, giving national and regional investments more firepower.
EU funds for Start-ups and SMEs to shape the future
Irene Tinagli (S&D, IT) leading the negotiations on behalf of the Economic and Monetary Affairs Committee added: : “We diverted more funds to meet environmental targets, to support SMEs, which suffered because of the pandemic, and we succeeded in placing Invest EU at the heart of NextGenerationEU. Since InvestEU will also help us to recover from the pandemic, we created synergies with the Recovery and Resilience Facility, allowing member states to implement part of their recovery and resilience plans through InvestEU”.
How will InvestEU provide capital support to SMEs?
The InvestEU programme allows capital support to help otherwise viable SMEs. These companies were not in difficulty in State aid terms already at the end of 2019 and that are now faced with liquidity issues due to the coronavirus crisis. It will help such companies at this critical time get back to a sustainable and profitable business track. Capital support is open under all policy windows and will therefore contribute to the EU priorities of the green and digital transitions. Such financing may be provided directly by the EIB, the EIF, the EBRD or National Promotional Banks or through financial intermediaries or dedicated vehicles.
More specifically, capital support operations under InvestEU will be implemented as all other financing and investment operations. An implementing partner will have to propose under one or more of the policy windows a financial product that aims at delivering capital support for SMEs and build a portfolio of operations. The financing provided will be partially covered by the EU guarantee. SMEs are eligible if they operate in one of the areas identified in Annex II and do not carry out activities excluded by the list in Annex V point B.
The financing will typically take place through financial intermediaries that take equity participations, convertible loans and other equity-type financing. These intermediaries would typically be independent commercially-run fund managers that select companies with adequate return prospects, driven by a commercial logic when selecting companies in which to invest or provide other forms of financing. The InvestEU intervention will done on commercial terms and crowd in private investors.
What will be the InvestEU eligibility criteria?
In order to benefit from InvestEU financing, potential projects must:
- address market failures or investment gaps and be economically-viable;
- need EU backing in order to get off the ground;
- achieve a multiplier effect and where possible crowd-in private investment;
- help meet EU policy objectives.
The policy areas eligible for financing and investment operations are in annex II to the InvestEU Regulation. The eligibility criteria are further defined in in the Investment Guidelines which lay down the requirements that financial products and financing and investment operations shall satisfy.
Can third countries participate in InvestEU?
The InvestEU Fund is open to contributions from third countries (non-EU countries) that are members of the European Free Trade Association, acceding countries, candidates and potential candidates, countries covered by the European Neighbourhood Policy and other countries, in accordance with the conditions laid down between the Union and those countries. This will allow continued cooperation with the relevant countries, in particular in the fields of research and innovation as well as SMEs. According to the Regulation, third countries would have to provide their full contribution to financial products in cash.
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