EU plans €21bn fund to share risk on new projects

The European Union is planning a €21 billion fund to share the risks of new projects with private investors, according to EU sources.

The new entity is designed to have an impact of about 15 times its size, making it the anchor of the EU's €300 billion investment programme, the sources said. European Commission president Jean-Claude Juncker is due to announce the three-year initiative in coming days.

The commission will pledge as much as €16 billion in guarantees for the vehicle, which will also include €5 billion from the European Investment Bank, the officials said.

Loans, lending guarantees and stakes in equity and debt will be part of its toolbox, with the goal to jumpstart private risk-taking so that stalled projects can get off the ground.

Mr Juncker's investment plan aims to combine EU resources and regulatory changes "to crowd in more private investment in order to make real investments a reality," EU vice president Jyrki Katainen said earlier this month in Bratislava.

The plan is one element of the EU’s economic strategy and “not a magic wand with which we will be able to miraculously invest ourselves out of a difficult economic climate,” he said.

While the Juncker proposal involves seeding investment in infrastructure and other fields, the €21 billion-euro sum with a proposed leverage rate of 15 times risks disappointing markets.

- (Bloomberg)