An Investment Initiative for Fiscally Constrained EU Member States - The Role of Synergetic Financial Instruments

Abstract

Abstract. The economy of the European Union has not recovered from the impact of the economic and financial crisis. Growth rates remain low and investment activity is weak. This questions current economic policies of the Economic and Monetary Union, known as austerity. In opposition to fiscal contraction measures, expansive fiscal action policies are often called for to initiate economic recovery. But the national interests of austerity’s main proponent, performed in an asymmetric intergovernmental bargaining arena, render most of the proposed expansive action plans impossible and hence austerity is expected to prevail. The Juncker-Plan constitutes an expansive action plan which respects the restrictive budgetary rules. Nevertheless an investment volume of 315 billion Euro should be made available, enabled by 21 billion Euro of public money. The budget contribution should lever private funds by a multiplier of 15. The crucial factor of 15 rests on experience with Synergetic Financial Instruments which have been increasingly executed during the last budget period. This work assesses the impact of expansive public investment conducted through these Synergetic Financial Instruments and thus gathers information to undertake an appraisal of the Juncker-Plan, foremost of its crucial mechanisms and resulting numbers. By this, the potential of financial instruments as means of fiscal policy and the validity of the Juncker-Plan can be assessed. Keywords. Economic and Monetary Union, austerity, fiscal policy, public investment, financial instruments, Juncker-Plan, European Fund for Strategic Investment. JEL. G23, E61, E62, E65, G01, G11, H62, H63.