A European initiative for growth
Step up efforts to mobilise public and private funds for investing in networks and knowledge-sectors with a high potential for growth.
Communication from the Commission - A European initiative for growth - Investing in Networks and Knowledge for Growth and Jobs - Final Report to the European Council [COM(2003) 690 final - Not published in the Official Journal].
This initiative will help to boost European economic growth. The report sets out the measures required to attract the necessary funds, whether from public or private sources, for investing in networks and knowledge. The initiative responds to the conclusions reached by the European Council of October 2003, which also asked the Member States to maintain sound macroeconomic policies and accelerate structural reform. The initiative was definitively adopted by the Brussels European Council in December 2003.
Action to develop trans-European networks (TENs) in transport, energy and telecommunications and invest in research and innovation is essential. It stimulates the growth and competitiveness of European companies and helps to create an enlarged internal market in keeping with the objectives of economic and social cohesion policy.
The European initiative focuses on three areas:
- launching the "Quick-start" programme;
- coordinating the existing and new Community financing instruments;
- introducing regulatory and administrative measures to encourage investment.
A "Quick-start" programme has been launched
The "Quick-start" programme lies at the heart of the European initiative for growth and has resulted in the compilation of a list of 54 priority projects of European interest which can be launched within three years. The total volume of investment should reach EUR 62 billion by 2010. The priority projects have been identified on the basis of four criteria: maturity, trans-frontier dimension, impact on growth and innovation, and benefits for the environment.
The 54 priority projects cover the following areas:
The Commission has identified 29 trans-European transport networks requiring investment of EUR 38 billion between now and 2010. One important objective is to redress the balance between modes of transport in favour of rail and sea routes. The projects selected include the GALILEO satellite navigation system.
In the field of energy (electricity and natural gas), 17 energy links have been identified, which will involve investment of EUR 10 billion up to 2010. The aim is to diversify energy provision within the EU and place it on a secure footing in the run-up to enlargement. In the field of broadband communications, three projects will speed up the development of high-capacity communication networks. They will seek not only to reduce the digital divide by connecting remote and/or rural areas, but also to support research into mobile technologies and to upgrade the "Géant" network which connects universities, research centres and educational institutions.
research, development and innovation;
In this area, five projects will receive funding of approximately EUR 14 billion up to 2010. Three of the projects will focus on the following key sectors: nanoelectronics, next-generation lasers and hydrogen. The two others, which seek to boost the EU's presence in space, relate to: the new satellite-based global system for monitoring the environment and security (GMES) and the construction of a launch facility for Soyuz rockets.
This list is not exhaustive. Other projects could be eligible if they met the criteria mentioned above.
What are the existing and new financing methods at European level?
The European Union and the European Investment Bank (EIB) will contribute fully to financing the initiative. The funds currently available and being considered are the following:
contribution of the Community budget;
The annual appropriation for the TEN-transport budget line is EUR 700 million. One of the Commission's proposals is to increase the Community's contribution to funding the total cost of TENs projects from 10 % to 30 %.
Approximately EUR 60 billion is provided from the Structural Funds to support investment in infrastructure (transport, energy and telecommunication), research, technological development and innovation. EUR 1.5 billion from the Cohesion Fund go to the four beneficiary Member States (Spain, Portugal, Greece and Ireland).
The Sixth Framework Programme for Research and Technological Development (FPRTD) provides EUR 17.5 billion for research. A special budget of EUR 300 million supports the roll out of the high-speed communications backbone (GEANT).
contribution of the European Investment Bank (EIB);
In terms of research, development and innovation, EUR 50 billion will be provided during this period under the EIB's "Innovation 2010" initiative.
The European Investment Fund (EIF) also promotes innovation by providing risk capital. 185 risk capital funds provide EUR 10 billion for 1 500 high technology businesses; EUR 2.5 billion of this comes from the EIF. The EIB has undertaken to provide an additional EUR 500 million to the fund.
It is essential that the funds available are coordinated if the initiative is to be successful. Mobilising the funds better will ensure that action is more effective. The European Commission and the EIB have defined the practical arrangements for creating synergies between the operations of the Bank, the Structural Funds and the Sixth FPRTD. As part of the economic and social cohesion policy, these arrangements are designed, in particular, to make it easier to plan structural operations on a joint basis. They involve incorporating the EIB's overall commitments into the regional programming documents and making the appropriate adjustments to the level of funding in line with the overall cost of an operation.
The Commission and the EIB are exploring ways of increasing private investment. They are particularly interested in the following four innovative types of financing:
provision of third-party equity or quasi-equity;
Under the Financial Regulation for the TENs, a share of the project budget can be provided by specialised investment funds.
Securitisation can help to increase the available pool of resources from financial markets for new growth-inducing investments. Using securitisation funds, the financial institutions involved in structural operations will pool their lending portfolios and securitise them to be placed with institutional investors.
structured Finance Facility;
The EIB is prepared to commit EUR 50 billion to support priority TEN projects as part of the Structured Finance Facility (SFF). This facility, which is used for large-scale projects, enables the debt risk to be shared and spread. It will help to increase the availability of debt finance for the early, pre-construction stages of projects.
The Commission is examining a new guarantee instrument in the context of public-private partnerships in TEN sectors. Once projects have been completed, the instrument will cover specific commercial risks such as traffic/revenue shortfalls. This will mean that debt providers can benefit from appropriate debt service.
Regulatory and administrative measures will be necessary to encourage investment
Experience has shown that non-financial factors can often be more powerful barriers to the viability and attractiveness of particular projects than the actual lack of funding.
The Council and the European Parliament have been asked to draw up legislation in the following five areas:
- the method of financing trans-European networks and the priorities of the transport TENs -- the adoption of priorities for transport networks will also make it possible to declare that a project is "of European interest" and to appoint a coordinator/coordinating body for it;
- charges for and financing of transport infrastructure ("Eurovignette proposal");
- the Community patent;
- public contracts;
- cross-border mergers.
The Commission, for its part, would like to make progress in the following areas:
- simplifying the procedures for granting State aid to SMEs, particularly as regards research and innovation;
- examining the treatment of public-private partnerships (PPPs) under Community public procurement rules;
- creating a legal structure for European risk capital funds;
- setting up European technology platforms;
- creating a European guarantee instrument to provide support for post-construction risks associated with TEN projects in the transport sector.
Statistical treatment of public-private partnerships
How should the economic ownership of the underlying asset in the PPP be established, irrespective of the legal provisions relating to ownership? Does it represent a State asset or an asset from a private partner? The application of the principle whereby economic ownership of an asset depends on which party bears the risks and rewards associated with the asset causes problems for PPPs. The European initiative for growth will clarify this matter and final decisions will be announced at the beginning of 2004.
Evaluation of progress
The progress of efforts to implement the European initiative for growth will be evaluated regularly as part of the annual reporting cycle to the Spring European Council from 2005. A more comprehensive assessment of progress will also be undertaken five years after the initiative has been launched.