EU finance ministers meeting in the ECOFIN council this week approved an extension of the European Fund for Strategic Investments (EFSI) - the ball of cash commonly known as “the Juncker Plan”.
The basic idea of the Juncker Plan - the big idea of Jean Claude Juncker in his bid for the Presidency of the European Commission - was to ramp up some €300 billion in badly needed investment over a three year period by using around €60 billion of public money to catalyse private sector investment of around €250 billion.
Halfway through the programme, the EFSI has pledged €27.5 billion - almost €20 billion for infrastructure and €7.7 billion for SME lending. This has triggered €154 billion of finance for investment projects (though not all of them have started yet).
This is about half of the money EFSI was set up to "crowd in" to projects and SMEs. Essentially EFSI takes the riskiest tranche in project financing, acting as a comfort blanket to private investors, encouraging them to back riskier projects by removing much of the risk.
Last week the Commission decided to pitch for a near doubling of the EFSI, bulking up the risk money to around €100 billion to trigger €500 billion in investment over a five year period.
The Commissioner in charge of the fund - former Finnish Prime Minister Jyrki Katainen - says its biggest challenge is raising awareness.
So here's the good news for Mr Katainen - and potential borrowers in Ireland. On Friday the European Investment Bank is opening an office in Ireland - the EIB is the bulk supplier of cash on technical expertise to EFSI.
And the EIB offices in member states are the designated "one stop shop" for people looking for money from "the Juncker Plan".
When we say people, we don’t actually mean people - we mean the Government, the commercial banks, local authorities and companies promoting Public Private Partnerships to finance infrastructure.
SMEs looking for cash still need to go to their local bank manager, with the usual business plans. It is the local banks that lend on the EIB/EFSI money (and pretend its their own).
This is sort of a big deal for Ireland. On a share of GDP basis, Estonia is the biggest beneficiary of EFSI funding. In pure cash terms Italy is the biggest user of Juncker Fund money for investments. But on a per capital basis, the biggest users of EFSI money are the Irish.
In Ireland four approved projects have attracted €345m in EIB funding under the EFSI banner, which is expected to trigger a total investment of just over €1.5 billion.
The biggest chunk of money is due to go into Irish Water - €200m from EFSI to part fund a total of €459m in capital spending for the utility. Italy is also using EFSI money for water infrastructure projects.
EFSI is also putting €70m into a €135m total spend on building 14 primary care centres.
In his press conference last Week, Commissioner Katainen singled this out as an "excellent example" of how EFSI money should be used in getting public private partnerships off the ground, crowding in private sector money to progress new types of projects in addition to regular capital spending on things such as schools (which normal EIB lending is intended for).
There have been three assessments of the fund - by the Commission itself, the European Investment Bank, and accountants and consultancy firm EY. The European Court of Auditors has also done its own report on EFSI. Based on these, the Commission declared EFSI a success, and pushed for more funds.
This required raising the "EU money" element to about €100 billion, from its current level of €63 billion. Finance ministers seem to have agreed to extend the fund, and gave approval for EU money to be used. But they did not agree to use any money from the member states to bulk up the “risk” money.
Although much of the attention surrounding the Juncker plan was on the funding of big infrastructure projects, it has in fact been the SME sector that has proven the most responsive to the cash on offer.
The Commission claims some 380,000 SMEs have benefited from various funding efforts that originated with EFSI. The money flows through intermediate banks - the fund has 243 agreements with various banks across the EU.
Jyrki Katainen - the Commission vice president in charge of EFSI - says the SME sector was more enthusiastic for the money than anticipated. "The demand has surprised us a bit", he said.
But the job rich SME sector has been cash starved across much of Europe these past few years, so why should he be surprised if Europe’s entrepreneurs take the arm off anyone offering them finance?
By the way a Central Bank research technical paper http://centralbank.ie/publications/Documents/09RT16.pdf pinpoints the interest rate premium paid by SMEs compared with larger firms for borrowing money. It is about 100 basis points for weak banks in distressed economies.
Those working with EFSI say it has mobilised just over €67 billion in resources for SME lending so far - about 81% of target, compared with 49% of target for all lending at the midway pint of EFSI 1.
This is unsurprising as infrastructure projects take time to get going, and SMEs are fast moving and cash starved.
The European Investment Fund, a bit of the EIB that actually manages money, declined to say what their target rate of return on investments in EFSI is, but they point to the 6% average return they make from recycling the legacy of the Marshal fund, which they are responsible for.
At a presentation in Brussels last week, EFSI introduced journalists to a couple of beneficiaries of Juncker Plan leverage.
One was a French academic spinout fund (it claims to be the country’s first) that got €20m form EFSI.
One of the projects that fund is backing is a way of delivering breast cancer treatment directly into individual cells, a spinout from research at the Pierre and Marie Curie University Institute in Paris. A classic high risk, potential high reward bit of venture capital funding in the high tech medical space.
Less risky, or so it appeared, was the EFSI tranch that went into a combined heat and power plant in Kiel, north Germany.
It is the first combined gas power and district heating plant in the world, built on the shores of the Baltic (where Gazprom’s pipeline comes ashore). Contractors had to remove over nine tonnes of munitions from the site before construction could begin. But where is the risk? The plant supplies heating to 70,000 homes beside the Baltic - a captive audience with a real incentive to pay the bills.
The risk seems to be in the form of technological disruption - industry sources tell me a big worry for power utilities is the emergence of disruptive technologies (such as Teslas’s solar cell roof tiles and domestic battery packs) that could undercut the payback possibilities of large, long term investments like powergen.
Their fear is that the powergen and distribution business is now starting to look like legacy phone companies in the internet age - financially vulnerable to sudden technology shifts.
Of course it would not be an EU programme without some bit of spending that provokes outrage, and in the case of EFSI, the outrage is in Germany.
German Social Democrat MEP Udo Bullman, (the joint rapporteur on EFSI) asked "why is EFSI money being used to fun and Autobahn between Bavaria and Baden-Wurtenbueg - the two richest parts of the country with the biggest current account surplus in Europe?”
Even within Germany there are poor regions that need investment in roads and have difficulty coming up with the money, as Mr Bullman points out.
But Berlin is committed to the “Black Zero” budget policy of not borrowing, even though the EU institutions never tire of telling them they have plenty of fiscal space, plenty of projects that need funding, and that enormous surplus that needs recycling into spending that could help lift Europe's limp economy.
EFSI is supposed to promote "additionality" - extra spending over and above that which would normally be expected - it is not a welfare programme for wealth governments.
In the second version of EFSI the Parliament says the only road projects that should get EFSI money are in cohesion countries - not the wealthy west. The EU 15 states are perfectly capable of coming up with other, more innovative investment projects.