President Juncker has presented the key features of the European Commission’s plan to boost investment in the EU. In this blog post we review the most important points and discuss the main policy challenges surrounding the plan. Five, still undecided, points are key for the success of the plan: (1) The small public funds should serve as a first loss guarantee; (2) The project selection committee needs to be able to identify projects that would not have happened without the guarantee; (3) By choosing more risky projects, the committee would increase the likelihood that the guarantee actually contributes to additional investment instead of just funding investment which would have taken place anyway; (4) The political economy of project selection is difficult. For true public infrastructure projects, public funds should be used directly; (5) investment-friendly regulation and structural reforms can substantially increase private investment without public guarantee and are not subject to selection problems.
Juncker’s investment plan: No risk – no return by Grégory Claeys, André Sapir and Guntram B. Wolff
Source Bruegel - Dec 1, 14