Europe starts to invest again in large-scale
The investment plan of the European Commission will be for the private sector a good opportunity to invest the excess money that the ECB is going to inject in the economy. The aim of this project is to put the economy in a faster train without raising the public debt that has reached considerable level for the old continent. The European Commission plans to invest in the next 3 years around 315 bn euro.
Well it looks a little like the multiplication of the loaves and fish but in our days nothing seems impossible. Where do they come from? If 220 bn were not enough to save a much smaller economy like Greece how can they boost the growth in a giant economy like Europe? For the moment it’s hard to be very optimistic on that plan however it could help a faster growth.
The idea is to put at least 16 bln euro of public funds from the EU’s balance and other 5 bln euro will come from the European Investment Bank. The European Countries can also contribute voluntary to the fund with extra billions. Italy for example has announced to contribute with 8 bln euro through its sovereign fund “Cassa Depositi e Prestiti”. Germany, France and Spain have also announced similar contributions. The European Commission also hopes to create at least 1.3 mln jobs in the next 3 years by investing some 240 bln euro in Strategic Investments and 75 bln euro in SMEs.
Why would private investors invest in the same project that will the European Commission invest ? Because the Commission will be paid back for last. This initiative comes after the failure of ECB to canalize the credit to the SMEs. In fact in the last lending operation by 1.000 bln from ECB to the banks very few of that money went to the companies that desperately need. The biggest part of that huge quantity of money went back to the ECB in the form of deposits. Also the government’s bonds received big money and in fact they have reduced yields more and more since the start of the operation. Now it remains to see if the financial engineering is useful for real as it was useful to create the last financial crisis.