The overarching goal of the EFSI was to close the investment gap in the wake of the Financial and Economic Crisis 2008 by mobilising additional investments for projects in the sectors infrastructure, research and innovation, education, renewable energies and energy efficiency. The main problem identified and criticised by the AK as early as 2015, has been that the Commission prioritizes private investments and neglects state investments. There were also doubts as to whether the planned leverage effect would be able to actually realise the optimistic targets. The European Court of Auditors is now confirming the exaggerated depiction of this multiplier effect and at the same time criticises further implementation sectors.

European Court of Auditors: Multiplier effect has been exaggerated

When setting up the EFSI, the European Commission assumed a multiplier effect of 1:15, i.e. the mobilisation of investments should amount to 15 times the Fund. As the Fund itself had been furnished with EUR 21 billion, it was supposed to encourage investments totalling EUR 315 billion. In 2018 the European Investment Bank (EIB) reported that based on declared investments, the aimed multiplier effect had even been slightly exceeded. However, the European Court of Auditors has now identified shortcomings in the identification of this multiplier effect and considers the depiction to be exaggerated.  For instance, one example in the Audit report concerning a concrete project shows that the EIB assumed a 30-fold multiplier, whereas the European Court of Auditors was only able to determine an 8-fold effect. This is due to the EIB’s unadjusted double-counting in the calculation.

Geographic distribution not balanced

A further point of criticism by the European Court of Auditors is the geographic concentration of a significant part of the projects on a small number of larger Western Member States with well-established Promotional Banks. In contrast, Eastern EU countries hardly get a look in. For example, on 30th June 2018 - in the sector “Infrastructure and Investments” a total of 47 % of EFSI financing were allocated to the three Member States France (18 %), Italy (17 %), and Spain (12 %). According to a report from the end of 2017, absolute figures show that Malta, Cyprus, Slovenia and Hungary received the lowest amounts. Austria ranks in 13th place and is thereby in the mid-range.

Almost a third of projects would have been implemented without EFSI investments

Within the scope of a sample inspection of aided projects carried out by the European Court of Auditors, it also emerged that about a third of projects would have been implemented even without EFSI investments. As it had been the actual objective of the Fund to mobilise additional investments, the funding of these projects is in contrast to the actual target of the EFSI. When the funds were allocated, it was not checked whether the project could have been also realised by other public or private funds.

Criticism of the Chamber of Labour confirmed

As early as 2015, it was - from the point of view of the AK extremely questionable whether the optimistic assumptions regarding the leverage effect could be realised.  The report of the Court of Auditors is now confirming this sceptical position.

Apart from that, the AK criticises that according to the Commission only two thirds of the mobilised funds come from private investors. Such private and mixed financing models respectively, such as Public-Private-Partnerships (PPP) are, because of higher profit entitlements of private investors not only expensive, but due to the only indirect control capabilities also organisationally inefficient. For that reason, the focus should be on a “Golden Investment Rule“ to facilitate the financing of public investments by the public sector in order to make a contribution to sustainable economic growth and to promote generational fairness.

Further information:

Austrian Chamber of Labour: Position Paper on EFSI

A&W-Blog: EESC demands Golden Investment Rule

European Court of Auditors: Special report EFSI

European Investment Bank: Juncker Plan exceeds original investment target

Chamber of Labour Vienna: The implementation of the Golden Rule for public investments in Europe