Fact Finding on Investment and the Investment Gap in France and in Europe

EIB – France Stratégie Workshop

11 March 2016

Summary Slides

Those slides are a selective subset of the material presented by various participants at the workshop. Please reference them and the workshop duely if you wish to make use of them. Contact: Christoph Weiss (EIB), c.weiss@eib.org.

Weak investment, above and beyond cyclical factors, has been a primary reason for the slow economic recovery in the EU

• Besides having a negative impact on current GDP, the low level of investment also negatively impacts on long-term growth potential

– productive investment in human and physical capital that is needed for future competitiveness, growth and employment in the EU

• On the supply side, structural reforms at member state and EU level are crucial to lift potential growth and stimulate investments

• But there is also a case for well-designed public support on the demand side, that can catalyse substantial follow-on investment by the private sector

19961998

20002002

20042006

20082010

20122014

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

EU 28 growth rates in chain-linked volumes (2010)

EU28_GDP EU28_GFCFSources: Eurostat.

Business investment growth in advanced economies fell from 4.7% over 1996-2007 to 0.5% over 2008-2014

Bussière et al. (2015) argue that • about 80% of the recent slump in

investment is due to expected demand, while 20% to uncertainty

• financial conditions (user cost of capital) have a minor impact overall (except in euro area periphery)

• over-optimistic GDP growth forecasts have supported business investment since the great financial crisis

Source: Banque de France. Data include 22 OECD countries.

Who invests in the EU28? By sector…

57%

2%

15%

26%

Non-financial corporationsFinancial corporationsGeneral governmentHouseholds; non-profit in-stitutions serving house-holds

Sources: Eurostat.

Who invests in France?

GFCF in 2014 by sector in France (% of GDP in value)

0%

5%

10%

15%

20%

25%

non-financial enterprises

households

generalgovernment

other

Source: INSEE, national accounts, base 2010.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ensemble del'économie

Sociétés nonfinancières

Ménages Administrationspubliques

non residentialbuildings

dwellings

machinery andequipment

intellectualproperty rights

productive assets

Nationaleconomy

Non-financialcorporations

Households Generalgovernment

Decrease in GFCF was relatively mild in France during the crisis but recovery is slower, especially due to the

decrease in households investment

GFCF in volume (=100 in 2007)

Source: OECD.

80

85

90

95

100

105

110

2007 2008 2009 2010 2011 2012 2013 2014

France

Germany

Euro area

United Kingdom

United States

3 ways to tackle the investment gap

Aim: to mobilise at least €315 billion in investment across the EU

Support investment in real economy• European Investment

Advisory Hub • European Investment

Project Portal

Mobilise finance for investment• European Fund for

Strategic Investments• Cooperation with

National Promotional Banks

Investment Plan for Europe

Create an investment friendly environment• Improving the

regulatory environment

• Structural reforms

Mobilising new investment...

…with targeted products…

Continuously adapting to market needs

…to make a difference

Addressing market failures or sub-

optimal investment situations

Financing operations not

possible to same extent otherwise

Absorbing part of the risk to trigger

additional investments

Value added

Maximising growth Supporting employment

Attracting other sources of finance

Impact orientation

Key areas +opportunities for promoters/investors

Targeting strategic public and private investment• Infrastructure: including transport,

energy and digital• Innovation: education and training,

health, research, development and innovation

• Renewable energy: expansion of renewable energy generation and support of energy and resource efficiency

• Environment: projects in the environmental, urban development and social fields

• SMEs and midcaps: financing support through local partner banks and institutions

EU Member States, National Promotional Banks, Investment Platforms and private sector can participate in different ways :• Projects

– Mobilisation of private sector capital (e.g. private investors, commercial banks, promoters)

– Co-financing / Risk-sharing with EIB/EIF• Investment Platforms

– Pooling of projects with thematic or geographic focus

– Agreement or Fund– Can benefit from EU guarantee via EIB– Cooperation with EU National Promotional

Banks• Interest by institutional investors, third

countries and Sovereign wealth funds– Working group EC-EIB-China on investment

cooperation

EFSI setup and governance

All EFSI operations are within the EIB Group (EIB&EIF)• On the EIB’s balance sheet (no separate entity)• Subject to standard due diligence• EIB & EIF governing bodies approve each operation

Additional EFSI governance:• Steering Board• Investment Committee, headed-up by a • Managing Director Operations already started in spring 2015

EFSIEIBGroup

Timeline and investment period2015 2016 2017 2018 2019 2020

30 June

2nd deadline for

signature of EFSI

Operations

4 July

Deadline for approval

of EFSI Operations

4 July4 July

Entry into force of

EFSI Regulation

1st deadline for signature of

EFSI operations

Investment period to achieve EUR 315bn of total investments “Extended” investment period

EFSI operations to target EUR 315bn of total investment by 2018Actual investment period runs until 30 June 2020

Third anniversary of signing the EFSI

Regulation