Update on the next Multiannual Financial Framework 2014-2020 Private Sector Forum Brussels, 18 April 2013 Eva Rømer
Commission proposal June 2012 Ca. 1% of GNI, down from ca. 1,1% of GNI More investment spending: Competitiveness Infrastructure Security Global issues Less traditional spending: Cohesion Agriculture Increased use of financial instruments 2
What are EU Financial Instruments? Equity/risk capital: e.g. risk capital to infrastructure projects or venture capital to SMEs with high growth potential Guarantees to financial intermediaries that provide lending to e.g. infrastructure projects, SMEs, microfinance Other risk-sharing arrangements with financial intermediaries in order to increase the leverage capacity of the EU funds in infrastructure projects and infrastructure RDI or a combination of the above with other forms of EU financial assistance (e.g. grants) Grants and FI are complementary! 3
Scope for financial instruments Financial viability 0 EU supported financial instruments Grants Level of risk 4
Financial Instruments Commission MFF proposals to be adjusted Research, Development Innovation Growth, Jobs and Social Cohesion Infrastructure Centrally managed by COM Horizon 2020 Equity and Risk Sharing Instruments Competitiveness & SME (COSME) Equity & guarantees EUR 1.4bn Social Change & Innovation Micro-finance EUR 192m EUR 3.5bn Creative Europe Guarantee Facility EUR 210m Erasmus for all Guarantee Facility EUR 881m Connecting Europe Facility (CEF) Risk sharing (e.g. project bonds) and equity instruments Overall budget EUR 30bn Share of financial instruments to be decided Instruments under Structural and Cohesion Funds EU level Shared Management Off-the shelf instruments Tailor made instruments Significantly higher amounts than currently 5
EU budget 2014-2020 European Council agreement of 7/8 February COMPARISON MFF 2007-13/2014-20 Billion EUR in 2011 prices Difference (in %) 2007-2013 2014-2020 1. Smart and Inclusive Growth 446,3 450,8 1,0% Of which Competitiveness 91,5 125,6 37,3% Of which cohesion policy 354,8 325,1-8,4% 2. Sustainable Growth: natural resources 420,7 373,2-11,3% Of which Market related expenditure and direct payments 336,7 277,8-17,5% 3. Security and Citizenship 12,4 15,7 26,8% 4. Global Europe 56,8 58,7 3,3% 5. Administration (including pensions and European schools) 57,1 61,6 8,0% 6. Compensations 27,0 Total appropriations for commitments 994,2 960,0 3,2% In % of EU-27 GNI 1,12% 1,00% 6
What happens next? Negotiations between European Parliament and Council But: Parliament rejected the European Council agreement on 13 March Trilogues scheduled for. 7
New Regulatory Environment Financial Regulation and its Rules of Application: Dedicated title for financial instruments, clarification of purpose, intervention modalities, parameters, reporting requirements, etc. Consistency in rules for EU-level instruments and instruments under the Structural Funds. Possibility of joint instruments combining Structural Funds resources with EUlevel instruments. Consistency in design of individual EU-level instruments. 8
New legal framework for EU level financial instruments (FI) Financial Regulation Delegated Act Financial Instrument Standards Regulations for new programmes: Horizon 2020, COSME, Connecting Europe Facility, Creative Europe, Erasmus for all, etc. Authorises the use of FI. May define type, duration, specific features (e.g. entrusted entity) or targets Single Framework Agreements (FAFAs) with entrusted entities Delegation Agreement with entrusted entities for individual/single programme Delegation Agreement with entrusted entities for individual/single programme Delegation Agreement with entrusted entities for individual/single programme 9
Incorporates lessons learned Audits and evaluations carried out of existing innovative financial instruments are positive regarding their output. Further improvement possible by streamlining rules to simplify implementation within a clear and dedicated legal framework. Scale is important -> fewer, larger instruments without overlaps Visibility and transparency of instruments can be improved through these and other means. Increased coherence and consistency between instruments is extended to Structural Funds 10
GREEN PAPER ON LONG-TERM FINANCING 11
Enhancing long-term financing Financial stability & confidence in financial markets are necessary, but not sufficient Building on stabilising regulation and supervision, further action to enhance the long-financing of the EU should address: The capacity of financial institutions to channel longterm finance The efficiency & effectiveness of financial markets to offer longterm financing instruments Cross-cutting factors enabling longterm saving & financing The ease of SMEs to access bank & nonbank financing 12
Next steps Period of consultation of 3 months (until 25 June) Follow-up will be based on outcome of consultation: Possible regulatory adaptation; Encouraging stronger coordination; Promotion of best practice; Policy work or further analysis in other areas. Some actions already in the pipeline, such as: Long-term investment funds proposal (announced in SMA II) EIOPA work on the calibration of capital requirement for long-term assets in Solvency II 13
PLEASE RESPOND: HTTP://EC.EUROPA.EU/INTERNAL_MARKET/TOP_LAYER/FIN ANCIAL_CAPITAL/INDEX_EN.HTM MARKT-CONSULTATION-LONG-TERM-FINANCING @EC.EUROPA.EU 14
More detail: FINANCIAL INSTRUMENTS IN THE NEXT MFF 15
Research, innovation and competitiveness Horizon 2020 Combines research and innovation funding, previously provided via FP7 (RSSF) and innovation part of CIP Foreseen overall budget: EUR 80 bn thereof budget for financial instruments EUR 3.5 bn COSME Strengthening the competitiveness and sustainability of European enterprises, encouraging entrepreneurship and promoting SMEs Foreseen overall budget: EUR 2.5 bn; thereof EUR 1.4 bn for financial instruments 16
Debt instruments for enterprises DEBT INSTRUMENT FOR SMEs 2007-2013 SME Guarantee Facility (SMEG) under the Competitiveness and Innovation Framework Programme (CIP) Risk Sharing Instrument (RSI): A dedicated compartment for SMEs under the Risk Sharing Finance Facility, created in 2011 Debt Instrument for EU Enterprises Growth and RDI DEBT INSTRUMENT FOR SMEs 2014-2020 Loan Guarantee Facility Guarantees and securitisation on loans for all types of SMEs, indicatively EUR 746m RSI-II Facility Guarantees on loans for R&I-intensive SMEs Cultural and Creative Sectors Facility (new) Guarantees for loans to creative and cultural entities EUR 210m to guarantee up to EUR 1bn of lending COSME Horizon 2020 Creative Europe 17
Equity instruments for enterprises EQUITY INSTRUMENT FOR SMEs 2007-2013 High Growth and Innovative SME Facility (GIF) under the Competitiveness and Innovation Framework Programme (CIP) GIF 1 invests in seed, start-up and early-stage SMEs GIF 2 invests in expansion-stage SMEs EQUITY INSTRUMENT FOR SMEs 2014-2020 EU Equity Financial Instrument for EU enterprises growth and RDI Equity Instruments for Research and Innovation - early stage Equity Facility for Growth - expansion stage - indicatively EUR 690m Horizon 2020 COSME 18
Debt instruments for large scale RDI DEBT INSTRUMENT FOR LARGE R&D PROJECTS 2007-2013 Risk Sharing Finance Facility (RSFF) under FP7 provides loans and guarantees to R&D projects DEBT INSTRUMENT FOR LARGE R&I PROJECTS 2014-2020 Loan & Guarantee Service for Research and Innovation Loans and guarantees to R&I (non-smes) activities of mid-caps and large firms, universities, research institutes, research infrastructures, etc. Horizon 2020 19
Debt instrument for micro-credits EQUITY AND DEBT INSTRUMENT FOR THE SOCIAL ECONOMY 2007-2013 European Progress Microfinance Facility (EPMF, est. 2010) Guarantees and counter-guarantees for microcredit lending Loans or Equity to microcredit institutions EU Budgetary contribution EUR 100m EQUITY AND DEBT INSTRUMENT FOR THE SOCIAL ECONOMY 2014-2020 Micro-finance and social entrepreneurship instrument Guarantees, micro-credit, equity and quasiequity to financial institutions that invest or lend to entrepreneurs, especially those furthest from the labour market, and social enterprises. Proposed EU budgetary contribution Access to microfinance EUR 87m Social enterprise development EUR 96m Capacity building EUR 9m Social Change and Innovation 20
New student loan facility (future entrepreneurs?) DEBT INSTRUMENT FOR STUDENTS Student Loan Guarantee Facility Guarantees for student loans EUR 881m Erasmus for All 21
Infrastructure: Connecting Europe Facility The EU infrastructure investment plan for 2014-2020 EUR 30 billion (incl. EUR 10 bn from Cohesion Fund) One facility for three sectors, centrally managed Transport EUR 24 bn Energy EUR 5 bn Telecommunications EUR 1 bn In addition: three large projects (not in CEF): Galileo (EUR 6.3bn), ITER (EUR 2.7bn), GMES (EUR 3.8bn) 22
Infrastructure debt instruments INSTRUMENTS FOR INFRASTRUCTURE 2007-2013 Loan Guarantee Facility for TEN-Transport (LGTT, started in 2008) EUR 250m of EU budget, initially EUR 500m Pilot phase for project bonds (PBI, started in 2012) EUR 230m budget for 2012-13 DEBT INSTRUMENT FOR INFRASTRUCTURE LGTT and PBI (including pooling of funding from third parties) TEN-T, TEN-E and broadband Loans and/or guarantees facilitated by risksharing instruments, including enhancement mechanism to project bonds, issued by a financial institution on its own resources: Expanded LGTT to better reflect market circumstances : availability payment schemes? PBI with a higher credit enhancement rate, I.e. 30% of the current 20% Exact budget not yet specified Connecting Europe Facility 23 23
Infrastructure equity instrument INSTRUMENTS FOR INFRASTRUCTURE 2007-2013 Marguerite Fund (started in 2010) EUR 80 million of EU budget EQUITY INSTRUMENT FOR INFRASTRUCTURE Infrastructure financial instruments (including pooling of funding from third parties TEN-T, TEN-E and broadband Equity instrument, such as investment funds with a focus on providing risk capital for actions contributing to projects of common interest; potential co-financing scheme Budget not specified, the need for such an instrument not yet confirmed Connecting Europe Facility 24 24
Timeline 2011: Commission proposals were adopted 2012: Discussions in Council and Parliament on the legal framework (Financial Regulation, delegated act) as well as on the basic acts for the specific instruments 2013: Expected adoption of legal bases by European Parliament and Council, ex-ate assessments of the financial instruments, negotiations with entrusted entities, preparations for the roll-out 2014: Roll-out, instruments operational 25
Conclusions EU Financial Instruments: Well-tested, efficient and effective way of supporting growth, jobs and innovation. EIB and EIF continue to be key partners, our cooperation stretches over 15 years and many generations of financial instruments. New role for further entrusted entities as well as financial intermediaries: Risk-sharing, higher leverage and use of the knowledge and expertise to reach a greater number of final recipients. Financial instruments have limited resources deployed only in situations with highest EU added value. Further financing provided through the Structural Funds, national and regional programmes and market players! 26
Thank you for your attention! 27