Junker's stimulus package is switched off in Greece
by Dimitris Rapidis and Martin Foehler
The European Fund for Strategic Investments (EFSI) is the so-called "Junker Package" that we are discussing since April 2014, before European elections. The major aim of the fund is to trigger private resources towards financing investments of strategic importance and filling in the void of investments in the EU. It is a joint initiative of the European Investment Bank, the EU and the European Commission.
The amount set by the fund is €315 billion, split between different sectors from innovation to energy, transports, education and research to all EU member-states. Additionally, a part of the amount is planned to be directed to SMEs. As of the financing modus operandi, it is structured upon financing tools such as lending, in many cases with low interest rates and with wide repayment periods. In other words, the Junker package is destined to replace the financing role of the banks, acknowledging huge liquidity issues that especially Eurozone's banking system is faced with. The mindset of the program is completely different from what we knew so far with regards to EU funding programs.
For Greece, the total amount can be up to €35 billion. But the major problem is that this amount will be mainly addressed to investment projects worth between €18 and €35 million, while the highest financial contribution can reach be up to €500 million. This requirement inevitably excludes SMEs, but also smaller entities that struggle to survive in a deeply fragmented and unproductive business environment.
Coming now to the information side, the entire state mechanism has to get mobilized and launch a broad campaign to inform all interested bodies. Every Ministry needs to have an information desk, whereas the Ministry of Finance should develop close cooperation with the relevant shareholders of the package to identity the major areas of attention and interest. Nothing has been done so far, but, at the same time, the European Commission and the MEPs of Greece have done nothing to assist in this process. Similarly, the relevant bodies of the banking institutions are stuck into the same dysfunctions and delays.
Another fact that perplexes the situation is the intention of the Greek government to reform the tax system in a way that it can be more responsive and flexible. During the last 30 years all Greek governments have embarked into the same challenge, always with the same disappointing results. Creditors will inevitably ask why they should expect any sustainable and long-term reform from this specific cabinet. And here the answers will not be at all convincing as, essentially, there are no credits to rely upon. Therefore, the problem for the Greek side is dual: heat up the engines of the tax-collective mechanism, while at the same time be accountable when dealing with domestic actors, groups of interests, and the unions. Hard task whatsoever.
October 2, 2015