Europe needs all of us to build its future.

Long Term Investments: time to think about building a new growth in Europe

The lunch debate took place

on Tuesday 21 June, from 12:30pm to 2:30pm

In Fondation Universitaire, 11 rue d’Egmont, BRUSSELS

On the theme:

Long-term investments:
time to think about building a new growth in Europe

Philippe HERZOG introduced the lunch-debate with the participation of:

Franco BASSANINI, President of Cassa Depositi E Prestiti, President of Astrid Foundation
Alain BERGER, Director of European and International Affairs, Alstom
Christophe BOURDILLON, Permanent Representative to the European institutions
Francisco CABALLERO SANZ, Head of Unit, DG MARKT, European Commission
Eric PEREE, Associate Director, Institutional Affairs, European Investment BankLong Term Investment

Long-term investment is a crucial factor in the development of new growth in Europe. In order to increase our growth potential and create the conditions needed for sustainable development, we must invest substantially in training, research and innovation, and infrastructure for the energy and digital technology sectors. However, the choice, implementation and governance of projects are not easy topics, nor are the funding sources and their organisation. Such investments often entail high fixed costs and the return on investment tends to be long term. In addition, the corresponding assets must be underwritten by financial investors willing to make a ten-year commitment at least. The European Union, with the backing of the Member States and regions, is taking steps to promote and set up long-term investment programmes of European public interest, particularly in the fields of infrastructures and venture capital. We would like to assess the governance methods employed and analyse the main obstacles to be overcome.In addition, we would like to look in greater depth at the general conditions in which long-term investments will be financed in today’s new and highly uncertain environment. What role does the European Union expect institutional investors to play (pension funds, life insurance funds, semi-public funds, foundations, responsible investment funds and, of course, the EIB)? How will these institutions work with the banks to assist businesses at each stage of their development? We will look, in particular, at the regulatory framework: is it really adequate and effective? Current decisions regarding prudential and accounting regulations have given rise to a great deal of criticism, reflecting concerns that they hinder long-term financial investment and the sharing of risks.Lastly, the role of public institutions deserves special attention. The state of public finances has worsened considerably, which could lead to a “crowding-out” effect whereby investors are encouraged to finance public debt rather than to invest long term in the real economy. Furthermore, bearing in mind that investors have been considerably more averse to risk since the financial crisis struck in 2008, and that they are now demanding a high rate of return on long-term investments, public financial support – although necessary – could lead to the unfair distribution of profit and loss, to the detriment of the public. We would like to devote a significant part of this lunch debate to examining the financial facilities offered by the Commission and the potential leverage effect of the European budget, especially in light of the proposed introduction of project bonds. A consultation has been launched on this proposal, and it will be interesting to see what the outcome is.

More information on the November 2011 European Economic Debates (Entretiens Economiques Européens or EEE
More information on the LUNCH DEBATE CYCLE: For a Social Market Economy: Reconciling Competitiveness with solidarity