Mr. John Hogan:

I thank the Chairman for the invitation to address the joint committee on the investment plan for Europe which aims to address the low level of investment in Europe in recent years, thereby promoting economic growth and increased employment. Although European Commission estimates put the drop in investment at about 15% compared to 2007 figures, within this there are variations across member states. In response, the Commission has brought forward its proposals for action in the form of the investment plan for Europe. Launched on 26 November last and endorsed by European leaders in December, the plan proposes a number of measures to unlock public and private investment in the European economy of some €315 billion in the next three years.

The plan has three key strands, namely, actions to mobilise finance for investments, ensuring finance reaches the real economy in Europe, and measures to improve the investment environment in Europe. In order to mobilise finance for investment, as the key action, the European Commission and the European Investment Bank, EIB, have proposed the establishment of a new European fund for strategic investments, EFSI. Seed capital for the fund will be provided by the Commission in the form of an EU guarantee of some €16 billion, together with an investment of €5 billion from the EIB. While other possible public and private contributions may add to this total, the Commission and the EIB estimate that the initial funding of €21 billion can be leveraged to facilitate a total investment of some €315 billion, with €240 billion earmarked for long-term investments and €75 billion channelled to SME and mid-cap companies.

A legislative proposal in the form of a regulation to give effect to the EFSI has been published and this week member states began discussions on the instrument in Brussels. The Latvian Presidency has set out an intensive programme of meetings aimed at working through the proposed regulation in order to reach common agreement across member states in time for the March ECOFIN. Building in discussions with the Parliament, the timeline for adoption of the regulation is envisaged for the summer, which means that, with the establishment of the fund, the formalisation of the governance arrangements, etc., the first activity by the fund is not likely to happen until the autumn. It is expected that advance work will be undertaken to warehouse projects which can be assessed as being supportable vis-à-visthe EFSI’s criteria. These could be funded quickly under the EFSI once it is active.

Under the second strand to ensure finance can reach the real economy, a special task force was established last October to develop an EU project pipeline of viable investments of European significance. The task force was jointly chaired by the EIB and the European Commission and included a representative from each member state. The task force had a key objective of compiling, by the end of the year, a list of economically valuable strategic investments across the public and private sectors. The aim was to try to identify and highlight projects across Europe that are not being advanced owing to economic, regulatory, financial or other reasons. The task force also sought to identify barriers and bottlenecks to project investment and propose solutions. The complete list contains approximately 2,000 projects from the 28 member states, with a total investment value of €1.3 trillion.

As part of this process, Ireland submitted a list of 70 projects, valued at approximately €23 billion. The Irish project list represented a compilation of potential investment projects as put forward by the Departments with policy responsibility for the relevant sectors but without any overall assessment or prioritisation of the projects from a national perspective. Inclusion in the list submitted to the EU-EIB task force does not confer any particular status or guarantee of funding for the projects in question, either at a national or European level. It represents a compilation of potential investment projects in the relevant sectors, any of which could potentially be commenced between 2015 and 2017, subject to being evaluated and approved by the relevant sanctioning authority, typically the relevant Government Department, in compliance with the public spending code and subject to funding being available. There is no prioritisation of projects within the list. The Irish projects were not assessed or endorsed by the Departments of Public Expenditure and Reform and Finance prior to their submission to the EU-EIB task force as the urgency attaching to the European request did not allow time for Ireland or other member states to do this.

Similar statements attached to almost all of the lists submitted by the 28 member states and any proposal to proceed on Irish projects would be subject to the normal capital expenditure and cost-benefit assessments and having regard to Government priorities for investment. The overall list does, however, serve the useful purpose of highlighting for potential investors a pipeline of projects across Europe which, with some risk support from the EFSI, could proceed. The EFSI is intended to provide support through the provision of debt funding, not grants for such projects. This has implications for the debt and fiscal position of member states in the context of public investment projects.

As the committee is aware, the Commission published guidance on the existing flexibility under the Stability and Growth Pact rules, following through on a commitment given at the June 2014 European Council and given concerns voiced by member states in the lead-up to the December European Council. The Commission's release accompanying its guidance stated member state contributions to the EFSI would not be counted when assessing the fiscal adjustment. This will be the case for all member states, whether in the preventive or corrective arm of the pact. The Commission’s release also stated for countries benefiting from the so-called "investment clause", co-financing with the EFSI of projects or investment platforms would also benefit from favourable treatment under the pact. The Commission also stated that, irrespective of the EUROSTAT accounting treatment, it would take a favourable position towards such voluntary capital contributions to the EFSI for the purposes of the assessment of the debt and deficit criteria under the Stability and Growth Pact.

We are still considering the exact value of this guidance to Ireland in the context of the positive developments in the Irish economy in 2014 and the expectations for 2015. Finally, in promoting the final strand of work on the plan in the area of improving the investment environment, the Commission is committed to improving the predictability and quality of regulation in Europe and to removing sector-specific and financial barriers to investment.

Ireland is approaching work around the European investment plan in as open and constructive a fashion as possible through full participation in the negotiation of the European fund for strategic investments regulation and any continuation of the work under the project task force. This is necessary to ensure that we take appropriate opportunities which make economic and budgetary sense if they arise as part of the final political agreement on the EFSI proposal.

I thank the committee members for their attention. We are happy to take follow-up questions and provide further clarity if required.