The effectiveness of the European Fund for Strategic Investments (EFSI) may have been overstated, according to a new report by the European Court of Auditors (ECA).
The report, released today, found that while EFSI has clearly demonstrated its effectiveness in raising money for future investments a significant proportion of the actual investment it has mobilised either functions as a replacement for other EU financing or could have been sourced from other public or private finance bodies. Many of the investments sanctioned by EFSI were allocated to the larger EU-15 Member States, which already benefit from established national banks.
EFSI was initially set up in 2015 under the “Juncker Plan”, the EU’s primary investment endeavour, with the goal of generating €315 billion in public and private investment in infrastructure and small and medium enterprises across the EU. It is a joint project of the European Commission and European Investment Bank (EIB).
The auditors conducting the report found that EFSI has been successful in its attempts to raise finance to support investments, sourcing €65.5 billion from the EIB by July 2018 – substantially more than its indicative goal of €61 billion. Support generated by EFSI allowed the bank to increase its higher risk financing operations by 400 per cent between 2014 and 2018.
Several projects funded by EFSI, however, had other investment options either from private or public sources of funding; or they could have sourced investment from the EIB directly. The report suggested project overseers preferred to work with EFSI investment where possible due to the fund’s generous rates and long payback period.
According to EFSI, its mobilised investments total €335 billion; however, auditors questioned the methodology used when arriving at this total. In some of the reported cases, the degree to which EFSI’s financial support boosted additional outside investment was found to have been overstated; in others, the reported numbers did not account for the fact that EFSI funding had simply replaced that of other EU financial instruments.
The report called into question the effectiveness with which EFSI monitors and reports its investment activity.
Leo Brincat, the Member of the European Court of Auditors responsible for the report, said: “EFSI has a high profile as a flagship EU programme. This makes it all the more important that any claims for its effectiveness are built on solid foundations.”