Rome Investment Forum – 17 December 2016
Results and prospects of the Juncker Plan were discussed during the second session of the Rome Investment Forum 2016, sponsored by FEFAB, dedicated to finance for the development of innovation and infrastructure, and held last December 17, representatives of the insurance, banking and institutions.
Reflections from the forum, in particular those of the leader of the Socialists and Democrats in the European Parliament and presidential candidate in Strasbourg Gianni Pittella, shows that the key word to understand the European Mediterranean policy has stagnation.
Indeed, he stated that “the causes of this stagnation are varied, primarily an east-west oriented political orientation more and more along the axis of the European Union (I think the TTIP, the trade agreement and investment being negotiated between EU and the US and relations with the countries of Eastern Europe). We need a new approach, hinged on two dimensions: foreign policy and new development pact. Behind a greater effort to concentrate investments to the South of the Mediterranean, has yet noticed the MEP, there must be a Europe renewed, able to “propose a more sustainable development model.”
The study centre BNL Group BNP Paribas, through the words of his manager, John Ajassa, used the term “secular stagnation”, whose most obvious symptom is the decline in exports and the contraction of world trade. “To get out of it we have to shift the investment focus, delicate creatures that need for economic and political incentives.”
Restore the competitiveness of the southern Mediterranean is the indicated priorities Abouyoub Hassan, Ambassador of the Kingdom of Morocco in Italy. To do that you need to address a number of issues: “bolster investor confidence and restore peace”, address the issue of governance and “create the conditions for the emergence of a fiscal policy, based on savings and investments”. “We lost too much time, we must open a real dialogue for development of the Mediterranean,” said the ambassador.
Streamline European decision-making
In conclusion of the Pittella and Abouyoub works they have proposed some recipes to boost financing for development of the Mediterranean. For the presidential candidate of the European Parliament is, first, to streamline European decision-making; then required “an institution that brings together and give guarantees for private investors, provided they exceed the triple A logical”.
The ambassador suggested dropping funding grant, which “are useless.” “We must also rethink the funding model, giving priority at risk assessment and risk mitigation”.
Alessandro Caranodella, DG Transport Brussels, emphasized on the European plan for outside investment (PIE), proposed by the Commission last September: a tool which will stimulate investment in Africa and in the EU neighbourhood countries, in particular to support the economic and social infrastructure and SMEs, by the removal of barriers to private investment. With a contribution of 3.35 billion euro from the EU budget and the European Development Fund, the PIE will support innovative guarantees and similar instruments to hedge private investment, to mobilize up to 44 billion euro investment.
A sort of foreign version of the Juncker Plan, designed to “meet the challenge of migration also thinking about the investment side.” Now, said Carano, it comes to acting to federate “the EU and non-EU resources towards investments in cooperation with partner countries in the Mediterranean and Africa, not only on the financial investments plan but also technical assistance” through the transfer of skills.
Brussels hopes to “create a favourable climate for investors through the sectoral dialogue, bilateral and multilateral, to ensure that in these countries there will be established a public-private partnership regime and reliable safety standards”. In general, “there is need to bring the world of public finance and the capital market.”
“Responding to the emergency and lay the foundations for a partnership.” Principles that, according to the president of the Commission for Culture and Education at the European Parliament Silvia Costa (who intervened a surprise during the panel), are important even under the cultural profile. In addition to the European plan for outside investment, therefore, it is “necessary to create a cultural and educational” platform, a kind of “educational corridor” necessary not only for the universities and educational institutions, but also for entrepreneurs.
The southern Mediterranean “become integrated area”, which facilitates investment by the northern shore
Underlining the role of venture capital, Innocent Chive, president of AIFI, said: “Private equity funds may invest in the Southern Mediterranean, bringing private capital to finance companies and infrastructure”.
However, necessary to protect investors, “individuals cannot take the political risk or institutional; you could develop a system of European guarantees to cover the risks of this kind.” However, important to create a network between companies and investors from the two shores of the Mediterranean: Cipolletta launches in particular an appeal to the South of the Mediterranean to “become an integrated area”, which facilitates investment by the North shore.
Another recommendation, defined during the forum by the Minister for Territorial Cohesion Claudio De Vincenti, stresses the need to complete the Banking Union to boost investment in Europe.
The sustainable finance must become a tool to promote responsible actions, inclusive and supportive.
In the last 20 years the international community has committed itself to incorporate the management of risks related to natural disasters in the poorest, said Robert Glasser, Special Representative of the Secretary General of the United Nations countries.
Environmental disasters have economic implications for developing countries, where populations are paying a disproportionate price due to events such as droughts, floods and tsunami. The private sector plays a key role in reducing the levels of risk in the most vulnerable areas, he said Glasser, stressing that the business world should support the implementation of the agreement Parigiper combat climate change.
Rethinking the investment criteria and incentives in agriculture
Private investment should also be strengthened in agriculture to give impetus to the incomes of small farmers, those most affected by the effects of climate change on agricultural production, continued Kostas Stamoulis of FAO. The companies, along with governments, have the task to work together to rethink the investment criteria and incentives in agriculture in order to uphold the 2030 Agenda for sustainable development.
To ensure the socio-economic conditions for the development of human potential requires financial institutions to serve people, said Archbishop Silvano Maria Tomasi. Finance needs an ethic cantered on people to create appropriate conditions for the development of society as a whole.
Sustainable Finance is at the centre of a dialogue at national level involving both the private sector and civil society, he said Davide Dal Maso, co-ordinator of the national dialogue on sustainable finance, UNEP Inquiry. The Ministry has set up a working group, with representatives of the financial world, which in February the Bank of Italy will present a report on issues related to sustainable finance in the country, with the objective of outlining public policies and joint strategies.
At European and international sustainable development has now become a new model of governance, said Pier Virgilio Dastoli, President of the Italian Council of the European Movement (CIME). In this context, the CIME has proposed the creation of a European platform for promoting dialogue between the public and private sectors in support of green and circular economy, with the goal of fighting climate change.
The political dialogue is indeed crucial for boosting sustainable investments, highlighted Flavia Micilotta, pan-European director of the association dedicated to the promotion of sustainability through the Capital market (Eurosif), that to be such must incorporate three elements – governance , society and the environment – in a long-term approach. An example of sustainable finance is investments in resilient and flexible structures, involving collaboration between private and public actors in responding to local needs, has commented Jonathan Watson, co-founder of integrated think tank.
To avoid economic stagnation that began with the financial crisis, Europe needs to invest more, said Robert Ophèle, the Banque de France. To start a long-term investment, however, the Eurozone should have a single jurisdiction and complete the banking union, ensure that risks are managed on a diversified basis in an efficient financial market.
Europe can lead the recovery of investments even at a global level, adopting reforms to 360 degrees involving different sectors, from business to that of finance, said the secretary general of the FEBAF Paul Garonne, provided to tackle the problem of lack of integrated financial services in the EU, which creates uncertainty in the market.
The Minister for Territorial Cohesion and the South Claudio De Vincenti, closing the Forum, stressed the need to conclude the integration process of financial services in Europe, by adopting a modern and transparent governance, with stronger tools to citizens and understandable , not only to insiders.
In this context, it concluded De Vincenti, the state has a democratic duty to deal with market failures, initiating infrastructure investments and politics industrial market-oriented. These are interventions that can help create an environment in which the role of finance is facilitated, both in the management of asymmetries in the definition of long-term investments.
On the need to stimulate private investment was also addressed by Vice President of the European Commission Jyrki Katainen, who stressed: “In many areas, particularly those related to research and development activities, which have experienced disruptive change, it is essential to mobilize private investment “. The Juncker plan “moves precisely in this direction: the EIB has approved about 20% of transactions in the R & D sector. Obviously we need to invest in human capital, since the skills are the catalyst element, “he added.
“The combination of the capital markets is one of our main objectives, but must be strong and well made at national level to enable of make different credit opportunities, especially for SMEs,” the Commissioner continued, recalling the Action Plan presented by ‘Executive Community in September 2015. “The Plan has identified a serious action for the Union of the capital markets: most of them have already been implemented, the remaining will be implemented in the coming months,” he assured Katainen.
Therefore, the Commission Vice-President recalled the proposal made recently by the Berlaymont Building for start-ups, scale up and crowdfunding, which provides, among other initiatives, the launch by the EU Executive and the EIB of a pan-European fund of funds venture capital: the EU will provide the cornerstone investment by providing a maximum budget of 400 million euro, while the fund managers will have to collect at least three times from private sources, thus mobilizing funding for at least 1.6 billion Euros owned by venture capital .
“We are trying to improve crowdfunding to improve access to finance for new businesses, and we are working on a revision of the functioning of credit to businesses,” notes Katainen.
To strengthen the initiatives supported by the Juncker plan is necessary, firstly, to develop interactions with actors who know the local economic fabric, like “Cassa Depositi e Prestiti” in the case of Italy, on the other hand, take fiscal homogenous policies across the EU, completing the banking union and consolidating monetary union, added the MEP.
In Europe some differences about the infrastructure investments made by the FEIS, explained Lutz-Christian Funke, Senior Vice President of Kreditanstalt für Wiederaufbau (KfW) have been observed. Risk mitigation offered by the Fund, in fact, did not work the same way in the Union, given that in some countries the long-term investment perspective represents a significant challenge for potential investors. It serves, therefore, a more stable regulatory environment, along with increased support from the EU in risk management.
“The Juncker investment plan has relocated to top EU agenda” said Valeria Ronzitti, secretary general of the European Centre of Enterprises and organizations offering services of general interest (CEEP). There remain, however, some limitations, including reduced investments in social infrastructure and the lack of innovation of the physical infrastructure, which can be overcome, within the framework of the strengthening of the FEIS, with more additionality and coordination with other European funding instruments, such as Horizon 2020 and the Connecting Europe Facility.
In addition to coordination with other European funds, concluded Laurent Zylberberg of Caisse des Dépôts et Consignations (CDC), the FEIS 2.0 will also improve cooperation between all parties involved, with the aim of making the implementation easier Juncker Plan and transparent.
According to Domenico Arcuri (CEO of Invitalia Spa) “the time has won the battle against both space and money” -as regards the state of the investments. “It means that the places where we produce goods and services are not necessarily the ones where there are the basic conditions to produce them: it produces an increasing amount of goods and services, and hence of wealth, in the places of the world where this is simple and fast.”
Situation that has an immediate consequence: the financial assets that can be turned into investments “are allocated not where national systems provide financial incentives for this to happen, but where certain that is this monetary mass produce income in a sufficiently short time and with a certain safety”. In other words, “you invest if you are sure that in a reasonable time that investment will become rich.”