Europe’s economy needed a jolt to recover some of its spark after the financial crisis. The Investment Plan for Europe aimed to provide that boost. Our economic models show it’s working.
“The Plan has set the economy in motion, and it’s a motion that’s self-sustaining”
EIB economists used a well-established economic model to assess the future impact of the investments supported by all its operations during 2015-16, as well as of the loans it made specifically under the Investment Plan’s European Fund for Strategic Investments. They found that the EIB Group’s lending is likely to have a major impact on Europe’s economy.
By 2020, overall finance approved by the EIB Group within the EU in 2015-2016 will: • support EUR 544 billion of investment • add 2.3% to GDP • add 2.25 million jobs
By 2020, the EIB Group’s loans approved under the Investment Plan by the end of 2016 will: • support EUR 161 billion of investment • add 0.7% to EU GDP • add 690,000 jobs
The EIB findings demonstrate that the EIB Group’s loans – whether made in good economic times or bad – lay the foundations for long-term growth, beyond providing an immediate boost to the economy. “Our main purpose is improving EU competitiveness and long-term growth,” says Debora Revoltella, the Bank’s director of economics. “These findings show that in the long term we will have a much bigger European economy, regardless of the economic cycle.”
Success against market failure
It’s important for the EIB Group to assess the impact of its work, so it can ensure its financing is effective on behalf of EU citizens. The EU bank’s lending under the Investment Plan has already been welcomed in Brussels, where the programme has been extended and its size has been increased. The European Fund for Strategic Investments, which is operated by the EIB, started in mid-2015. It’s backed by a guarantee from the EU budget and was originally intended to trigger EUR 315 billion of investment over three years. That has been increased to EUR 500 billion by 2020.The aim is to support companies that might otherwise have had a tough time finding bank financing, targeting key areas of innovation and small businesses. “We built this programme to answer a crisis when there were specific market failures,” says Natacha Valla, head of the EIB’s economic policy and strategy division. “This study shows that we are making a difference.” Conservative assumptions
To measure its impact, EIB economists had to account for the complex interaction between the Bank’s operations and other activities in the economy. The economists teamed up with the European Commission’s Joint Research Centre in Seville and worked with an economic model called RHOMOLO that was used to calculate whether increasingly scarce public financing was being used effectively. “We were conservative in the assumptions we made in the model,” says Georg Weiers, an EIB economist who worked on the study, “and yet the impact results are still very sizeable.”Once the initial boost to the economy dissipates, the study shows that the Investment Plan will continue to have a strong structural effect on the economy in the long term, just as other loans by the EIB Group do.
In 2036, the investments supported by the EIB Group’s loans approved under the Investment Plan by the end of 2016 will: • add 0.4% to GDP • add 344,000 jobs
Overall investment supported by loans approved in the same 2015-16 period by the EIB Group will make an even bigger impact after 20 years. It will: • add 1.5% to GDP • add 1.3 million jobs
“The impact is big and it persists over time,” says Valla. “In 20 years, there will still be jobs around that are the result of these investments. That’s a key positive outcome from the Investment Plan and all the Bank’s operations.”