Juncker defends investment plan

Addressing lawmakers at the European Parliament in Strasbourg on Wednesday, European Commission President Jean-Claude Juncker said he hoped a new investment program for the 28-member bloc would breathe fresh life into EU economies, many of which have failed to grow since the global financial crisis and are still mired in mass unemployment and alarmingly low inflation levels.

"Europe needs a kickstart, and today the Commission is providing the jump cable," Juncker told legislators. He called the plan "the missing piece in the puzzle" to unleash the EU's economic capabilities.

He referred to the new European Fund for Strategic Investment (EFSI), which was to have 21 billion euros ($26 billion) at its disposal, with 16 billion euros covered by EU member states and the remaining 5 billion euros to come from the European Investment Bank (EIB).

Juncker emphasized the plan essentially was not about securing new money, but rather re-engineering existing funds by bringing together various smaller investment programs and channeling them towards one big effort.

Snowball effect?

Juncker said the plan would be perfectly suited to address the bloc's current drastic lack of investments, all the more so since guarantees for the financing of private-sector driven projects would eventually make the initial 21 billion-euro fund attract total investments by a factor of 15 to about 315 billion euros in available resources.

Officials hope the EFSI can be operational by mid-2015. A team of financial experts will then help decide on projects, based on their likelihood to attract private investors. The Commission believes the plan will create up to 1.3 million new jobs across the bloc.

German Chancellor Angela Merkel said she backed Juncker's plan "in principle," if the funds are invested wisely.

"Investment is important...but what's important above all is which projects" are targeted, Merkel said.

Italian government leaders welcomed the scheme, saying it signaled a turnaround in Europe's economic policies, meaning a move away from too much austerity and towards more spending to boost domestic cyclical developments.

Juncker faces a vote of confidence in the European Parliament on Thursday after euroskeptic lawmakers filed a motion against him. Many people are criticizing the former Luxembourgish Prime Minister's role in that country's loose tax law for corporations.

Not everyone is pleased

But German deputy conservative floor leader Hans-Peter Friedrich told the Reuters news agency that he was not impressed by the plan.

"The Commission wants to provide guarantees for investments which on their own are perceived as being too risky by potential investors," Friedrich argued. "And now taxpayers in Germany and elsewhere in the bloc will have to foot the bill for any losses that may be incurred in the process."

He urged EU member states to push on with their structural reforms instead so as to become more attractive to investors.

"Nobody wants to invest in nations where structures are old-fashioned and businesses are hampered by red tape," Friedrich said.

hg/cjc (Reuters, AFP, dpa)