Brussels, March 2015
How to make the new European Fund for Strategic Investments a success: Roland Berger und United Europe propose six key elements for mobilising private investment in infrastructure
Over the next three years alone, Europe’s crumbling infrastructure needs investment of approximately EUR one trillion. At the same time, Europe’s capital markets are experiencing historically high levels of liquidity. Yet private investment in infrastructure remains obstinately low.
To overcome this mismatch, EU Commission President Jean-Claude Juncker has proposed to create a European Fund for Strategic Investments (EFSI). With EUR 21 billion in public contributions, the EU Commission and the European Investment Bank plan to mobilise investments amounting to a total of EUR 315 billion.
However, the EFSI’s success cannot be taken for granted given the regulatory and financial obstacles persisting in the European Union.
This is why Roland Berger Strategy Consultants has drawn up a study on behalf of United Europe, a non-profit organisation, suggesting a solution that addresses Europe’s difficulties with infrastructure investment in a holistic, systematic and pragmatic fashion.
According to the study “Squaring the circle: Improving European infrastructure financing”, regulation in the EU is too complex, unpredictable and fragmented across countries. Also risk structure and expected yields are not aligned. Supervisory requirements for banks and insurance companies pose certain obstacles, governance mechanisms fail to meet investors’ requirements and standardised projects are few and far between.
As a solution, Roland Berger and United Europe suggest making the EFSI part of an overall “European Infrastructure Investment Model”. The model proposed comprises six key elements:
- Create a pipeline of investment-grade projects
- Stock the pipeline with current projects to kick-start the market
- Tailor risk-return profiles to different types of investors
- Make private infrastructure investments financially viable
- Establish a robust ownership and governance model
- Actively manage project risks
“Europe needs an organised market for infrastructure investment,“ said Heiko Ammermann, Senior Partner at Roland Berger and author of the study. “This means abolishing the bureaucratic and political obstacles and ensuring a professional investment process.“
Improving European infrastructure is not only crucial for general economic development. It is also paramount to completing the single European market, improving energy security and strengthening European innovation.
„What is at stake here is Europe’s competitiveness in the global economy,” said Wolfgang Schüssel, former Austrian chancellor and President of United Europe. “We desperately need more infrastructure investment not just to create jobs in the short term, but also for Europe’s long-term growth perspective.”
The study can be downloaded at: united-europe Roland Berger study
Roland Berger Strategy Consultants, founded in 1967, is the only leading global consultancy of German heritage and European origin. With 2,400 employees working from 36 countries, we have successful operations in all major international markets. Our 50 offices are located in the key global business hubs. The consultancy is an independent partnership owned exclusively by 220 Partners.
United Europe is a non-profit association dedicated to the idea of a strong and competitive Europe which can defend its common interests, yet respects the diversity of its peoples. It was founded in 2013 by the former Austrian chancellor Wolfgang Schüssel and the German entrepreneur Jürgen Grossmann. United Europe organises speeches, conferences, research projects and seminars for young professionals. For more information, please go to: www.united-europe.eu