Boosting investments in the EU

The highly followed virtual conference by the European Court of Auditors on ‘Boosting investments in the EU in times of crisis’ that I was invited to co-address and moderate offered the opportunity to address topical and controversial questions; such as is the European Investment Bank doing the work of banks by crowding out private market finance. 

As the external auditor of the EU, we have been following closely the landscape of the EU’s financial instruments and policy initiatives for mobilising investment in the EU particularly from a performance audit standpoint. We have published several reports and opinions over the past years that have touched upon the activities of the EIB. In 2019, we published a performance audit on the European Fund for Strategic Investments (EFSI) for which I was reporting member.

Our audit objective was to assess whether EFSI was effective in raising finance to support additional investment within the EU. We concluded that EFSI has been effective in raising finance to support substantial additional investment in the EU.

However the reported estimate of investment mobilised does not take account of the fact that some EFSI operations replaced other EIB operations and EU financial instruments or the fact that a part of the EFSI support went to projects that could have been financed from other sources albeit on different terms. In additional we concluded that action needs to be taken to improve the geographic spread of EFSI- supported investment.

More specifically in relation to crowding out, we found that:

Nearly a third of projects signed under the Infrastructure and Innovation Window could have been financed without EFSI support but not on such favourable terms.

While the assessment of additionality for the IIW projects takes into account market failures or suboptimal investment situations, it did not necessarily include assessing whether the project could have taken place with other sources of finance.

We found that the main reasons for opting for EIB financing included : (i) the EIB’s experience and non-financial contribution; and/or (ii) the cost of funding was lower than alternatives; and/or (iii) the longer maturity; and/or (iv) it lowered the risk to other investors.

In certain cases, the EIB used the more favourable financial conditions to justify the additionality of an operation. We have seen how EIB financing might be preferred simply because it is cheaper than the market. In which case there is the risk of displacing other sources of finance. Through our work, we identified some infrastructure and utility projects that would have been financed by the market.

We also found that the EIB assessment focused on whether EFSI support attracts other sources of finance rather than whether it avoids displacing available sources of finance from commercial banks, capital markets, NPBIs or even EU-managed EU financial instruments or the EIB’s own risk financing.

In conclusion we strongly recommended strengthening the assessment of whether potential EFSI projects could have been financed from other sources.

Leo Brincat – European Court of Auditors, Luxembourg

Unfortunate gender-bias

A fly rests on the head of US Vice President Mike Pence as he takes notes during the vice-presidential debate against US Democratic vice-presidential nominee and senator from California Kamala Harris. Photo: AFP

In the AFP news agency article ‘Fly creates buzz at VP debate’ (October 8, timesofmalta.com), there is unfortunate gender-bias. 

Reporting on the critical matter of the fly crawling across the US Vice President’s shiny, white head, the author writes that Mike Pence was “discussing the sombre issue of racial injustice and police reform”.

Nothing could be farther from the truth.

At that moment, Pence was not only not discussing sorely needed reforms, but he wasn’t even speaking at all. He was staring vacantly into space, eyes glazed, as the fly buzzed atop his scalp. In the meantime, Senator Kamala Harris (which the article only refers to as a “Democrat”) was chastising his administration for advocating white supremacy:

“Last week the President of the United States… refused to condemn White Supremacists... This is a part of a pattern... He called Mexicans ‘rapists and criminals’. He instituted as his first act a ‘Muslim Ban’. On the issue of Charlottesville, where people were peacefully protesting the need for racial justice… and on the other side there were Neo Nazis… [he] said, ‘There were fine people on both sides’.”

But the fly received far more press than the senator. All the article said about her was: “A split television screen showed Harris looking at Pence while the fly basked in the spotlight, but it was not immediately clear if she saw it”. 

This falsely portrays Harris as passive and inept. Yes, she failed to see the fly; she was delivering a scathing rebuke of the VP’s administration instead.

Did the author of the article even watch the debate? 

Why is Pence, an older white male, portrayed as delivering “sombre” remarks, and the senator, a younger black woman, said to be doing nothing more than “looking at” him?

More critically, Pence is not in favour of law- enforcement reform. Even the fly knows that! America has a serious problem with police brutality that the administration consistently refuses to acknowledge, preferring instead to blame – and incarcerate – protestors. During the debate, Pence claimed “justice was done” when a jury refused to indict the police for killing Breonna Taylor, an innocent 26-year-old black woman, in her home. Meanwhile, Senator Harris, as California’s former attorney general, already enacted progressive law-enforcement reforms.

Give credit where credit is due: to the woman – and senator – who is beyond the vice president in terms of intellect, efficacy, experience, talent, honesty and courage.

Americans need to vote the Lords of Flies out of office on November 3.

Malta can help.

Dawn Adrienne Saliba – Tal-Qroqq

Listening to the opposition

It’s good to see that at last, the government is accepting proposals forwarded by the Nationalist opposition.

The issuing of a new vouchers scheme was first suggested by Nationalist MP Hermann Schiavone.

At the time, the government side had a good laugh about this suggestion, but then with much fanfare it went on to announce such a scheme, thinking that the people would believe that it is a Labour initiative.

The Nationalist Party keeps on suggesting measures and it is hoped that the government will implement these proposals for the benefit of the entire nation.

Mario Dingli – Sliema