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EU Proposes $380B Investment Plan      11/26 06:28

   The European Union's executive is proposing a 315-billion euro ($380 
billion) investment plan to boost the bloc's flagging economy, a scheme whose 
success will depend on leveraging 21 billion euros in guarantees and seed money 
to attract private funds.

   BRUSSELS (AP) -- The European Union's executive is proposing a 315-billion 
euro ($380 billion) investment plan to boost the bloc's flagging economy, a 
scheme whose success will depend on leveraging 21 billion euros in guarantees 
and seed money to attract private funds.

   European Commission President Jean-Claude Juncker said Wednesday that the 
long-awaited plan will not increase debt and will be based on EU guarantees to 
entice private sector investment in education, transport, the digital economy 
and the environment.

   Juncker estimated that every euro invested in the three-year scheme could 
generate investment of about 15 euros.

   Europe's economy has been struggling to grow since it emerged from recession 
over a year ago, partly because many governments are still cutting back on 
spending to reduce debt. The European Central Bank has offered economic 
stimulus, but says it can only do so much, and that investment needs to pick up.

   Juncker's plan aims to do that, though a lot will depend on its 
effectiveness.

   "Europe is back in business," Juncker told the European Parliament in 
Strasbourg, France. "We are offering hope to millions of Europeans 
disillusioned after years of stagnation."

   The proposal will now be discussed by the 28 EU leaders at the Dec. 18-19 
summit.

   Under the plan, a European Fund for Strategic Investments will rely on 21 
billion euros ($26.5 billion) in guarantees from the EU budget and the European 
Investment Bank. It will be used to offer loans worth over 60 billion euros 
($75 billion) to stimulate investments of at least 315 billion euros.

   Juncker said the fund was necessary to jump start Europe's economic engine, 
since investors on the continent are wracked by uncertainty. "Investors lack 
confidence, credibility and trust," Juncker said.

   The EU said there was plenty of liquidity in the market but investors were 
looking for the right projects.

   Investment levels in the EU are down some 430 billion euros ($540 billion) 
compared with 2007, before the financial crisis exploded. And while investment 
is back on the rise in the United States, Europe is lagging behind.

   EU Vice President Jyrki Katainen said that "we need just enough money to get 
the motor running."

   He insisted the plan would not rely on creating more public debt, which 
already stands at some 90 percent of gross domestic product in the EU. He said 
the seed money from the EU budget would be coming from the funds which were now 
badly used and will be redirected.

   "Either we continue business as usual with traditional grants and loans, and 
that is as far as the money goes," Katainen said. "Or we use our budget the 
most efficient way - to support riskier borrowing and create a larger lending 
capacity."


(KA)


 
 
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