EU agrees 24 new guarantee programmes to boost investments in enlargement and neighbourhood regions

The Operational Board of the European Fund for Sustainable Development plus (EFSD+) has endorsed a further package of 24 guarantee programmes to support investments in the EU’s neighbourhood and enlargement countries. Together with the three guarantees for the Western Balkans to support SMEs approved in December, the new guarantees, worth €2.4 billion, are expected to generate investments in the order of €17 billion in priority sectors, including renewable energy, digital connectivity and private sector competitiveness, under the Economic and Investment Plans (EIPs), which are the vehicles to deliver on Global Gateway in the Western Balkans and South and Eastern Neighbourhood.

The EFSD+, the financial arm under the EU’s Neighbourhood, Development and International Cooperation Instrument (NDICI) – Global Europe, provides guarantees to mitigate the risk for investments aligned with EU priorities in our partner countries.

European and international financial institutions, such as the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), and EU national development banks, will work jointly with the European Commission to originate investment opportunities, aligned with the Economic and Investment Plan flagships and that are expected to crowd-in private investors.

Once the guarantee agreements are signed between the EU and a total of 11 European and International Financial Institutions such as the EIB, the EBRD and national development banks, these entities will have three years to generate investments in areas like: the competitiveness of the private sector and the innovation agenda for the Western Balkans; the Black Sea connectivity in the Eastern Neighbourhood; the energy transition and security in the Southern Neighbourhood. The EU guarantee is also expected to increase banks’ finance for small and medium enterprises, as well as to increase the issuance of green bonds in the EU partner countries.

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Background

The European Fund for Sustainable Development Plus (EFSD+) is part of the EU’s investment framework for external action and ensures worldwide coverage for blending, guarantees and other financial operations. It is included in the EU’s long-term budget programme for external action – the Neighbourhood, Development and International Cooperation Instrument (NDICI)-Global Europe. The EFSD+ Operational Board was established under this budget programme.

EFSD+ supports public and private investment in partner countries worldwide to promote decent job creation, strengthen public and private infrastructure, foster renewable energy and sustainable agriculture, and support the digital economy. It does so by providing financial guarantees and grants combined with loans in “blending” operations.

The EFSD+ has €40 billion in guarantee capacity, excluding the €11.65 billion additional for macro-financial assistance operations. The EFSD+ guarantees offer favourable, highly competitive terms and allow investors to finance projects in challenging markets, by assuming the risks associated with more unstable environments while at the same time avoiding market distortions. Since the EFSD+ covers a share of the risks, the EU’s development finance partners can match the EFSD+ guarantees with their resources attracting additional investors.

The EFSD+ guarantees programmes are implemented in partnership with European financial institutions through two main paths:

• In partnership with the EIB, the EU provides a €26.7 billion guarantee for financing investments mainly from the public sector in areas such as clean energy, green infrastructure and health. The guarantee will have a maximum impact in partner countries where sovereign and other public sector risks are still a major bottleneck.
• Under the EFSD+ open architecture, the EU provides up to €13 billion guarantee cover. This will be deployed by a range of international financial institutions (primarily European development finance institutions, including the EIB) and aims to mobilise private investments in support of the achievement of the Sustainable Development Goals (SDGs) and the Economic and Investment Plans agreed with our partner countries.

Source: European Commission