Government of the Republic’s positions on the European economic recovery package
Last week, at the Estonian Employers’ Confederation’s council meeting, Henrik Hololei, Director General of the European Commission’s Directorate-General for Transport, spoke about the European Union’s recovery package, highlighting the second measure, which is to relaunch the European economy by supporting private investment.
At the government session on 11 June, the positions on the recovery package were adopted and forwarded to the Riigikogu for comments. The Finance Committee and the European Union Affairs Committee will discuss the issue with officials from the Ministry of Finance on 15 June and with the Prime Minister on 17 June in the Council.
One part of the recovery package is precisely about entrepreneurs, and the explanatory memorandum prepared by the Government of the Republic very nicely spelled out what this measure contains, so we will share them with you:
€56 billion is earmarked to support private investment to relaunch the EU economy, based on support from private companies, mainly through the European Investment Bank. This will be done by increasing the guarantee fund supported by the EU budget, which will allow the EIB and other clearing banks to reduce the risk of private investors’ investments and provide soft loans to businesses.
Activities are divided into three main strands:
1) A new solvency support instrument will be set up to provide rapid support to otherwise viable businesses that have been hit by the crisis. It will have a budget of €26 billion from the relaunch plan (plus €5 billion from the EU’s long-term budget for 2014-2020, which is already being revised in 2020, for a total of €31 billion). The European Investment Bank will use the guarantees in the EU budget to reduce the risk of private investors investing in companies by taking some of the risk. This allows companies to access investment money on more favourable terms. Together with private capital, the increased EU guarantee fund is expected to secure more than €300 billion of investment in businesses. The main rationale for the instrument is that Member States’ capacity to support companies at national level has been very uneven (e.g. Germany has provided more than half of its state aid to its own companies during the crisis).
2) A Strategic Investment Facility, to be set up under InvestEU (InvestEU is a programme guaranteed by the EU budget, which will offer EU guarantees to the European Investment Bank and other development banks from 2021, so that they can support riskier projects than they are able to do with their own capital). With a budget of €15 billion, it should help attract €150 billion of additional investment to support companies to build strong EU supply chains, especially in critical areas such as advanced technologies, strategic critical infrastructure, etc.).
3) An increase of €15 billion in the guarantee originally proposed in the InvestEU long-term EU budget proposal. This is aimed at increasing the volume of soft loans to businesses through the EIB and other development banks.
Estonian companies have received €192 millionfrom the European Investment Bank’s predecessor, InvestEU (the European Fund for Strategic Investments), as of April 2020, which has led to €1.6 billion in investments. This puts Estonia in second place in the EU in terms of GDP. For Estonia, it is important that smaller companies also have access to finance, as the vast majority of Estonian companies are small and medium-sized.
More detailed views on the new funding will be presented separately at a government meeting.
Read more about the government’s positions here and the explanatory memorandum here.