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 Finance ministers from the bloc's 28 countries are fleshing out a
host of ideas circulating in European capitals. With interest rates
already at record lows, ministers need radical steps to help growth
at a time of near record unemployment.
From Poland's 700-billion-euro ($907 billion) 'European Fund for
Investments' to the European Central Bank's plan to resurrect the
EU's market for asset-backed securities, Europe's ability to get
credit flowing to small companies is central to its economic
revival.
"We're thinking about instruments that facilitate investments,"
Italy's economy minister, Pier Carlo Padoan, said as he arrived for
the gathering in Milan.
"Resources (for investments) will come mostly from the private
sector but of course public sector resources will be instrumental in
leveraging them," he said.
The European Union's economy, which generates about a quarter of
global output, grew by just 0.1 percent last year and its jobless
rate is almost double that of the United States, with around 25
million people unemployed.
Investment is the new buzz word among ministers, overriding the
German mantra of budget cuts. Germany is under growing pressure from
partners like France and Italy to loosen the fiscal reins and use
its overflowing government coffers to ramp up public investment.
But German Finance Minister Wolfgang Schaeuble this week rebuffed
calls for Berlin to spend more to boost the euro zone economy which
showed no growth in the second quarter as recovery stalls.
In a speech in Milan, ECB President Mario Draghi described business
investment as "one of the great casualties" of the financial crisis,
saying it has fallen 20 percent since 2008.
"We will not see a sustainable recovery unless this changes," he
told officials on Thursday night.
The incoming president of the European Commission, Jean-Claude
Juncker, wants a 300 billion-euro ($410 billion) investment program
to revive the European economy.
Unlike in the United States, European companies rely on banks to
provide 80 percent of loans, but banks are reluctant to lend
following the worst crisis in a generation.
In Italy, Europe's fourth-largest economy, credit to companies has
shrunk by more than 70 billion euros since mid-2011 and is still
contracting, central bank data shows.
That problem is mirrored across Europe, holding back the recovery
because smaller companies provide two out of every three
private-sector jobs in the European Union.
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ITALIAN ORGANIC JAM
Indebted countries like Italy and France have little public money
for businesses. Another hangover of the crisis is the differing cost
of financing across the euro zone in a currency area that aimed to
create the same financing conditions for all.
At their meeting, ministers have four ideas in front of them: an
Italian paper on new financing tools for companies, a Franco-German
proposal on how to boost private investments, a Polish proposal on
creating a joint EU fund and the Juncker Commission's call for the
300-billion-euro program.
Poland wants a 'European Fund for Investments' that would be able to
finance, through leveraging its own capital, 700 billion euros worth
of investment. The fund could be a special-purpose vehicle under the
umbrella of the European Investment Bank, the EU bank owned by
European governments.
"The European Investment Bank isn't short of money. There's a
shortage of projects and if we can match the money with good
projects, we'll get there," said Luxembourg's finance minister,
Pierre Gramegna.
Italy's proposal is a pan-European market, where smaller companies
can raise capital, building on its "minibond" legislation in 2012
that allows unlisted companies to issue.
That could be part of a EU capital-market union, building on the
euro zone's banking union, but that will need to closely involve
London, the leading financial center in Europe.
Twenty-six Italian family businesses, including one that makes
organic jam, issued bonds in the past two months, raising 1 billion
euros combined, according to the Italian treasury.
"This is not just about funding small companies per se, it is about
funding high growth companies," said Nicolas Veron, an expert on
capital markets at the Bruegel economic think-tank in Brussels.
"They start small but the ones you are really interested in are the
ones with the high growth potential."
(Reporting by Robin Emmott, James Mackenzie, Gavin Jones, Francesca
Landini, Martin Santa, Jan Strupczewski, Valentina Za; Writing by
Robin Emmott; Editing by Rosalind Russell)
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