EU investment initiative to boost financing for rural economy

The first pilot projects under the new initiative for investment in EU rural areas, outlined at last month's high-level 2nd annual EAFRD fi-compass Conference on financial instruments, are encouraged to get started before the end of the year, it has emerged this week, as talks with the first interested Member State are advancing. Announced on November 25th by Commissioner Hogan and the European Investment Bank (EIB) Group, in the presence of the Commission's Vice-President Katainen, the new initiative aiming to combine EU budget amounts from the European Agricultural Fund for Rural Development (EAFRD) and the European Fund for Strategic Investment (EFSI), the core of the Juncker Commission's Investment Plan for Europe, is now under preparation.

Results are intended to create substantial leverage and economic gains for EU farmers and rural economies by attracting significant volumes of private capital to further support a modernising and improving Common Agricultural Policy (CAP) and EU agriculture, as announced by the European Investment Fund (EIF) during the conference. Design, targeted areas and scope of the support will be instrumental in the delivery, which may reach an impact level of 60% higher than the currently implemented EAFRD support options. The adoption of the Omnibus regulation proposed by the Commission in September 2016 is a critical element for the success of the initiative, as it provides the legal base for the move.

The initiative will start by involving up to five pilot cases of interested Member States, and will be expanded further in 2017-2018 in case of growing demand. One of the advantages that Member States have is the existence of well identified needs in the national Rural Development Programmes that ensure full coverage of all targeted farm recipients throughout their territories.

Countries with regionalised Programmes will have to group resources and align approaches for ensuring a sufficient critical volume and streamlined eligibility. Although not being part of the initiative, this approach is already shaping up in Italy where after extensive high-level discussions between regions, the national government, the Commission and the EIB Group, a national macro-regional financial instrument for agriculture under the EAFRD is to be set up in 2017. The first wave of eight to ten regions are expected to conclude agreements and modify their Rural Development Programmes in early 2017. Then, a second wave of regions is expected to join in late 2017, as these are not yet ready with their preparatory work. In 2018, subject to the adoption of the so-called Omnibus regulation and depending on the decisions of the regions, additional resources from EFSI may also be added, with which could be joined the initiative. The readiness of the Italian regions to support their agricultural community was already announced during the fi-compass Rome conference back in June 2016. Similar intentions were also declared by Spain, during the similar Madrid conference in May 2016.

In terms of geographical coverage, the aim is to expand the areas already covered by EAFRD financial instruments ensuring a balanced approach and support options for EU farmers across the Union. At the same time, the combined instrument may target specific national farming situations. It is expected any interested Member State to signal its intention to the European Commission and the EIB Group.

The initiative will run through two different, but interlinked phases:

1) feasibility assessment being covered by the EIB (fi-compass) supported by the European Commission (DG AGRI), in addition to any effort undertaken by the pilot Member States at the time of joining the initiative;

2) Design and implementation of the resulting investment activity through delivery of financial instruments by the European Investment Fund (EIF).

Experts from all sides, including Member States, would get involved in both phases of the initiative, which will be implemented in the course of 2017-2018.

The initiative is now becoming also a central point for discussion and development for the EIB Group. Pim van Ballekom, Vice-President of the EIB, commented: “EFSI has already allowed EIB to provide stronger support to the sector, and the impact of the new phase of EFSI on European agriculture and rural areas will allow us to do even more. Combined with our other lending activities in the sector, the intentions of combining EFSI with the EAFRD resources represent a powerful additional tool to achieve an even greater level of risk taking, potentially leveraging significant additional private sector resources for even more economically sustainable investment on the ground.”

EIF Chief Executive Pier Luigi Gilibert added: “The EIF is very pleased to be leading the development and implementation of financial instruments in the key agricultural sector in partnership with DG AGRI and EIB. This new initiative builds upon our existing experience of financing this sector and our long-term role in helping managing authorities to make value-adding financial instruments a reality for their markets. The new possibilities of combining EAFRD and EFSI could be a breakthrough moment for the sector.”

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