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INTERVIEW

Jyrki Katainen to Greek investors: Come straight to the EIB and EFSI for funding, no government intervention needed

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The European Commission Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen urges private investors to use the European Fund for Strategic Investment directly, as well as contact the European Investment bank with no need for “government permission”, in an exclusive interview to  Capital.gr. He stresses, ever so discreetly but pointedly, the lack of confidence building in Greece – an issue closely tied with the structural reforms – as well as the countrys competitiveness, as the most important parameters in reversing the recessionary course that burdens the greek economy.


I would like to start with growth, the big question which remains dominant. Do you believe that Greece is on track to achieve positive growth and the economy will develop, new jobs will be created and finally or gradually the country will come out of the crisis?

Certainly its possible for Greece to come out of the crisis and achieve a better growth path which is important because we need jobs and Greek people need jobs. Of course the path is quite challenging, but its doable. Things look a bit better now than a year ago, because the greek authorities are implementing all the reforms which are necessary to improve the business and growth environment. There are a lot of reforms that must be done in order to improve the environment which enables the private sector to create new jobs. But, right at the moment things seem to be moving in the right direction. Lets hope that the greek authorities will continune on this path.

How about the investment environment in Greece? Can Greece attract investors interest? What kind of incentives could the country give so that investors decide to bring their money in? Does Greece lack something that should exist for investors to be motivated?

The most important thing is confidence. If investors feel confident watching the future of the country, then they wil start investing in Greece. So, confidence and a sense of security are everything. If there is no sense of security or if people -investors- feel that the future of the country is not secure enough or the government is not doing reforms which are essential for improving competitiveness, then they will not invest. And nobody can force anybody to invest in any country.

But as I said before, things are moving in the right direction at the moment. And we do hope here in the Commission and the other member states that the greek authorities continue to do reforms. It sometimes may feel painful. But they are a precondition for a business environment. I have had a chance to discuss with several Greek enterpreneurs and industrialists. I have a feeling that Greek enterpreneurs are the first to start investing in Greece. Because they know the business climate,  their clients, the environment they will invest in.

That is why for instance the EFSI Fund, the new EU risk financing facility could help enormously the Greek business people and companies. Because one of the reasons, in addition to lack of confidence, why there hasnt been more investment in Greece, is that it has been difficult to get financing for long-term invesment. But now the EU can help because we provide risk financing. We continue to be in contact with Greek authorities but most importantly with Greek enterpreneurs. Because we have to work together. Enterpreneurs know that if they want to invest, we can help them if they want risk financing. That is a very good cooperation that we have right now and we have to continue.

Now, you spoke about the investment fund and the EFSI. They havent shown results yet in Greece. What is the reason and when should we expect them?

I think there are a few reasons. The first reason is that the EFSI is a fund which provides risk loans, keeps guarantees or does equity investment. Its a demand-driven fund. There are no country-specific quotas. If an enterpreneur or an industrialis or a company is planning to invest on something and is lacking risk financing, the company itself has to contact itself the EIB or the EFSI. This has not happened so far in Greece. Why this has not happened? At least two reasons. First, there has been no confidence in the future of the country so there has not been willingness to invest in Greece that much. The second reason is that private investors and even public companies, sometimes dont know enough about EFSI. And this is something that we have to change. I have visited Athens, the EIB has strengthened their presence here in Athens and the Commission has sent a structural reform support service group to Athens, in order to raise the awareness of the EU opportunities, what we have to offer the Greek enterpreneurs and industrialists. Also when I visited Athens I found that not all greek authorities are aware of the opportunities, how to use for instance the structural funds. So this is also an issue that the Commission wants to help greek authorities with. This is a cooperation and I am sure that once there is a positive view on the future of Greece so the people can come down and look ahead a bit more confident, it is possible to get more investment. And also to use the EFSI, the new fund.

When do you expect this to take place?

I hope that it will happen already during this spring or at least during this year. One of the fastest ways to use EFSI financing is with SMEs. I have been thinking that we should encourage greek banks which are recovering now to use EFSI as a source for raising funds and distributing them to SMEs in Greece. And there is one of my message to bankers in Greece: be aware that there is a new fund which is called EFSI that provides risk financing for your clients. So you can contact EIB already today or tomorrow morning if you are interested in this. Greece is an enterpreneurial nation. There is a big number of SMEs which are lacking funding so EFSI can really help.

So you say that confidence is the key?

Of course.

So I suppose that its because of confidence that other countries are benefiting from this program?

Yes, there are already 22 or 23 countries in which EFSI has financed projects. There are 45 projects, industrial or infrastructure-related, which have got financing from the EFSI. More than 100 banks have raised money from the EFSI for SMEs. So the overall amount of new investments that have got financing from the EFSI is around 60 billion euros, in 6 months time. There is big demand for this kind of financing and thats why Im 100% sure that Greece can benefit from the EFSI. For banks that are willing to provide loans and guaranteees to SMEs, its the fastest way. Also projects in alternative energy and tourism infrastructure are very good candidates  for financing from the EFSI and we need to let authorities know, but also companies themselves can contact the EIB. So if you are an industrialist who is willing to invest in Greece, you can directly contact the EIB without any governmental approval.

Im sure youre doing a lot to promote this program, not only in Greece. What is the biggest challenge in order for this program to be successful?

The overwhelmingly biggest challenge is the lack of awareness that EFSI is up and running. Because the EFSI has created in within 1 year a totally new facility which provides loans and equity to higher risk private sector investment. Even though we have already managed to find investments, both SME financing and infrastructure with 60 billion in 6 months time, still its a relatively new fund. But we just have to go around from one country to another and raise awareness that the EFSI exists. Demand seems to be there. Also, in most of the countries, there is a lot of liquidity in the market. So the real economy is not primarily lacking liquidity but risk financing. Because we have changed for instance the banking regulations and banks cant take as much risk as they did a few years ago. Banks are full of money, companies are full of money but they lack risk financing. And this is why we wanted to establish the EFSI.

What other measures are put in place to help Greece return to growth, except for financing measures?

There are at least four: The first and most important thing is that greek authorities will continue to do reforms in order to create a better environment and strengthen confidence. Also, we have a special structural reform support service which helps greek authorities use structural funds. For instance last year, in 2015, Greece got 3,5 billion in structural funds. The Commission special service helped the greek authorities spend it and develop projects in which this money is used more efficiently and  could attract some private investors. The third thing we did is that the support service helped the greek authorities identify reforms that will help the business environment to be more flexible and more growth-oriented. For instance, to reduce the barriers for competition, help to get building or investment licenses, etc. Fourth, the EIB has increased its presence in Athens, in order to help the private sector but also the public sector investors to use what the EIB has to offer. Also, both the Commission and the EIB are helping private and public investors to build up projects - we are providing technical assistance. So there is both financial support and lots of opportunities in financing and technical assistance in order to improve the quality of projects but also the business evinronment in Greece.

You spoke about structural funds. How does Greece fare? Is it a potent recipient? You spoke about 3,5 billion in total.

Greece has got a significant amount of money from structural funds for investments. Now the country is doing quite well in absorbing all this money coming from EU funds. And that is good because the structural funds are meant to be an economic boost and to do investments which serve the nation as a whole. And also they improve the business environment. So Greece is doing rather well at the moment. Also, if you add to this the EIBs effort since 2008 when crisis started, the EIB has provided 12 billion euros as loans or guarantees to greek business and the private sector. The overall exposure is 18 billion. So the EIB has been extremely helpful and structural funds can really make a change in Greek business if the money is used wisely. So that is the reason why both the Commission and the EIB are so willing to help the greek authorities but also investors, to use opportunities in the most efficient way.

Lately there has been high uncertainty in the financial markets. How does this affect Greece?

Of course the financial market has been in turmoil. But now the situation has improved significantly. In Europe, one can say that we dont have a financial crisis anymore, in the sense that the banks are more robust than they used to be, the economic environment is quite stable even though growth is still too low, but anyway we have managed, for instance in the euro area, to achieve the stability pact. But this is not exactly the same in Greece, because its structural weaknesses are deeper than in the other countries. Thats why the reforms in Greece are so important. Im fully aware that many unemployed Greeks are totally tired of reforms and budgetary cuts, facing difficulties in their everyday lives. All Europeans share the pain and understand the difficulties. But if your country is not competitive enough to allow private investors to invest in your country, then you have to do reforms that allow for private money to come, for new jobs and the future of the country. So basically, to sum up, we have managed to achieve financial stability in Europe and in the eurozone and now we have to focus to help Greece in order to reform the country but also to use EU funds for attracting private investment.

You spoke about unemployed people. Im sure you are aware of high unemployment rates in Greece. Over a million people are out of the job market which causes a huge problem, while at the same time thousands of immigrants and refugees are in the country, a potential workforce. So, how can the EU help a member state so that it gets out of this crisis?

Its a very challenging situation. Greece is facing several challenges at the same time. Im sure Im not the only one who doesnt feel this is fair, in a sense that domestic economic challenges would be enough, but a flux of migrants are coming to Europe through Greece. So, I fully recognise the pressure and the difficulties that the nation is facing. The first thing is again to continue to reform the national economy. The EU will support and help greek authorities in This. The EIB too will help. But we also expect Greece to take care of its external borders. Because everyone enjoys free movement of people. Its a very important principle for the EU. Its very important for Greeks who want to go abroad to find a job. Its very important for other European investors who are seeking opportunities to invest in Greece. So a borderless Europe is a very important principle. Thats why all the member states must take care of their external borders, and this is exactly what Europe is expecting from Greece. At the same time we have to cooperate very closely with the Greek authorities because we have to help to secure the borders and also deal with the huge numbers of immigrants coming to Greece and trying to go to other countries in Europe. So there are several elements which EU is providing already now to help Greek authorities, but we have to cooperate on this. Everybody understands that the situation is challenging, one would say unfairly challenging.

Greek authorities have talked about a growth bank. Do you think that such a move would contribute?


When I last visited Athens I was talking with greek authorities about an institution for growth. Im not sure what the right name is in greek but there is a special public bank or fund which the German national promotion bank helped establish. KFW is the institution which has provided the capital. And this public bank would be a very, very good institution to support growth because in most EU countries there are some sort of national promotion banks which provide SME financing or guarantees so banks can finance some big project. So the public takes on some of the risk from the private investor. These function quite well in many countries so Im sure it would work well in Greece. If there is any need, the Comission is ready to help.

Are you planning to come to Athens?

I am planning to, I dont have a date yet but as I said I have very cooperation with Greek enterpreneurs and the industrial sector. I would love to meet them again and talk to them about  opportunities because I feel very obsessed to help Greece get out of this very bad crisis and especially for the people to get new jobs. So I know what the other countries have done or how they have used EFSI for instance, and I would like to pass this message personally to private investors. Because this is the way for Greece to get out of the crisis.

I would like to have your comment on EUs pace of growth and the global economy

EUs economy is growing and its doing better than before, deficits are coming down, we have achieved financial stability in most of our countries. Investments are improving as the  member states are doing structural reforms. But right now the growth figure is too modest. There are some challenges coming from the outside. For instance, the situation in China has raised some questions, one should not exaggerate the problem but it has raised some concerns. Also the situation in the Middle East and in Northern Africa, which have an impact in the refugee crisis. They all are negative things when looking at business environment and investment environment. But anyway, more generally speaking, we are on a better direction, there are more internal and external challenges to tackle but this is normal.

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