Improving the investment climate in Europe Markus J Beyrer is BusinessEurope Director General Europe remains the major global destination of foreign direct investment, but it is losing ground to other destinations. The European Union with all its strength – millions of skilled workers and innovative technologies – is still perceived as a complicated and expensive place to invest in. Investment levels in our continent have dropped significantly during the financial and sovereign crisis. The difference between current levels of investment and their projected level - the investment gap - remains wide: it is estimated at around €260 billion in 2014. Part of the explanation behind the weak investment in Europe is related to the different crises we are facing, including high uncertainty in the political, economic and regulatory fronts. However, many problems are structural. The cost of doing business in Europe remains penalised by higher taxes, energy prices and non-wage labour costs than competing regions. The European Single Market is still incomplete and many existing barriers hamper companies’ cross-border investment and operation. However, the investment situation is slowly improving (Figure 1). Currently, over 80% of BusinessEurope member federations expect businesses to increase investment rates over the coming year, compared to just over 50% when surveyed in spring 2016. But the recovery is still timid. If we are serious about boosting investment in Europe, we must take effective measures to address existing barriers to investment in Europe. The business community counts on the European policy makers to set a stable and attractive business environment. Investment Plan for Europe In November 2014 the European Commission launched the Investment Plan for Europe aimed at unlocking public and private investments in the ‘real economy’. This plan, welcomed by businesses, focuses on three key pillars: 1) The European Fund for Strategic Investment; 2) technical assistance and visibility to investment projects; and 3) removing obstacles to investment. It is still early to evaluate the full results of the Investment Plan, but we can already see some of its impact. The European Fund for Strategic Investment (EFSI) is a guarantee which aims at mobilising private investment through small amounts of public investment. It helped raising public attention and the political debate regarding the urgent need to boost investment in Europe. Moreover, it promotes a greater calculated risk culture and a new mentality regarding the use of EU funds. As an innovative instrument, it opened new windows and opportunities for riskier projects that would have not taken place in its absence. The technical assistance is helping some projects off the ground and the project portal is supporting large projects to find investors. Finally, regarding barriers to investment, while some progress can be noticed in the priority areas of the Commission such as the digital single market, energy union and capital markets union, we need further and quicker action in other areas and at both European and national level. It is essential to speed up the process of removing remaining barriers to the single market and remove administrative burdens for entrepreneurs. Only by reducing existing barriers to investment in Europe will we be able to attract investment in a long-term perspective. Extending funding instruments European business welcomed the proposal brought forward in 2016 to extend the EFSI and to substantially increase its financial capacity. However, the revised plan must be developed on the basis of the most recent evaluations and it must draw on the lessons from implementation so far. It became clear that the EU member states with stronger technical and administrative capacity are getting greater benefits from the EFSI, especially when it comes to large-scale projects. For example, about 63% of total EFSI financing within the Innovation and Infrastructure Window was granted to three countries. Thus, more action is needed to support those EU countries lagging behind. This can be done in particular by greater technical assistance and capacity building at national and regional level. The very dynamic response by financial intermediaries and by small and medium-sized enterprises (SMEs) to the SME Window show that they are well designed and should be further deployed. In November 2016, the new European Venture Capital Fund of Funds was launched. It will provide more venture capital to high-growth SMEs and will help mobilising private finance for venture capital in Europe. The business community also supports planned development of new equity products under the SME Window in the future. The Advisory Hub is another tool with great potential which should become a more proactive platform in supporting the EU member states to take forward projects, and a real facilitator of cross-border projects which still face substantial barriers. In particular, the Hub and EIB operational staff should help to identify barriers in the roll-over and implementation of different projects, and understand where procedures involving multiple national approvals can be simplified. This information should then be properly used in advancing in the regulatory developments. And finally, we believe that the market-based logic of the EFSI is a key principle that should be defended. The projects should continue being selected according to their merits, aligned with EU priorities, but without prioritizing specific sectors 
or regions.
It is essential to speed up the process of removing remaining barriers to the single market and remove administrative burdens for entrepreneurs
Figure 1. Total investment growth (% change on preceding year) Source: European Commission, AMECO Database

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