EU investment plan may be hard to realize

According to the European Investment Bank, investment now in Europe is 15 percent lower than in 2007 because investors are shy of taking actions and risks. It argues that lack of investment is not due to a lack of capital. Europe has ample liquidity, which is available both in financial institutions and in corporations, but this money is not reaching the real economy.

While the EIB is on track to meet its commitment as part of the EU's Compact on Growth and Jobs, some member governments do not favor an increase in its lending as they want to ensure its AAA credit rating.

And even if the money does start flowing as promised, it will only make a small inroad into what is being called the eurozone's "investment gap", the amount that was expected to be invested if the financial crisis hadn't occurred and it had continued to increase at pre-crisis rates.

For Juncker the priority is not to give "a big sum" to boost public confidence. His most urgent task is to balance the welfare of workers while offering incentives to businesses to invest.

This will be a difficult balancing act. Belgians took to the streets in November as the new prime minister was planning to reduce unemployment benefits. They plan more such actions this month.

While inflation in eurozone, which is expected to be 0.3 percent in November, is adding to Juncker's policy difficulties, because the European Central Bank cannot cut interests rate further as they have already hit bottom. This means he cannot offer a further incentive to attract businesses to borrow by cutting interests rates as capital is already cheap.

Juncker also has to bear in mind the initial purpose of this plan, which is to stimulate growth and create jobs. While Juncker is yet to finalize the project list, he should be paying special attention to the jobless rate in different countries.

He needs to have a very clear picture of where are the 24 million jobless men and women in the 28 EU countries.

For example, the increased investment should target those countries with high jobless rate such as Greece and Spain, instead of being channeled to Germany and Austria.

Obviously, it is going to be hard for Juncker to juggle everyone's interests amid the complex politics of the EU.

The author is China Daily's chief correspondent in Brussels. fujing@chinadaily.com.cn