The euro is vying against the US dollar this week with news of an investment strategy from the European Commission.
European Commission chief executive, Jean-Claude Juncker, is releasing the official plans of a fiscal policy with the aim of reinvigorating investment in Europe. The plan is to provide the triple A rated European Investment Bank with the substantial sum of €21 billion. The bank then raises €60 billion by issuing new bonds, and the cash from the bonds funds up to €315 billion in major projects. The money will be raised by taking €16 billion from the EU budget and €5 billion from the bank.
There will be a strict vetting process on projects, specifically pushing investment into the failed economies of Italy, Spain, Ieland, Portugal and Greece, countries that often miss out to Germany due their high risk. The all-new ‘European Fund for Strategic Investments’ will direct the bank in choosing projects.
To protect the European Investment Bank, and its cheap lending rate, the money will be employed as risk protection so if a project does not work, the Bank maintains its money and the loss will be taken from the EU €16 billion. This, Juncker feels, will stimulate the European Investment Bank, historically a low-risk lender, to inject money more leniently.
As Juncker laid out the details of the plan to the European Parliament, the euro was volatile against the dollar and the European indices fluctuated, with Greece and Italy rising.
The projects themselves will be aimed at public infrastructure, majoring on broadband or cross-border energy linkages.
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