Global gateway: another EU PR project

Remember the Juncker investment fund? When Jean-Claude Juncker became Commission president in 2014, his big idea was a fund to mobilise €315bn in investments. We characterised it as a PR stunt. There was no real money behind it, and as the European Court of Auditors later analysed, it ended up mostly being an exercise in reclassifying existing investments. It was not until the recovery fund that the EU started to put real money behind investments. While we don’t see the recovery fund as a blueprint for fiscal union, we acknowledge that at least it is real money.

The EU new global gateway programme, Europe’s answer to China’s belt and road, comes with the same magical number of €300bn. Unfortunately, it falls squarely into the Juncker investment fund category. You won’t read this in the news reports that are gushing about the EU finally standing up to China. It is not. China’s investments into belt and road is €2.7 trillion. This is real money invested.

The Chinese don’t bring gifts. Their outlay includes dodgy loans, like the debt-funded Montenegro mountain motorway that ended up driving the country to the edge of bankruptcy. But the EU brings even less. Global gateway is not a programme of loans, but of loan guarantees, levered by a tiny sum of the EU budget. This is the old EU investment fund model: small state guarantees to enable private sector investment. Germany built its KfW state investment bank on that model. It started in 1948. The European Investment Bank was created ten years later, based on the same idea.

One of the pioneers of this idea was the young Jean Monnet. It was successful at a time when money for investments was scarce. Juncker’s big idea had a long pedigree. But in our era, the constraint is no longer the availability of large loans. Even now after the motorway fiasco, Montenegro can still raise debt on the international capital markets at yields of under 3%.

We are perfectly aware that the EU cannot simply emulate China, which is now starting to built military bases in western Africa. Our criticism of global gateway is not so much that it is not enough money, but that it diverts attention from the more important issue, which is that the EU is falling behind China technologically. The Finnish prime minister, Sanna Marin, is one of the few political leaders in Europe who is demanding that we must end our reliance on Chinese and US technology, lest we end up becoming vulnerable to cyberattacks and other forms of interference that restrict our freedom.

The whole raison d’etre of the new German government, which will assume office this week, is to modernise the country with a 10-year, €500bn investment programme. A part of the programme is Juncker-style now-you-see-me-now-you-don’t type money, which we should probably deduct from the headline numbers. But we agree with the Finnish prime minister that the priority of the EU should be high-tech investment. We see green investment as part of that, rather than as a separate category.

One reason for belt and road is access to raw materials, both in terms of ownership and transportation infrastructure. The global gateway programme is a recognition that the EU, too, needs to improve its supply security. But this programme is not fit for purpose. Unlike belt and road, it is overspecified. The Chinese are purely commercial, as Montenegro found out. The EU will tie its lending to conditions, like the protection of workers’ rights and social rights. The EU tries to project its values, and so it should. But it is questionable whether the best way to achieve a global gateway is through an under-funded investment programme that ticks all the boxes of European domestic politics.


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