German support brings investment fund closer

The government appears to be getting very close to the creation of a Hellenic investment fund, now that that it has secured the political and economic support of Germany toward that end.

The political support is expected to be expressed during German Finance Minister Wolfgang Schaeuble’s visit to Athens, which will likely take place in the latter half of July; it is possible that official announcements will be made then. The economic support will come via the participation of German investment bank KfW in the Greek fund’s share capital.

It appears that the strong support from Germany, combined with the fact that the government has recently intensified its efforts to show how valuable the fund will be, will be able to dispel the strong reservations held by the International Monetary Fund and, to a lesser extent, the European Central Bank.

Among the government’s arsenal of arguments in favor of the fund’s creation is a feasibility study conducted by international consultancy firm Oliver Wyman and funded by the Onassis Foundation, which suggested that the financing gap for investments in the next five to 10 years will amount to 20 billion euros per annum.

The same study also clearly defines the existence of significant gaps in the funding of various sectors of the Greek economy that could at least partially be covered through the investment fund, along with the additional value that would bring to the country’s economy. Another conclusion of the Oliver Wyman study suggests that even if Greece were not mired in an economic crisis, it would still have experienced a financing gap for investments, but which would be about half as big as the existing one.

According to sources, the initial capital of the new fund will amount to 500 million euros, of which 350 million euros will come from the resources of the National Strategic Reference Framework (NSRF), which is funded by the European Union, and the budget Public Investment Program, while the rest will derive from KfW and the European Investment Bank (EIB).

KfW’s participation is expected to amount to 100 million euros, as up to that amount there is no requirement for approval by the German parliament. This is another reason in favor of the estimate that the foundation of the Hellenic investment fund could take place after the German elections, scheduled for September 22.

The EIB is likely to participate in the initial capitalization of the investment fund, not through new resources, but via the transfer of loans from the National Fund for Entrepreneurship and Development (ETEAN), which the EIB itself has issued and are seen to have not been used to a satisfactory degree. This way, two goals will be met at once: The obstacle of having to approve new resources for Greece – that often leads to delays – will be overcome, and the existing funds will be better utilized.

According to the plan that the government is currently examining, the private investors will not be able to participate in the initial capital of the fund but in special sub-funds to be created, primarily concerning construction, small and medium-sized enterprises and the energy sector.

In the context of scanning the private sector for interest in participation, the Development Ministry has had contacts with the Onassis and Niarchos foundations as well as the Hellenic Federation of Enterprises (SEV) and the Hellenic Shipowners Association.

The fund will bear the English name Institution for Growth in Greece (IfG) and will be based in Luxembourg, while also having an Athens office.