ECONOMY

EU subsidy for private investments

eu-subsidy-for-private-investments

The Greek government has earmarked almost the entire sum of loans from the Next Generation EU fund – i.e. about 12.5 billion euros – for corporations in the private sector. This forms part of plans for the fund’s 32 billion euros for Greece, per the proposal that Athens will submit to the European Commission this week.

The Greek proposal provides for the issue of loans to enterprises for investments that will also have been approved for financing by Greek or European credit institutions, thereby securing some form of sustainability guarantee.

Emphasis will be placed on investments compatible with European priorities (green development, the digital transition) and with the directions of the Greek recovery program (strengthening exports, boosting research). The European fund’s subsidies will cover up to half of the investments, provided that a significant share – e.g. 30% – is covered through bank borrowing. That means the Next Generation EU fund will finance investments in Greece that will exceed €25 billion in the next seven years, provided of course that the Commission accepts the proposal and there is sufficient interest on the part of the private sector.

Although the landscape remains unclear concerning the acceptance of the private investment subsidy proposal, according to Greek sources, Greece is pinning its hopes on the strong argument that it has to cover a yawning investment gap following the decade-long financial crisis, which exceeds €100 billion.

The government will also request that these loans not count toward the budget deficit, as that would lead to a fiscal derailment; instead it wants them to count as financial transactions. The mobilization of private resources is a major priority of the government in the context of the recovery program. Finance Ministry officials believe that this will offer the biggest possible leveraging opportunity for bolstering growth.

Private investment and changing the country’s production model constitute one of the four main pillars of the Greek proposals, as presented in mid-October by Alternate Minister Thodoros Skylakakis.