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How to leverage a zero: Jean-Claude Juncker edition

  • Jean-Claude Juncker presents his European Fund for Strategic Investment (EFSI), with exactly zero upfront ash, to be levered to €315bn;
  • the Commission will inject an equity tranche backed by only a guarantee of €16bn, plus another guarantee of €5bn from the EIB;
  • the total official leverage of the operation is 15 – on the basis that investors treat these €21bn as genuine equity;
  • the idea is to split up the investments into long-term infrastructure projects – some €240bn – and the rest for SME and mid-cap companies;
  • of the guarantees, half is explicitly backed by existing resources from the EU budget;
  • the process now moves to the European Council and European Parliament with the idea that the EFSI starts to operate mid-2015;
  • Juncker said he reject the idea of upfront cash because he does not want any more debt-finance;

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