The European Commission released a proposal for an European Long-term Investment Funds (ELTIF) Regulation on 26.06.2013. The WEED fact-sheet explains this proposal.
ELTIF should help, according to the Commission, to promote the long-term commitment to "patient capital” and "help increase the pool of capital available for long term investment in tomorrow’s economy of the European Union.”
In terms of ELTIF asset values, the Commission is specifically thinking of real assets with a value of over 10 million Euros and certain "portfolio companies”, which are not traded on the stock exchange. Specifically, the following are mentioned:
- schools, hospitals or prisons
- social infrastructure such as social housing
- transport infrastructure such as roads, mass transit systems or airports
- energy infrastructure such as energy grids
- climate adaptation and mitigation projects
- power plants or pipelines
- water management infrastructure such as water supply systems, sewage or irrigation systems
- communication infrastructure such as networks
- waste management infrastructure such as recycling or collection systems.
The Commission rightly points out that the financial markets favour short-term, speculative investment, potentially leading to crises. The financing of infrastructure projects is also a laudable goal.
But placing private capital in infrastructure - rather than in speculative investments - is a major step in the wrong direction, as most of this infrastructure is still largely in the public hand. The list of concrete examples above shows that the Commission has learned nothing from bad experiences with privatisation. The capital market is unsuitable for financing prisons, public transport systems, energy networks, schools or sewage plants, because this occurs at the expense of the populace and democracy. Existing funding gaps should be closed by taxes and, if necessary, through government loans.