How can cities and regions turn barriers in long-term investments into future opportunities?

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date
10-03-2017

On 8 March 2017 the Urban Intergroup and the Long-Term Investment and Reindustrialisation Intergroup hosted a joint workshop led by POLIS and co-organised by CEMR and EUROCITIES at the European Parliament in Brussels entitled “Long-term investments: Barriers and opportunities for regional and local authorities”.

The purpose of the event  was to address the challenges that municipalities, cities, regions and the private sectors face when making long-term investments. The Stability and Growth Pact (SGP), the Treaty on Stability, Coordination and Governance (TSCG) and the European Accounting Standards (ESA 2010) have a strong impact on the regional and local public investments in several sectors such as transport, social housing and waste management. 

Municipalities, cities and regions together called for more flexibility in budget and financial accounting rules in order to boost local investments delivering long-term benefits. Bearing in mind the upcoming second iteration of the European Fund for Strategic Investments (EFSI), the future negotiations for the Multiannual Financial Framework (MFF) post 2020 as well as the revision of the European Monetary Union within the next two years, long-term investment will be key to continue supporting growth, employment and efficiency across Europe. 

Some key solutions have been suggested during the debate. In that perspective, the local and regional authorities EU organisation are committed to the following actions:

  • Seek together with EU institutions how to have some leeway for future local/regional public expenses investments within the Stability and Growth Pact and/or specific funding mechanisms such as the EFSI 2.0, also distinguishing investments from operational spending and allowing depreciation over time
  • Ensure that a written question is submitted toward the European Commission and the Council in order to seek clarification over PPP treatment under Eurostat rules as well as flexibility when it comes to strategic investments with public funding resources
  • Invite Eurostat to explore how to address the impact of local public investments on the debt and deficit of governments for strategic investment such as transport, considered the backbone of the EU economy, as indicated in  Autumn 2016 for efficiency in buildings.

Local and Regional perspectives on this issue

“The European Commission consistently calls for investment to spur economic growth and create jobs. National and local governments are urged to set up large infrastructure projects together with the private sector. That is all very well, but it is in complete contradiction to the strictness with which budgetary rules are applied”, said Pascal Smet, Minister of Mobility and Public Works of Brussels Capital Region (Polis member) during his speech on how to unlock transport infrastructure investments for the future. “The Brussels Capital Government will invest 5.2 billion euros in new metro and tram lines and 750 million euros to renovate its tunnels but accounting rules prevent us from spreading out these investments in line with the works carried out. In addition, rules on Public Private Partnerships have become so strict that it proves difficult to activate private capital. The city cannot wait for European accountants to see the light if we want to carry on our investment and projects”.

Flo Clucas, Councillor, Cheltenham (LGA, UK) - CEMR spokesperson on local finances said that “Good, quality investment is the key to real and sustained growth, jobs and services. For towns, cities and regions to be able to grow their economies, their business and employment base, they need to invest. Currently, fiscal rules both by national governments and the EU prevent local governments from investing, as when they borrow, their investments count as national government debt. If we want our economies to grow, that has to change and become more flexible."

Tanja Wehsely, Chair of the Committee on Financial, Economic and International Affairs of the Vienna City Council – Chair of EUROCITIES economic and development forum, also clearly explained the situation on investment issues locally: “Vienna and many other fast growing cities face a need for long term public investments, and a good mix of instruments is vital. We are convinced that EU funds and EIB loans must fit our systematic integrated policy approach, and not the other way round. We want to underline that sustainable long-term public investments are not only good for our citizens, but also for the economy in general. Therefore, we must examine together how the statistical treatment of public expenses in the Stability and Growth Pact can be adapted better to our needs for investment in the future of our citizens.”