The current "Barroso II" Commission began its term cleaning up after the financial crisis, spent its middle years stabilising the euro and is coming to its end with Europe’s need for long-term investment at the centre of its work.
Although Brussels is increasingly preoccupied with the imminent elections, this theme is still getting plenty of attention. The European Parliament recently adopted an important report setting out its political commitment to promoting long-term investment.
MEPs have also voted for a first set of amendments to the proposal to establish a new European Long-Term Investment Fund (or ELTIF) structure. The ELTIF is designed to provide an EU-level quality stamp to a new investment product that will encourage investors to commit to longer term assets, which could include private equity and venture capital.
Although its mandate can now be measured in weeks, the European Commission remains active. This week, it will adopt two proposals with significance for the long-term investment agenda.
The first will be a new Communication on Long-Term Investment, setting out the Commission’s vision for how this debate might be taken forward in the future. We can debate whether it contains all the right initiatives (it doesn’t) and whether the new Commission will feel at all bound by its proposals (they won’t), but it’s nonetheless a good sign that this is a theme that is increasingly embedded in policymakers’ thinking.
And one can see similar signs in the other big initiative this week – the proposal to amend the IORP Directive, the EU legislation for pension funds. Internal Market Commissioner Michel Barnier is expected to be true to his word and not propose new solvency capital requirements for pension funds. Even if it is not the primary motivation for this decision, one positive consequence of it will be that long-term asset classes like private equity will not have to fear that they are about to be priced out of the market for pension fund investment (as many fear they could be for insurance company investment if the final technical details of Solvency II are not got right).
As Wolf Klinz MEP said at Invest Europe Responsible Investment Summit: “It’s only through long-term investment that you really can finance the necessary projects that will eventually determine whether or not you stay competitive or regain your lost competitiveness.” That long-term investment will only happen here in Europe if public policy – at national and EU levels – creates the right incentives.