The European Union sought ways to marshal billions of euros into its sluggish economy without getting deeper into debt, considering options from a pan-European capital market to a huge investment fund.
With Europe's economy struggling to recover from the worst financial crisis in a generation, EU finance ministers tasked the European Commission, the EU executive, and the European Investment Bank (EIB) to draw up a list of projects that would create growth and decide how to finance them.
"We have given a mandate to the Commission and the EIB to swiftly present an initial report on practical measures that can be taken, on profitable investment projects that are justifiable," Italy's economy minister, Pier Carlo Padoan, told a news conference.
Ministers are expected to discuss the projects and investment tools at their next meeting in Luxembourg in October. There were no details of what those projects might be.
New Finance
To finance them, the ministers discussed four ideas: an Italian paper on new financing tools for companies, a Franco-German proposal on how to boost private investments, a Polish proposal on creating a joint EU fund worth 700 billion euros ($907 billion) and a call from incoming European Commission President Jean-Claude Juncker for a 300-billion euro investment program to revive the European economy.
The European Central Bank's plan to resurrect a market for asset-backed securities would be another financing tool.
The European Union's economy, which generates about a quarter of global output, grew by just 0.1 percent last year and its jobless rate is almost double that of the United States, with around 25 million people unemployed.
Investment is the new buzz word among ministers, overriding the German mantra of budget cuts. Germany is under pressure from France and Italy to loosen the fiscal reins and use its overflowing government coffers to ramp up public investment.
The euro zone will grow again in the third quarter but full-year growth will be below 1 percent, ECB Vice President Vitor Constancio said after the meeting.
Minibonds
Unlike in the United States, European companies rely on banks to provide 80 percent of loans, but banks are reluctant to lend following the worst crisis in a generation.
In Italy, Europe's fourth-largest economy, credit to companies has shrunk by more than 70 billion euros since mid-2011 and is still contracting, central bank data shows.
That problem is mirrored across Europe, holding back the recovery because smaller companies provide two out of every three private-sector jobs in the European Union.
Indebted countries like Italy and France have little public money for businesses. Another hangover of the crisis is the differing cost of financing across the euro zone in a currency area that aimed to create the same financing conditions for all.
Poland wants a 'European Fund for Investments' that would be able to finance, through leveraging its own capital, 700 billion euros worth of investment.
Italy's proposal is a pan-European market, where smaller companies can raise capital, building on its "minibond" legislation in 2012 that allows unlisted companies to issue.
That could be part of a EU capital-market union, building on the euro zone's banking union, but that will need to closely involve London, the leading financial center in Europe.
Twenty-six Italian family businesses, including one that makes organic jam, issued bonds in the past two months, raising 1 billion euros combined, according to the Italian treasury.
"This is not just about funding small companies per se, it is about funding high growth companies," said Nicolas Veron, an expert on capital markets at the Bruegel economic think-tank in Brussels. "They start small but the ones you are really interested in are the ones with the high growth potential."
