A larger use of financial guarantees: the EFSD+ approach
The use of ‘public funding as a guarantee to attract public and private investment to create real jobs’. Launched in 2016, the European Fund for Sustainable Development (EFSD) was based on this modus operandi. It transposed in the field of EU external action the same novel approach introduced in the EU cohesion policy after the 2007-2009 financial crisis.
The Fund is based on the assumption that smart and sustainable investment could only be achieved through private funding. It was designed to create new opportunities for public and private entities through the provision of partial guarantees or risk cushions to financial institutions, typically the development banks which already provide support through loans, guarantees, equity or similar products in states characterised as fragile, LDCs, or highly indebted.
The new EFSD+ became along with the External Action Guarantee the financial arm of the Neighbourhood, Development and International Cooperation Instrument (NDICI) “Global Europe” after the adoption of the Multiannual Financial Framework 2021-2027. It integrates and brings together lessons