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This section aims at ensuring that FIs will contribute to the achievement of the Programme and the ESIF objectives.

Identification of Value Added of the FIs: objectives of the ex-ante assessment

• Check the value added of the FI;

• Consistency with other forms of public intervention addressing the same market failure to limit overlap and avoid conflicting targets;

• Possible State aid implications including the proportionality of the envisaged intervention to the identified market needs;

• Measures to minimise market distortion resulting from the FI.

Source: EC (2014c).

As reported in Figure 16, experts are rather convinced that the strategy proposed for financial instruments in the ex-ante assessments is in line with and connected with the strategy defined in the operational programmes. Under the CPR, there is no legal obligation to report on the thematic objectives supported by the financial instruments, but very often the priority axes defined in the ex- ante assessments voluntarily recall and have a clear link to the thematic objectives. In 5 cases only, there is no direct guiding link or reference to the thematic objectives (Romania, Toscana, Sardinia, and two cases in Germany)

Figure 16. Link between Financial Instruments (FIs) and the Operational Programmes

Source: Authors’ elaboration. Note: It refers to the perceptions of 23 experts.

Market assessment includes recommendations that confirm the usefulness of the existing offer of financial instruments and validates the choice of the Managing Authorities (MAs) for new instruments. A rather generalised problem is the little consideration attached to the need of adopting tailor-made financial instruments to tackle different problems. Too often, a single design of instrument is presented for each area of intervention (e.g. loan guarantee fund for farm businesses or co-investment fund for innovative businesses).

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QUESTION: Based on your experience, to what extent is the proposed use of FIs in ex-ante assessments aligned to the strategy outlined in the Operational Programmes?

A more specific and therefore more effective design of the FIs requires a greater analysis of the value added brought by each potential FI. Value added is defined in the guidelines (EC, 2014c) as being of two different natures: a) quantitative, b) qualitative. Each of this aspects presents a list of values.

The quantitative dimension is based on four points (text from guidelines):

• The leverage of the EU (i.e. ESIF) contribution of additional contributions to the investment at all levels down to the final recipient. The higher the leverage achieved by the FI the higher its value added;

• The intensity of subsidy of the FI, which may be quantified in addition to the qualitative con- sideration (see below) of non-distorting the competition. The quantification helps to rank different options. The lower the intensity for a given project or group of projects the higher the value added;

• The revolving effect allowing the recycling of funds;

• Additional contributions coming from the final recipients, since these are excluded from the calculation of leverage.

From the above, the elements taken into account for the qualitative analysis of value added are to some extent highly questionable. At present, central to value added are leverage, non-competition and recycling. However, such an approach would be equivalent to measuring the success rate of grants by using “absorption” capacity of funds rather than impacts. The search for more “European” value added in the qualitative dimension does not improve on this weakness.

On the other side, the qualitative dimension lists a large number of possible value added items, which is non exhaustive. The list also puts addressing market failures as only one of the many possibilities and not as a fundamental prerequisite.

Overall, the guidelines leave the definition of value added wide open. The whole document does not once mention European value added. This means that nearly all financial instruments proposed will manage to justify the intervention based on value added, as long as the leverage is high and better is revolving.

As a result, the value added analysis of document analysed for this paper vary strongly in quality and reasoning. This does, however, reflect the lack of consensus in the EU on what constitutes value added at European level, which will likely remain an issue in the future. However, the link to EU objectives should be presented as a sine-qua-non condition and not just one of the numerous bullet points. In conclusion, our evaluation of the value added analysis performed in the ex-ante assessments is in most cases not positive. Only some assessments provide a robust “value added” which included EU objectives. In one of the ex-ante assessments, in this case for Hungary in the area of competitiveness of SMEs, we found nearly no mention on the expected value added.

Box 3 – Good Example for the identification of value added of the FIs: Germany

The Ex-ante Assessment of ESF Mikrokredite Thüringen (Germany),produced in August 2015, offers an example of available good practice methodology for the identification of value added. For this section, the analysis is divided in two parts:

• Mapping other existing funding opportunities: A detailed description of the existing FIs explaining why they serve a different segment from the one targeted by the new FI proposed by the Managing Authority.

• Analysis of the off-target potential beneficiaries: Analysis of the appropriate FI’s design in order to cater the needs of the potential beneficiaries that cannot meet the requirements of other existing funding opportunities.