Brussels weighs up options for €300bn investment funds New commission president Jean-Claude Juncker has invested significant political capital in the project The European Commission is considering the creation of investment funds seeded with cash from either the EU budget or the European Investment Bank, as the centrepiece of a new growth plan. The move is aimed at enticing private investors to finance European infrastructure. The €300bn programme, to be spread over three years, is the first major initiative from Jean-Claude Juncker, the commission's new president , who has invested significant political capital in it. "This will be a major credibility test," said one person involved in the talks. The package would amount to under 0.8 per cent of EU gross domestic product over three years. But struggling economies within the bloc are counting on it as one of the few sources of investment spending available at a time they are having to cut budgets to meet EU-mandated deficit targets. The exact structure of the new funds, which would be unveiled before next month's summit of EU leaders, is still being worked on. But officials aim to maximise the chances that money from private investors will help fund riskier projects which are finding it hard to raise cash. According to officials, and documents seen by the Financial Times, the structure most favoured by the commission would use public money as a "first-loss tranche" in new special purpose vehicles. The EU would take most of the downside risks from any investment, while allowing private investors to benefit from any financial gains. Several funds with different risk profiles could be offered. Commission officials said the plan has faced intense scrutiny from within Brussels institutions and some EU capitals, particularly Berlin. They warned that the exact structure of the initiative could change in response to the concerns being raised - particularly the amount and source of the EU funds to be used. The proposal to use cash from the EIB or the EU budget comes after Berlin opposed a similar plan that would have used the eurozone's €500bn bailout fund, the European Stability Mechanism. The ESM is governed by its own treaty that makes it difficult to use its funds for anything other than sovereign rescues. In order to reach the €300bn figure, the commission would rely on "leverage ratios" that build in assumptions of how much private money the funds would be able to attract. According to an official involved in the talks, the commission is discussing a leverage factor of 10, meaning that only about €30bn in official EU money would be needed. Some officials in Berlin have argued that is overly optimistic. When a similar co-investment fund to buy sovereign bonds was mooted in 2011, officials anticipated a leverage factor of four or five. When the EIB's capital was raised by €10bn in 2012, officials predicted that it would increase the bank's lending capacity to €60bn, a leverage factor of six. Commission officials argue that because the first-loss guarantee will cover higher risk projects, it will help unlock bigger inflows of private capital, which justifies the higher leverage assumptions. Brussels is anxious to avoid the pitfalls of the €120bn "compact for growth" agreed in 2012, which included the EIB capital increase. The bank's failure to spur wider investment has brought criticism even in normally cautious Berlin. German officials complained that the bank was unwilling to fund riskier projects in dire need of capital because of excessive fears of losing its triple A credit rating. The proposed special purpose vehicles are seen as a way to avoid a similar fate. In order to attract sufficient private investment, Jyrki Katainen, the commission vice-president overseeing the plan, may be given the task of going on road shows to global financial capitals such as New York and London to generate interest in the funds. Preliminary talks with some advisory firms have already been held, according to people briefed on the talks. In addition to the investment funds, the €300bn plan would include two other legs: a technical assistance programme to identify projects and help countries make them attractive to private investors; and a road map to clear sector specific regulations that have hampered investment in the past.