Slovakian dam project is a warning sign for Juncker's investment drive

Late last month decision makers in Brussels approved the EUR 21 billion European Fund for Strategic Investment (EFSI). This new mechanism, the engine of the Juncker Investment Plan, is basically intended to stimulate investment in sustainable and resource-efficient projects of the kind that individual EU countries find it difficult to realise. But in its current form - that is without stringent economic, social and environmental criteria - this piece of legislation runs a serious risk of helping finance the wrong projects.

One such case is Slovakia's Slatinka dam. With roots in the 1950s, this plan simply makes no economic, environmental or social sense. According to the plans, this dam is intended for storing water that can be released during the dry season for use by the Mochovce nuclear power plant and other nearby industries downstream. If realised, this large dam would involve the flooding of a vast tract of land to create a reservoir with a capacity of close to 27 million cubic meters.

Over the years, government officials have come up with a variety of reasoning to try and justify this project – from recreational purposes and support for agricultural irrigation to flood control and climate change adaptation measures. But eventually, the heavy toll that constructing this dam and its reservoir would take on the fragile ecosystems, the local residents and ultimately state coffers simply doesn't justify any of its supposed benefits.

The 12 kilometre long Slatina valley in central Slovakia is a mosaic of protected forests, wetlands and wet meadows which are home to 158 butterfly species, 123 bird species, 27 mammal species and many others. A number of the animal and plant species in the valley are officially classified as critically endangered. The rocky banks of the Slatina river are rich with vegetation, including willows and alders that are over 100 years old.

In fact, in 2013 the European Commission has already ruled that the damage that the planned dam would cause to the valley's natural habitats would constitute a breach of EU biodiversity regulations as well as counteract the objectives of Slovakia's own Operational Programme for Cohesion Policy funding.

Moreover, the planned reservoir would also inundate its 625 year old namesake village. The longstanding plan has also meant that for decades local residents are prohibited from building new homes or even repairing existing ones. The local school, the medical clinic and even the train and bus stations have already been abolished. Some of the people still live in the village but, naturally, young residents were left with no choice but to leave for other towns.

Even the economic rationale for this project is highly questionable. The project's estimated cost of EUR 114 million is based on extrapolation and its economic feasibility seems to rely on the rather dubious assumption it will be operated for at least 400 years.

And in fact, it appears that the project's developer, the state-owned company Vodohospodárska výstavba, is having a hard time advancing it, failing to produce the necessary documents. Last month the company withdrew an application for a permit for felling 100,000 trees in the area slated for construction of the dam. The delays in the implementation of the project have also meant that the environmental impact assessment for the project, one of the requirements for land use permits, has expired in November 2012. Both documents are legally mandatory for realising the project.

“It is paradoxical that Slatinka has made it to the list of EFSI candidate projects,” said Martina Paulíková from the Slatinka Association. “This instrument is supposed to support innovative investments, growth and jobs, whereas this dam was planned by communist technocrats in the 1950s to support the development of environmentally destructive heavy industries.”

Yet, the Slatinka dam is not the only problematic project the European Investment Bank could be considering for funding through the EFSI. The European Parliament will soon be voting on the European Commission's EFSI Scoreboard (pdf), that is the assessment methodology for candidate projects. To ensure that only those projects that genuinely contribute to a more sustainable Europe receive this financial support, the Scoreboard must be comprised of stringent economic, social and environmental criteria.