The European Union's vaunted investment plan, due to be formally blessed by the bloc's 28 leaders at a summit this week, may be a day late and several euros short to revitalize a stagnant economy.

Because of Europe's mountain of public debt, the initiative outlined by European Commission President Jean-Claude Juncker contains no new public money and relies on financial engineering to turn 21 billion euros in existing EU and European Investment Bank funds into a putative 315 billion euros in project funding.

Whether it can revive sagging public and private investment will hinge largely on the choice of shovel-ready infrastructure projects that boost Europe's growth potential, and on the way that national contributions are treated by the EU bean counters.

Investment in the 28-nation EU in 2013 was on average 15 percent below pre-crisis levels, according to an EU task force report, with a plunge of more than 60 percent in the worst affected southern countries.

There is much debate about whether the slump is mostly due to weak demand, tight credit conditions, an absence of economic reform or a lack of business confidence, but EU governments agree that something must be done now.

The Juncker plan, due to be up and running in mid-2015 and last three years, will focus on "viable investments of European significance" mostly in transport, energy and digital networks, as well as research and development.

Juncker has promised "favorable treatment" for countries that take equity stakes in the planned European Fund for Strategic Investment when the EU authorities calculate budget deficits, which must be below 3 percent of national output.

Polish Finance Minister Mateusz Szczurek told a conference of the Council for the Future of Europe last week no government would pay into the fund unless it was guaranteed that money invested would not be counted against its deficit.

But economic powerhouse Germany, the biggest stickler for EU budget discipline, opposes bending the fiscal rules, fearing a precedent and abuses of the definition of "investment".

"Any renewed discussion about tweaking the fiscal rules runs the risk of undermining market confidence," German deputy labor minister Joerg Asmussen told the conference. It was very hard to define good and bad expenditure, and all spending needed to be refinanced either by taxation or by borrowing, he argued.

Former Italian prime minister Mario Monti wants the bloc to go much further to promote productive investment by excluding from the deficit calculation not only payments into the EU fund but also EU-approved national projects that boost infrastructure and raise a country's growth potential.

ACTION NEEDED AT NATIONAL LEVEL

"Although highly welcome, the plan is unlikely to be large enough or fast enough to have the needed impact all on its own," Monti and French European lawmaker Sylvie Goulard wrote in a joint paper. "Action is required at the national level too."

Like the Germans, Monti believes in strict enforcement of rules, but he argues the EU should adopt Germany's own post-war "golden rule" that authorized borrowing for investment, not to finance current spending.

Berlin replaced that principle in its constitution in 2009 with a so-called "debt brake" that forces the federal government to run a virtually balanced budget from 2016, except in cases of natural disasters or severe economic crisis.

Monti, a former EU competition and single market czar, argues that at a time when interest rates are at a record low, there is a strong moral case for governments to borrow cheaply to produce social and economic benefits.

Perhaps surprisingly, the International Monetary Fund shares that view. Its annual World Economic Outlook in October said a debt-financed increase in public infrastructure investment would deliver a reduction in debt-to-GDP ratios by boosting output.

Without growth, highly indebted countries like Italy cannot reduce their debt burden. But Italy also highlights a potential hurdle to Juncker's investment plan: it has been unable to spend some 20 billion euros in EU regional funds because it lacks the so-called absorption capacity - a term that covers clean public administration, project definition and management capability and matching national money.

Without sizeable investments at national level, notably in Germany, the Juncker plan is unlikely to deliver a significant growth stimulus, economists say, especially since the leverage ratios for private money seem highly optimistic.

It may speed up construction of some gas pipeline and electricity grid inter connectors in central Europe, helping reduce dependency on imported Russian gas over time, and supporting the transition to renewable energy sources.

But it also risks repeating past errors of EU structural funds by promoting bridges and airports to nowhere to please national politicians.