6 February European Investment Bank

Date: 13/02/1997

IN ITS annual report, the European Investment Bank (EIB) revealed that it was planning a series of large bond issues to develop the capital market for the single currency before it was even introduced. Last week, the EIB - which is the largest single issuer in the market for ecu bonds - launched key bench-mark issues as part of its programme to underpin the euro, which is due to replace the ecu in 1999. At the end of January, the EIB issued a 1-billion-euro seven-year bond hard on the heels of a 1-billion-Dutch guilder issue. The latter is intended to act as a 'tributary' whereby the EIB can redenominate the paper into euro and feed it into the main euro-bond once the single currency area is established. The markets reacted favourably and the euro-bond was oversubscribed two-fold.

LAST year, lending by the EIB totalled a record 23.2 billion ecu, of which 21 billion ecu was used to fund projects within the Union. The bank raised 18.6 billion ecu on the capital markets. “These results once again demonstrate the EIB's strong practical commitment to furthering European economic integration, laying the basis for long-term growth and employment,” said President Sir Brian Unwin. “By doing so, it helps to create the conditions for a successful economic and monetary union.”

UNWIN stressed the role of the EIB in financing the EU's Trans-European Network (TENs) projects. Last year, the bank lent 6.3 billion ecu for transport and energy TENs, bringing its total lending on these schemes since 1993 to 31 billion ecu. Special emphasis was placed on the projects given priority status by heads of government. These 14 transport and ten energy programmes benefited from almost 2 billion ecu of extra funding during 1996.

WITHIN the Union, the EIB provided 13.8 billion ecu for infrastructure, energy, environmental and industrial projects in less-favoured regions. Of this, 1.6 billion ecu went to the eastern states of Germany. For the four EU countries with the lowest per capita income - Greece, Spain, Portugal and Ireland - a total of 4.6 billion ecu was earmarked. This accounted for 10&percent; of all new capital formation in Greece last year, 9&percent; in Spain, 5&percent; in Ireland and 16&percent; in Portugal. The bank also completed its interest rate subsidy scheme for small and medium-sized enterprises in Northern Ireland and the border areas, advancing 203 million ecu for 350 new ventures.

OUTSIDE the Union, EIB loans totalled 2.3 billion ecu and virtually completed the expiring mandates for lending to central and eastern European countries (CEECs), North Africa, South Africa and Latin America. In the CEECs, the EIB achieved an all-time high with loans of 1.1 billion ecu, of which 688 million ecu went to fund transport schemes along trans-European road and rail corridors defined by the 1994 Crete conference. In the Mediterranean region, the bank lent 681 million ecu for communications infrastructure, measures to fight pollution and electricity and gas links between countries. African, Pacific and Caribbean lending totalled 396 million ecu.

“I EXPECT to see a similar high level of bank activity in 1997,” said Unwin after announcing the results, adding that this might lead to an even greater recourse to the capital markets. The bank's priorities will continue to be to support regional development, maintain progress on TENs and prepare the ground for the euro through bond market activity.