Bank gears up for investment spending spree

Date: 19/06/1997

THE European Investment Bank is drawing up plans for an ambitious multi-billion-ecu capital spending programme designed to put flesh on the bones of the Amsterdam summit agreement on jobs.

In contrast to the low figures floating around in the Dutch capital, officials at the EIB envisage a scheme on the scale of that agreed at the Edinburgh summit five years ago at the depth of recession.

In December 1992, EU leaders agreed to let the EIB activate a two-year temporary lending facility of 4 billion ecu; a figure which was raised to 6 billion ecu six months later.

The cash was focused on investment in trans-European transport, telecommunications and energy networks along with spending on the environment and urban renewal.

Added to this was the so-called 'Edinburgh facility' worth 1 billion ecu, which provided loans with interest subsidies to small and medium-sized enterprises (SMEs), leading to the creation of 30,000 jobs.

When EU leaders agreed this week to add a resolution on growth and employment to the 'stability pact' which will enforce budgetary discipline in the monetary union, they decided to extend the powers of the EIB.

They called on the bank to establish a special facility to fund SMEs' high-technology projects in cooperation with the European Investment Fund (a loan guarantee specialist part-owned by the EIB); expand its lending in the education, health and urban environment sectors; and consider making very long-term loans to transport projects.

“Most of the ideas were things we had already played with,” said an EIB official. “These proposals did not just come out of a hat.”

Indeed, the bank has only recently made experimental loans for the building and equipping of hospitals in Spain.

The EIB is puzzled by talk in Amsterdam that these new powers would only increase lending by less than 1 billion ecu - a drop in the ocean compared with the bank's total lending last year of 23 billion ecu.

“It is much more likely to be in the billions,” said an official. “This will be raised from the capital markets based on the strong financial position of the bank.”

The promise to establish a special research fund with left-over cash when the European Coal and Steel Community disappears in 2002 remained vague in the Amsterdam conclusions as this is still a contentious issue between member states.

Governments estimate that a 670-million-ecu surplus will be left from levy payments made to the Community by coal and steel companies over the years.

The EIB is already a major lender to SMEs through 'global loans' made to financial intermediaries over the past quarter century. Through 11- billion-ecu worth of loans over the past five years, the EIB has fostered capital investment by 40,000 SMEs.

None of the changes can be agreed without being referred back to the EIB's board of directors and ultimately to EU finance ministers in their capacity as the bank's board of governors.

Officials are hoping to have a detailed plan ready in time for the special Union jobs summit which will be held in Luxembourg in the autumn.