EIB breaks the ice on the euro gngngngn

Date: 17/04/1997

By Tim Jones

THE European Investment Bank this week invited one of its debtors to repay a loan in euro for the first time.

The EU's Luxembourg-based lending arm announced that a 26-million-ecu loan for the construction of an ice-breaker could be repaid by the Republic of Finland in euro once the single currency is up and running.

The Helsinki finance ministry will forward the cash to the Finnish Maritime Administration, which is responsible for the safety of ships navigating the country's waterways and running ice-breaking operations in the Baltic Sea.

The loan will be made over 20 years, with the first five years treated as a grace period, meaning that the Finnish authorities can opt to start their repayments in euro from 2002.

The EIB is by far the biggest player in the financial market for ecu debt and this latest initiative reflects its policy of promoting the ecu's successor.

In March, the bank issued the world's first-ever euro bond, worth 1 billion euro. This was intended to form the basis of a market for government bonds denominated in euro and was followed by a similar-sized issue from the Italian state.

With this albeit small Finnish loan, the EIB has embarked on the second prong of its strategy to convert its lending, which totalled a massive 23 billion ecu last year, into euro.

Finland is one of the front-runners to sign up to the single currency if it begins on time on 1 January 1999, since its budget deficit dipped under the entry ceiling of 3&percent; of national income in 1996.

The ice-breaker will concentrate operations in the Bottniska Viken, the sea separating Finland from Sweden. The EIB decided to make the loan because the ice-breaker will be used to keep open the sea routes between Finland and the rest of the EU.