MEPs warn of funding shortfall threat to TENs

Date: 05/11/1998

By Rory Watson

WITHOUT the active involvement of private finance, the full potential of the ambitious network of Trans-European Networks (TENs) criss-crossing the Union will never be achieved.

That is the view of the European Parliament's transport committee, which has just adopted a new report on the issue which warns that despite the political and economic significance of the TENs, the level of funding provided by the EU budget "falls visibly short of what is required for the needs and challenges" which lie ahead for the road and rail links.

The MEPs' warning comes just as EU leaders have reopened the debate on the Union's economic future and are stressing the need for greater priority to be given to policies which stimulate growth, jobs and competitiveness.

The TENs can make a contribution to all three objectives and the search for ways in which greater impetus can be given to the 14 priority projects identified at the Essen European summit four years ago will soon test the imagination of finance ministers.

While essentially focusing on the need to encourage greater involvement by the private sector in individual programmes, the transport committee also stresses the importance of an even higher degree of participation by public finances.

In a direct appeal to governments which have reduced infrastructure investment in order to meet the single currency convergence criteria, the MEPs call for member states to devote at least 1.5% of their budget resources to the TENs, "especially in view of the multiplier effect of such investment for the economy and jobs".

The report by Italian Christian Democrat MEP Alessandro Danesin, which will be discussed by the full Parliament at its plenary session in Brussels next month, insists that an increase in the volume of TENs funding from the EU budget is called for.

In the five years leading up to the end of 1999, this was set at 1.8 billion ecu - just a fraction of the overall amount of investment required for the projects over that period, which is estimated at 40 to 50 billion ecu.

Even though a further 5 billion ecu is being proposed by the European Commission for the following seven years, MEPs believe that this is far short of what is needed.

The only way of realistically bridging the shortfall, they maintain, is to mobilise private investment through the use of public-private partnerships (PPPs).

Private sector involvement in the financing of Europe's transport infrastructure is not a new concept. The development of the railway network in the last century was accomplished with private capital and although state funding lay largely behind road construction in the first half of this century, private finance was increasingly used - particularly in Italy and Spain - from the Fifties onward.

Last year, the Commission identified a handful of TENs projects which could lend themselves to public/private partnerships. They included the high-speed rail link between Madrid and Perpignan, the Dutch section of the Paris, Cologne, Brussels, Amsterdam and London high-speed train, the Brenner and Semmering tunnels, Berlin airport and the rail connection between Piraeus and Athens.

The Parliament's transport committee agrees. It believes that such partnerships can improve the financial viability of TENs, enhance the profitability of the various projects and help keep construction costs under control, provided that a clear balance can be struck between commercial and socio-economic criteria.

At the same time, it maintains that private sector involvement should not be purely financial. To optimise the benefits of such partnerships, they should begin at the drawing board and planning stages and run right through to the exploitation of the TENs, while providing for a suitable division of risk.

To achieve this, MEPs argue that the Union must create "conditions of legal security" which will encourage private capital to participate, and suggest this can be guaranteed through clear and flexible legislation on public contracts relating to infrastructure projects.

MEPs are specifically warning governments against using the input of private capital to cut back on public funding for infrastructure improvements.

They are also calling on the Commission to propose new forms of long-term funding and ways to make venture capital more easily available.