Brussels, 14/10/2011 (Agence Europe) - As countries are tightening their belts in the face of the sovereign debt crisis and neither banks nor nations have the cash to provide long-term funding for massively expensive infrastructure projects, the European Commission wants €50 billion over 2014-2020 to use to raise private capital to co-finance the missing links in big European infrastructure projects in transport, energy and telecoms with the aim of kick-starting the economy and job-creation.
On Wednesday 19 October, the president of the European Commission, José Manuel Barroso, unveiled a new financing tool to connect up transport, energy and digital infrastructure throughout the EU. With a budget of €50 billion under the upcoming multiannual budget for 2014-2020, the new Connecting Europe Facility will act as leverage on the money markets to raise funds to carry out massive infrastructure projects. The plan needs to be approved by the Council of Ministers and the European Parliament and demonstrate its ability to raise capital from pension funds and insurance companies, explained EU Economic and Monetary Affairs Commisioner Olli Rehn, who stood next to Barroso at the press conference on Wednesday. Transport will get the lion's share of investment, €31.7bn, including €10bn from the Cohesion Fund for 2012-2014. Energy and telecoms will receive €9.1bn and €9.2bn respectively.
To assist with the financing of the Connecting Europe Facility, the Commission has also adopted the terms for the EUROPE 2020 Project Bond Initiative which will be one of a number of risk-sharing instruments upon which the facility may draw in order to attract private finance in projects, in collaboration with the European Investment Bank (EIB). The pilot phase will start next year and last until 2013, with an initial budget of €230 million. The EU budget would be used to provide capital contributions to the EIB in order to cover a portion of the risk the EIB is taking when it finances the eligible projects. While the EU budget will provide some risk cushion for the EIB to finance the underlying projects, the EIB would cover the remaining risk. The Commission says that when EU budget funds are combined with the EIB financing, the total budget amount of €230 million is expected to mobilise investments of up to €4.6 billion. In the pilot phase the idea is to focus on 5-10 projects, concentrating on those that are at a relatively developed stage of the bidding and financing process or require refinancing after the construction phase, in one or more of the three targeted sectors of transport, energy and broadband. The pilot phase will be overseen by the EIB.
The Commission is determined to keep control of project selection, which will need to be economically viable and have a pan-European logic, explained Barroso, stressing the key words: “European solidarity.” The Commission has unveiled an initial list of priority projects like, for transport, the Lyons-Turin high-speed rail line, the canal Seine-Nord canal (Amsterdam-Marseilles), the Dublin-Brussels route and connecting up Gdansk Port with a multimodal platform; for energy, offshore windfarms in the North Sea, gas and electricity grid connections in the Baltic region, gas connectios from north to south in Eastern Europe, connecting up southern Europe's electricity grid with North Africa and a gas pipeline from the Caspian to the EU via the Nabucco pipeline; and for telecoms, high speed internet access, which would have a budget of €6.4bn under the Commission's plans.
The Commission is certain that the project will be beneficial because targeted investment in key infrastructure will help create jobs and make Europe more competitive at a time when it certainly needs this. Along with providing the missing links in EU transport, energy and digital infrastructure networks, the Commission's grand plan will promote cleaner transport and very high speed connections, which will make it easier to introduce renewable energy sources for a greener European economy. (EH/transl.fl)