Brussels, 22/05/2012 (Agence Europe) - The European Union will provide €230 million to facilitate the funding of major infrastructure projects through an innovative mechanism for bond lending, better known as “project bonds”, which can leverage more than €4 billion from private funds. The first pilot phase for these bonds will begin this summer thanks to an inter-institutional agreement facilitated by the Danish Presidency on Tuesday 22 May, as previously indicated by EUROPE (see EUROPE 10617). This phase will be staggered throughout 2012 and 2013, but if the results prove conclusive the project will be extended for good and financed through the 2014-2020 financial framework. This agreement comes just at the right time, on the eve of the informal heads of state and government dinner.
Reducing risk factor. The European institutions have mobilised to swiftly implement an initiative that could facilitate investment in major infrastructure projects by attracting important investors from the capital markets, such as pension funds. In addition to their expertise, the EU and the EIB will provide €230 million and will act as guarantors for large-scale Trans-European Network projects in transport, energy and telecommunications. By assuming part of the risk inherent in carrying out these infrastructure projects, the institutions will facilitate project funding and therefore compensate the budget difficulties being experienced by respective governments.
A budget for growth. EP rapporteur Göran Färm (S&D, Sweden) is firmly persuaded that project bonds are a way to reverse falling investment in Europe. They are a fresh way of encouraging investment which “could play a key role in the growth strategy now being called for by many EU member states”, he said. He said he was particularly happy that project bonds carry little risk for taxpayers, in that, if a project does not work, taxpayers are unlikely to lose very much. The €230 million will come from the EU budget for the current planning period. With the multiplier ratio of between 15 and 20 expected by the European Commission, this could mobilise up to €4.6 billion in private investment. Even if one remains less optimistic, billions of euro could still be raised, Färm said.
Which projects? At this stage, the pilot phase could involve a dozen projects, though none has so far been identified. Clearly, they will be selected from the list of major works highlighted in the Connecting Europe Facility, depending on the European added value they bring and how well-developed they are.
In future. While an agreement was reached, there remain, nevertheless, further stages to be gone through before everything is formalised. The EP budgets committee will vote on this issue at the end of the month, probably paving the way for a plenary session vote in July. The Council will approve the agreement this month. “This is a first step. It should become more permanent with the Connecting Europe Facility in the 2014-2020 planning period. We are open to that but it is no secret that the Parliament wants something more long-term”, Färm said. The Socialist Group is considering other options, he stated. (MD/transl.fl/rt)