Serving European policies. The European Investment Bank (EIB) has never been so much in the news. All the plans for getting out of the financial crisis agree on the EIB's role in the face of the threatening economic crisis. One could innocently ask oneself why, at a time when bankers and the financial world in general are being blamed as the main culprits for the current problems, the EU should hand essential work like funding small and medium-sized enterprises (the main creators of jobs in Europe) and big infrastructure projects over to a bank?
The answer is clear: the EIB's work is the direct opposite of the work of the banks and financial institutions that have turned the financial world into a glorified lottery (or casino, in the words of Valéry Giscard d'Estaing). Ever since it was set up, the EIB has applied strict criteria when deciding where to invest, which is understandable because all its capital is provided by the member states, which enables the bank to borrow from the market at the best rates. Despite the criticisms of some investors who would prefer greater flexibility at times, the EIB would never have given in to the subprime temptations. After winning the confidence of the money markets and shrugging off the initial scepticism from the banking world, the EIB has acted as a tool in the service of EU policies. Its current president, Philippe Maystadt, has gone further down this road. This is the direction being pursued by the EIB and it is in acting to stave off economic recession that the EIB's full value will be seen.
Three special tasks. The European Council has given the EIB three special tasks:
a) small and medium-sized enterprises. SMEs are the first victims of the credit crunch, despite being the fabric of the European economy and the main provider of jobs. The EIB's intervention will help commercial banks grant SMEs loans on better conditions than they could obtain otherwise;
b) big infrastructure projects of European interest. The EIB is already working in this field. Looking forward, Philippe Maystadt has already talked explicitly about setting up a new fund to this effect. This would mean returning in a way to what Jacques Delors recommended in the past (in vain) when he suggested that the EU could itself borrow money in certain circumstance in order to fund projects of clearly recognised European interest;
c) action to tackle climate change.
Expansion. The EIB is already active in the three areas I have mentioned and is being asked to expand its work. Maystadt has on several occasions talked of aims, modalities and objectives and I summarise his ideas on the next page. I will add a few comments of my own:
In terms of support for small and medium-sized enterprises, Maystadt has expanded his ideas, explaining “…as long as the banks carrying out operations play their part”. In the past, this was not always the case, as was shown by a special investigation. There is a detailed summary of the future guidelines and criteria in issue 9740 in September. Philippe Maystadt's comments set out what he is expecting from the commercial banks.
Climate change and industrial competitiveness. On action to combat climate change, the EIB's guidelines can be seen as a partial response to the concerns expressed by Italy, Poland and a handful of other member states about the danger of the commitments planned in the EU's energy and climate plan having a negative impact on the competitiveness of a section of EU industry. The EIB president explained how environmental commitments can be a key component of future economic growth and job creation. This is not a new idea but it has been given official backing from the EU body responsible for funding projects and innovation, a body with serious experience and expertise. This is crucial for Europe's future - turning the restrictions imposed by climate change into an extraordinary opportunity to make progress, by creating a new economic expansion paradigm. Maystadt has explained how the EIB feels it can play a pioneering role in this field.
New areas. Belgian Prime Minister Yves Leterme has suggested that the EIB should be given a new task in the EU's response to the financial crisis. He said: “We (Ed: heads of state) should consider setting up a European Emergency Fund to buy non-liquid assets, where necessary, to recapitalise banks and guarantee inter-bank loans. The EIB can borrow the required funding at the best rates because it has a triple A rating.” To sum up, I would like to point out that the European Council has given the EIB a new role, in connection with the European Commission, namely of supporting investment in energy efficiency and renewable energy sources. The EIB itself has written a reflection document on the role it could play in reforming the EU budget system for the post-2013 period. The objective has not changed - consolidating the EIB's role as a tool in the service of EU policies and their funding.
(F.R./transl. fl)
Summary of the statements by Philippe Maystadt, President of the European Investment Bank, on the EIB's role in encouraging economic recovery in the European Union
A. Overview. “The European Council has made several requests of us in three domains. The first is small and medium-sized enterprises. The EIB was asked to increase the funding it provides to banks for them to improve lending criteria for SMEs. The EIB will introduce four new measures: simplifying lending access procedures; extending lending to intangible investment (licences, research, etc); sharing the risks between the EIB and the banks; and transparency on the financial benefits granted to SMEs.
The EIB has already granted lending to SMEs totalling between €5-6 billion a year. The European Council wants us to increase this to €15 billion for 2008 and 2009 and to plan funding of €30 billion for the following years. The banks, of course, will have to play their part.
Second domain: the European Council wants the EIB to strengthen its intervention capacity for infrastructure projects. The idea is to make greater use of investment funds (equities) to increase the EIB's clout. We will seek long-term investors to fund such projects. We are moving in the direction of setting up a fund to supplement our lending.
The third domain is the battle against climate change. I am keen to stress the fact that fighting the economic recession does not contradict the fight against climate change. It would be a great mistake to believe the opposite. It is important to invest now in new renewable energy technology. Such investment will help support growth and create jobs in Europe. The EIB will therefore take a number of energy efficiency initiatives. For example: funding programmes in European cities (transport, buildings, etc); at-risk financing of research, particularly in medium-sized enterprises; and supporting the car industry in connection with clean cars.”
B. Further clarification about SMEs.: After explaining that the EIB has for several years been granting loans to commercial banks, which they then lend on to small and medium-sized enterprise (at the start of 2008, Nicolas Sarkozy and Gordon Brown asked the EIB to make greater efforts to help SMEs), Philippe Maystadt said: “Back in 2007, we launched a structured consultation exercise in the 27 member states of banks and SMEs to find out whether financial benefits really were being passed on to SMEs. They were not always passed on. We then brought forward three measures that were accepted by the EU finance ministers in Nice, namely: a) simplifying lending procedures; b) updating products and making loans available for any type of investment - buying licences, research, handing companies on to the next generation, etc; and c) sharing the credit risk with the commercial banks. These three factors are obviously very clearly understood by the banks. But we added a fourth factor. We are demanding transparency in the transfer of financial benefit to SMEs. Banks must introduce a mechanism to allow small or medium-sized enterprises to see an improvement in their funding conditions.” At the same time, the volume of funding will increase by half, in addition to which there is also funding available from the European Investment Fund (an EIB subsidiary). (transl. fl)
(information culled from interviews with and statements by Philippe Maystadt)