Extending the reach of European funding

Renewable energy, infrastructure, water management and SMEs are under focus for one of the most secure lenders on the block, the European Investment Bank, writes the bank’s head of the Romanian office, Goetz von Thadden

April 2008 - From the Print Edition

Since Romania joined the EU in 2007, it has become part of EU institutions including the European Investment Bank (EIB), in which the country is now a shareholder. While there has been extensive coverage in the Romanian press about EU Structural Funds, which are administered by the European Commission, and of the role of other European institutions, such as the European Parliament, the activities of the EIB are less well known.
The EIB, which is 50 years old this year, was founded by the original six member states to contribute to the ‘balanced and steady development of the common market in the interest of the (European) Community’. The Bank’s role is to support economic development of the EU’s less developed regions, with an original focus on areas such as the Mezzogiorno in Italy.
This mandate has expanded over the years as the Union has grown. Other goals, which are aligned to EU policy objectives, include support for environmental sustainability, innovation and research, Trans-European Infrastructure networks, sustainable, competitive and secure energy and SMEs. As an entity owned by EU member states, EIB benefits from the highest credit rating (“AAA”) and can pass on the advantages of its funding to the Bank’s borrowers via both competitive interest rates and long term financing matching to the economic life of assets.
The Bank’s activities in eastern Europe date back to 1989 and, in Romania, the EIB signed its first operation in 1991 (a loan worth 25 million Euro to Renel). Over time, loans to Romania have grown to over five billion Euro, covering sectors from transport to energy, communications, education, health, municipal infrastructure, SMEs and industry. Romania and EIB also signed a Memorandum of Understanding in October 2006 to lend up to one billion Euro a year and, in 2007, the EIB together with JASPERS, a joint initiative between the Commission and EIB and the European Bank for Reconstruction and Development (EBRD) for offering technical support for the preparation of EU-funded projects, opened offices in Bucharest. Romania and its investment needs have a high priority in the EIB.
As a new EU member, Romania can look forward to opportunities in additional support from EU funds, growing capital flows and inward investment, which can drive growth in living standards. But significant challenges remain. Effective absorption of the large volume of EU funds will require substantial efforts. Infrastructure investment needs also remain huge if Romania is to achieve its full potential.
The EIB is sensitive to these needs. This includes not only offering infrastructure and financing, but also supporting the implementation of projects through technical assistance. The role of the private sector is also potentially important such as via Public Private Partnerships (PPPs) and this is an area where EIB, as the largest lender to PPPs in the EU, can offer important strategic and financial support. JASPERS is now involved in over 80 projects in Romania, providing crucial assistance in the preparation of the future EU funded projects.
In Romania, projects being assessed by the Bank include co-financing for EU-funded projects, the modernisation of urban transport, the provision of renewable energy, the environmental upgrading of water and sewerage systems and a transport sector PPP.

Yet, the EU institutions have also realised that while funds are important, it is also necessary to look for innovative structures to open new opportunities. One example is the JEREMIE initiative of the European Commission and the European Investment Fund, a daughter of the EIB, which has recently been allocated 100 million Euro to invest into the support of Romanian small and medium-sized enterprises. These are Structural Funds that are due to Romania, which have been entrusted to the EIB Group to be invested on behalf of the Romanian Government in schemes to support SME development. The same approach might apply in the urban development sector via the JEREMIE programme, which is intended to support new urban development funds with EU resources. The Bank grants loans to national and regional governments, municipalities and state-owned enterprises, but also to banks, private companies and to public-private partnerships (PPP), but this is being extended to new risk sharing and capital instruments with our partners as the European Investment Bank looks to take more risk for more value added.