European Investment Bank
Rehn calls for swift EIB capital boost to fund recovery
By Sarah Collins | Wednesday 18 April 2012
Economic Affairs Commissioner Olli Rehn has called on EU governments to increase their capital contributions to the European Investment Bank, the EU’s long-term lending arm, which is in the process of winding down its crisis lending. Rehn, speaking to MEPs in Strasbourg, on 18 April, said the bank was “reaching the limits of what it can do with its current capital base”. “For the sake of sustainable growth and job creation, we need more European cross-border and Community investment in infrastructure, energy and transport, and innovation, research and communications, and therefore I call on EU member states to provide without any delay additional capital to the EIB,” Rehn said, asking MEPs for “support for this very important objective”.
The call comes amid renewed tensions on eurozone bond markets, weakening growth prospects and soaring unemployment in the bloc’s periphery, particularly in Spain, Portugal and Greece. EU leaders have recently refocused their attention on growth and jobs, but are unable to release extra money from the EU budget to help ailing governments. Rehn’s call is unlikely to go down well in Germany, which along with France, Italy and the UK guarantees most of the EIB’s lending. Germany has repeatedly resisted calls to pledge more cash to the eurozone rescue effort, and only reluctantly agreed to up the lending ceiling on the bloc’s bailout funds in March.
EIB President Werner Hoyer told
Europoliticsin a recent interview that capital increases were a “very sensitive issue” given the huge amounts of bailout cash being handed over to Greece, Ireland and Portugal, and said the EIB could increase its effectiveness by offering loan guarantees rather than cash to bridge the gap left by banks paring down lending during the crisis. He said the bank would continue to decrease lending and “do more with less” by leveraging money from the EU budget and the private sector. The EIB lent €61 billion to selected projects and companies in 2011, but will slash that to €50 billion this year as it unwinds an emergency loans package that peaked at €79 billion in 2009.
The bank mainly finances projects that help in carbon reduction, boosting road and rail links and developing poorer regions, funnelling as much money as possible to smaller companies. It also offers loan guarantees to private companies to help jump-start projects, effectively agreeing to take a percentage of any losses they might incur. The bank agreed to up its lending at the start of the crisis, in 2008, but said this would only last until 2010. It can lend up to 2.5 times its capital base, which stands at €232 billion (of subscribed, not paid-in capital). “To allow the EIB to do more for growth and jobs its capital base needs to be increased,” Rehn said. “In our view this should be done by its shareholders - in other words, by EU member states.”