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Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
Investing for growth: comments in the EP budget committee discussion on the EIB's capital increase
EP BUDG Committee with VP Rehn and EIB President Hoyer
7 May 2013
Mr Chairman, President Hoyer, Honourable Members,
I am pleased to be here today in the BUDGET Committee for an exchange of views regarding the EIB capital increase, which was agreed at the Commission's initiative by the June European Council 2012 as part of the Compact for Growth and Jobs. The capital increase will generate EUR 60 billion of additional lending over the next three years and therefore constitutes an important stimulus for the European economy.
The EIB Group provides a key contribution to promote growth and reduce unemployment. This is the top priority for the EU, together with the structural reforms needed to rebalance and raise the growth potential of the European economy.
EIB lending has to be aligned with the country-specific recommendations of the European Semester in order to maximise the impact on growth and competitiveness.
I consider that the impact of the capital increase will not only be assessed in terms of volume but also with regard to the value added achieved by the EIB lending.
While the Commission recognises the importance of the triple A rating of the Bank and the need to properly manage portfolio risks, it is critical that EIB deploys the fresh funds to high value-added projects across the 27 Member States, including vulnerable and programme countries, for which funds are not available from other sources on reasonable terms.
For example, EIB activity in 2012 has been supporting economic recovery in Greece and Portugal. The Bank provided substantial amounts in support of school facilities throughout Greece as well as for the development of environment-friendly energy production. Small and mid-cap businesses play a key role in the Greek and the Portuguese economy and the EIB funding helps them gaining access to credit despite the difficult market conditions.
In the short term, we have to address the problems companies are facing in accessing finance. Lending spreads differ widely across Member States, which seems to relate less to the intrinsic credit quality of the borrower and more to its geographical location. In this sense, the differences reflect more fundamental problems of fragmentation in the EU banking sector. There is evidence that SMEs are particularly affected by constraints on credit supply.
We encourage the EIB, as the EU bank, to mobilise its own resources on a broader scale to kick-start an EU initiative for alleviating the financing constraints for SMEs, particularly in vulnerable Member States.
Moreover, Europe faces large-scale, long-term investment needs to respond to challenges like climate change and ageing but also to complete the Single Market and the shift to a competitive knowledge economy. Tackling these needs now would give a much-needed boost to economic activity as Europe fights its way out of the crisis.
The Commission's Green Paper on long-term financing aims to initiate a broad debate about how to foster the supply of long-term financing and improve and diversify the system of financial intermediation for long-term investment in Europe.
Taking into account the feedback received during the currently on-going public consultation, the Commission will prepare an action plan still this year. That action plan could take diverse forms, such as regulatory action, stronger coordination and promotion of best practices and specific follow-up with individual Member States in the context of the European Semester.
If the needs for capital market financing of SMEs and infrastructure projects are not tackled now, Europe risks encountering a major funding gap, against the background of shrinking bank balance sheets, impaired securitisation markets, an under developed covered bond market and the impact of new regulation on capital market investment or direct lending by insurance companies and pension funds.
In light of the new market circumstances, we consider that a major challenge for the EIB in the years to come will be to use its catalytic capacity to attract resources from the capital markets in support of EU priority investments. At the same time, it should reinforce and streamline its cooperation with public investment banks in Member States.
With a view to the next Multi-annual Financial Framework, I would like to stress that the EIB is the Commission's natural partner for innovative financial instruments, such as loan-grant blending and risk-sharing mechanisms. These instruments are a very efficient tool to combine and leverage the limited resources from the EU budget, the EIB and other European institutions to promote growth and employment in Europe.
Therefore, the Commission has proposed to considerably expand their use under COSME, Horizon 2020 and the Connecting Europe Facility. Moreover, to further improve the impact of the EU intervention, we should continue exploring synergies between EIB financing and Structural Funds.
A clear example of an intelligent combination of EU Budget with EIB resources is the pilot phase of the project bonds initiative. All the legal preconditions are in place. The EU budget contribution of EUR 230 million is expected to raise around EUR 4.5 billion in project cost. The positive feedback from the market participants provides confidence about this new way of financing infrastructure projects in the EU and more generally on the use of innovative instruments in support of the Europe 2020 strategy. The project pipeline is good with projects in the three areas of transport, energy and broadband. [It is up to local tendering authorities now to take up this way of innovative financing.]
In conclusion, the current extraordinary economic and financial situation requires decisive policy action, and that's why the EIB activity is crucial to fight the financial and economic crisis in Europe. In this difficult environment, the EIB has to assume its role of a policy-driven bank, act as a countercyclical institution and continue to provide financing to the real economy.
I am looking forward to a continued close and successful co-operation between the Commission and the Bank.
Thank you President, thank you Honourable Members.