The EU will set aside €230 million in guarantees to support the issuance of "project bonds" for EU infrastructure projects under a deal concluded by MEPs and EU governments in Strasbourg on Tuesday. The deal will pilot test this innovative plan to attract private investment in transport, energy and information technology network projects.
With an expected multiplier ratio of between 15 and 20, these loans and guarantees could mobilise up to €4.6 billion in private investment.
Parliament has called several times for the introduction of such innovative risk- sharing instruments.
"Europe's economic crisis stems not only from the financial one, but also from declining investment. Given tough national budget restrictions and bank capital requirements, we must find new ways to boost investment for growth. Project bonds should make investing in important infrastructure projects more attractive to capital market investors, without excessive risks for taxpayers. This new scheme could play a key role in the growth strategy now being called for by many EU member states", said MEP in charge of the negotiations, Göran Färm (S&D, SE), who welcomed the first-reading agreement:
Modern and efficient infrastructure is vital to achieving the "Europe 2020" growth targets. Whilst the private sector should finance the bulk of these - mostly profitable - investments, the public sector's role in Europe will be crucial for achieving the EU2020 targets, added Mr Färm
Investment needs for transport, energy and Information and Communication Technologies (ICT) infrastructure projects in Europe are estimated at €1.5 trillion for 2010-2020.
EU budget and European Investment Bank loans or guarantees backing project bond issuing companies should make the bonds that they issue safer and more attractive to capital market investors such as pension and investment funds.
MEPs and the Council want to use 2012 and 2013 to introduce these new risk-sharing instruments, so as to pave the way for their wider use under the "Connecting Europe Facility" at the start of the new Multiannual Financial Framework (MFF) in 2014. The idea is to test how the financial markets perceive the initiative and to use the practical experience of the coming 18 months to fine-tune the initiative.
The outcome of the negotiations will be put to a vote in Parliament's Budgets Committee on 31 May, followed by a vote in the plenary session in July.