An EU allocation of €230 million in guarantees to back the private issuance of "project bonds" for transport, energy and information technology infrastructure projects was approved by Parliament's Budgets Committee on Thursday. The vote endorses a political deal concluded by MEPs and EU governments in negotiations in Strasbourg last week.
The decision - to be put to a vote at the July plenary session - allows pilot testing of this innovative plan to attract private investment in transport, energy and information technology network projects.
€200 million will be set aside to guarantee investments in transport networks, €20 million for ICT networks and €10 million for energy connection. The scheme will be managed by the European Investment Bank (EIB).
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.
With an expected multiplier ratio of between 15 and 20, these guarantees could mobilise up to €4.6 billion in private investment. Investment needs for transport, energy and Information and Communication Technologies (ICT) infrastructure projects in Europe are estimated at €1.5 trillion for 2010-2020.
Modern and efficient infrastructure is considered 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, said the MEP steering the legislation through Parliament, Göran Färm (S&D, SV).
Project bonds will be introduced in 2012 and 2013 to pave the way for possible wider use under the "Connecting Europe Facility" at the start of the EU's new Multiannual Financial Framework (MFF) for 2014-2020. The idea is to test how the financial markets perceive them and to use the practical experience of the coming 18 months to fine-tune the initiative.
"Europe's economic crisis stems not only from the financial one, but also from declining investment. Given severe 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", added Mr Färm.
The allocation decision is to be put to a vote by Parliament as a whole at in its plenary session in July.