Back-door plan to pay for EU projects
Thomas Fuller IHT Friday, October 17, 2003
BRUSSELS Leaders of the European Union have for years said they wanted to build more train lines and highways across the Continent, a web of infrastructure to create a more efficient single market.
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But cash-strapped governments, notably Germany and France, Europe's largest economies, are already spending well beyond the limits allowed by Europe's Stability and Growth Pact, which underpins the euro.
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The European Commission proposed a back-door solution to the financing dilemma Thursday at a summit meeting of EU leaders here: using the European Investment Bank to provide some of the money for the projects and thus keep it off the books of European governments. The bank is the EU's main financing arm but is technically independent from governments.
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"The European Bank has the ability to act," said Romano Prodi, the president of the European Commission, the EU's executive arm. "We would be able to use our resources without upsetting the balance that we are committed to."
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The bank gets its funding mainly by selling bonds. It then lends its money on terms better than what commercial banks offer - and usually with a longer repayment schedule of up to 35 years.
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Officials from the investment bank say plenty of money is available: The institution is ready to lend E90 billion, or $105 billion, over the next decade for research and development and projects that involve trans-European transport infrastructure, according to a spokesman for Philippe Maystadt, the president of the bank and a former Belgian finance minister.
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The main problem, Maystadt told a group of journalists during a meeting several months ago, is not money but a "lack of administrative will."
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Spanish officials want to build five links across the Pyrénées mountains. But the French have other priorities and are not as keen. National railway companies fear losing control and do not like the idea of a private company being in charge of construction. And there is no European law clarifying the status of the contractor in a project that crosses several jurisdictions.
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Getting the private sector involved in these projects is necessary, bank officials say, because public money alone cannot pay for such ambitious projects as the high-speed train line through the Alps from Lyon to Turin, one of the frequently cited infrastructure plans. But the ghost of such financially disastrous projects as the tunnel under the English Channel looms for private investors.
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"What is at stake is to overcome the scars of the Eurotunnel story, which is a case study in mismanagement," said Henry Marty-Gauquie, director of communications at the investment bank.
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The overall proposal for increasing spending in trans-European projects "was received with grand enthusiasm," said Silvio Berlusconi, the prime minister of Italy, which holds the rotating presidency of the European Union. Berlusconi spoke at a news conference late Thursday. But officials said no decision on projects or financing was made.
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International Herald Tribune
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