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EU Parliament’s Endorses Risk-sharing Instruments for Member States

EU Commission welcomes Parliament’s endorsement of risk-sharing instruments for Member States worst hit by the financial crisis, to contribute to investment and job creation

Brussels, 19 April 2012 – The European Parliament has today approved the Commission’s proposal enabling the use of cohesion policy allocations still available to back-up guarantees and loans by financial institutions such as the European Investment Bank (EIB). EU funds will be used to create so-called “risk-sharing instruments”. The measure is intended to address the serious obstacles faced by some Member States, especially Greece, in raising the private financing needed to implement key projects which can only be part-financed by public funds. This tool will support more investment in the economy and therefore creation of jobs.

President of the European Commission, Jose Manuel Barroso said: “The risk-sharing instrument will turn our Structural funds into a real investment tool. In Greece for example €1.5 billion can generate at least €2.25 billion for lending or guarantees to infrastructure projects. This is yet another proof of strong European engagement for the future growth of Greece and new jobs for Greek people. I welcome the Parliament’s rapid adoption, only 6 months after we have presented our proposal.”

Johannes Hahn, European Commissioner for Regional Policy commented: “This new instrument will allow the realisation of infrastructure projects and provide a much-needed boost to economic activity and job creation in many financially straitened Member States, especially Greece. This represents an efficient use of EU resources which can help leverage more private investment. I look forward to its swift adoption by the Member States.”

The proposal was presented following a request by Eurozone Heads of State and Government to enhance synergies between EIB loan programmes and EU investment in Member States most affected by the crisis. The measure is foreseen for countries in receipt of special macro-economic assistance: currently , Greece, Ireland and Portugal. However, it will be only implemented upon a Member State request (so far only requested by Greece).

The aim is to kick-start projects co-funded by the European Regional Development Fund (ERDF) or the Cohesion Fund, which are currently blocked due to financial restraints. This is particularly the case for infrastructure projects which generate net revenues (such as toll motorways), the value of which cannot be covered by grants from cohesion policy. This is also the case for investments for which the maximum allowable public aid is capped by state aid rules (such as grants for enterprises). In Greece alone, the implementation of infrastructure projects in the transport sector could create some 50.000 new jobs.

Multiplier effect of EU funds
‘Risk-sharing instruments’ will result from signed agreement between the Commission and the EIB or a national or international financial institution which provides guarantees. The EU, therefore, covers part of the risk associated with private lending or providing guarantees to final beneficiaries, thus, catalysing additional private finance. As such, more projects on the ground can be supported.

For instance, in Greece, €1.5 billion of EU investment should generate at least €2.25 billion lending or guarantees to infrastructure projects. This will not modify the country’s overall cohesion policy 2007-2013 allocation and will have no impact on the community budget.

Next step: The Member States are expected to adopt the proposal by the end of May.

Contact: Ton Van Lierop (+32 2 296 65 65)  Annemarie Huber (+32 2 299 3310)