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Thursday, April 19, 2012

EU funds used to create new "risk-sharing instruments"

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News The European Parliament and the European Commission agreed today on using certain funds previously allocated to the Cohesion Policy, to create "risk-sharing instruments." These new arrangements should enable some Member States in difficulty to access financial institutions’ guarantees and loans that they need to implement their projects aimed at boosting the economy.

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.

Source :  European Commission - Press release

More information  Regional Policy


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