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EU looking to boost investments in major infrastructure projects â€Ž

01 March 2011 11:28 (UTC +04:00)

EU economy commissioner Olli Rehn and European Investment Bank President (EIB) Philippe Maystadt said 1.5 to 2 trillion euros (2 to 2.8 trillion dollars) in public and private money would be needed through 2020 to upgrade transport, energy and communication networks.

With most EU governments hard-pressed to contribute as they struggle to trim their deficits, Rehn told a news conference in Brussels that to bridge an emerging ’funding gap, the EU and the EIB would assume part of the risk’ of financing major projects.

That action is intended to make it more attractive to private investors to direct money toward the construction projects, taking some of the burden off of public budgets.

Under the so-called Project Bond Initiative, the EIB would buy some of the bonds private firms or state entities routinely issue to raise money to build infrastructure.

The EU’s bank could also offer a stand-by loan to the issuing company to make sure it can pay back creditors, while the EU commission would use the EU budget to offer a limited guarantee on the company’s bonds.

Altogether, those measures would improve the credit rating of the issuances, making them more attractive to banks, pension funds and hedge funds looking for a safe investment.

Rehn stressed that the initiative ’should not be confused with so- called eurobonds,’ which would see eurozone state collectively financing at least part of their government debt with joint bond issuances.

Financial investors were invited to comment on the commission’s idea before it formally proposed to include it in the EU’s next seven-year budget, due to start in 2014, and on which negotiations are scheduled to begin later this year.