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21 Oct 2011 00:00
The European Union will launch plans this week to invest €50-billion in modernising digital, energy and transport networks, creating hundreds of thousands of jobs over the next few years.
The European Commission scheme envisages the use of bonds backed by the European Investment Bank to fill funding gaps left by cash-strapped governments and to leverage private investment.
The plans are designed to pay back taxpayers for the aid and guarantees of €4.6-trillion given to the financial sector in the past three years. Despite this taxpayer-funded support, venture capital investments in Europe slumped last year to just €3-billion.
Philippe Maystadt, president of the investment bank, said: “Infrastructure finance in Europe has suffered since the financial crisis and banks face new constraints on long-term lending.
Project bonds could be a way to attract capital from other investors such as pension funds and insurance companies, and be a useful addition to traditional financing options.”
The commission said developing smart infrastructure could require between €1.5-trillion and €2-trillion for trans-European transport networks, the energy sector and information and communication technologies.
This equates to the putative size of the eurozone bail-out fund discussed by G20 finance ministers last weekend.
The bulk of the funds to be announced—about €32-billion—would go to transport infrastructure projects, with €9-billion each earmarked for energy, including smart grids, and for broadband infrastructure and digital public services.
High-speed broadband projects will receive €7-billion between 2014 and 2020—enough, said Neelie Kroes, digital agenda commissioner, to leverage more than €50-billion of public and private investment by lowering the risk attached to projects.
Kroes said the money would be largely in the form of equity, debt or guarantees provided by the EU and the investment bank, thus improving the credit rating of projects. These would be proposed not only by telecoms operators but also by water and electricity utilities, co-operatives or construction firms.
The aim, she said, was to support investment in less obviously attractive broadband infrastructure projects such as those in remote rural areas.—
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