The European Investment Bank (EIB), the European Union's long-term financing institution, has advanced a loan of 11 billion pesetas (ECU 68 million)(1)  to the Ente Público de Aeropuertos Españoles y Navegación Aérea (AENA) towards funding major improvement works at the airports on Lanzarote and Fuerteventura and both airports on Tenerife.

In view of their geographical location, air transport is vital for the Canary Islands, which also count as a priority area for regional development. Given the scale of the tourism industry in the region, the Islands' airports are currently suffering capacity problems, which risk hampering development of the tourism sector, the Canaries' chief source of revenue. With these airport improvements, the project will foster growth in the local and regional economy; furthermore, the airports are considered as part of the trans-European air transport network and will thus make for more efficient links between the Canary Islands and the rest of the EU.

The project comprises construction of new passenger terminals and access roads at Tenerife-North, Lanzarote and Fuerteventura airports, a taxiway at Fuerteventura airport and improvement and extension works in one of the passenger terminals at Tenerife-South airport. The EIB's loan will complement the financing provided by the EU via the ERDF and will attract a 2% interest rebate, the cost of which will be met from the Financial Mechanism of the European Economic Area (EEA). In addition, at the request of Spain's Ministry for Economic and Financial Affairs, the works at Lanzarote airport will be receiving 1 050 million pesetas in grant aid under this Mechanism.

The EIB was founded in 1958 by the Treaty of Rome, which established the European Economic Community, for the purpose of fostering integration, balanced development and economic and social cohesion in the Member States, by means of long-term financing for capital investment contributing to attainment of the European Union's objectives. The European Union's regional policy is designed to correct the structural imbalances affecting a considerable part of its territory. To do this, the Union has available various instruments, including the Structural Funds (one of which is the European Regional Development Fund or the ERDF), financed from the Community budget, and loans from the EIB. The EIB and the European Commission work closely together to ensure that loans and grant aid are combined as effectively as possible to achieve a maximum volume of viable investment. With a view to boosting cross-border trade and enhancing mobility for the purposes of travel and work, the European Union is providing support for development of its transport systems, the "trans-European networks", which link up Europe's regions, thereby bolstering development prospects and fostering the process of European integration.The grant aid and the interest rebate are being funded from the Financial Mechanism set up by the EFTA countries(2) which form part of the European Economic Area (EEA). In July 1993, the agreement entered into force to establish a free-trade zone between the 12 Member States of the European Union (EU) and 6 of the EFTA Member States (Austria, Finland, Iceland, Liechtenstein, Norway and Sweden), some of which had applied for membership of the EU. This free-trade zone was named the EEA. The Agreement also created the Financial Mechanism, which was funded by contributions from the six countries mentioned above, in order to support projects relating to environmental protection, transport, training and education in Greece, Ireland, Portugal and certain parts of Spain. When three of the donor countries (Austria, Finland and Sweden) became full members of the EU in January 1995, the EU took over their financial commitments. Consequently, funds are at present provided by three EFTA Member States (Iceland, Liechtenstein and Norway) and the European Union.

(1) The conversion rates used by the EIB for statistical purposes during the current quarter are those obtaining on 31 March 1997, when ECU 1 = ESP 165.605, GBP 0.71.

(2) EFTA stands for European Free Trade Association.