The European Investment Bank (EIB), the European Union's long-term financing institution, is lending ECU 30 million (1) for works to protect the environment on the south western coast of Cyprus.

The investment concerns the construction of a new sewage collection and treatment system, as well as a strormwater drainage network of the coastal greater city of Pafos, which has a resident population of 35 000, but is visited by almost one million tourists each year.

This loan concerns only the first phase of the project, which, upon completion in 2000, will have wide economic, social and environmental benefits, as it will protect the island's scarce groundwater resources and will further improve the quality of bathing waters along the highly touristic coastal region, thus supporting the mainstay of the local economy. The improved drainage system will also alleviate flooding during winter storms, while the collected wastewater will be reused for irrigation, following tertiary treatment.

This is the first EIB loan in Cyprus under the Euro-Med facility, and given the project's regional benefit for the environment in the Mediterranean, the loan should carry an interest subsidy of 3%, financed from European Union budgetary funds. It will be advanced to the Sewerage Board of Pafos (SBP) a public company established in 1993, and responsible for the financial management of the sewerage system's operation and maintenance in the Greater Pafos area.

The loan agreement was signed for the EIB by the Vice-President P. Gennimatas and for the Republic of Cyprus by H.E. Ambassador Attalides, and was preceded by the signature of a framework agreement between the EIB and the Republic of Cyprus, providing the legal context for future EIB financing operations in Cyprus.

Since its foundation in 1958 under the Treaty of Rome, the European Investment Bank (EIB) has supported European Union (EU) objectives by making long-term finance available for sound capital investment. As part of its remit, the EIB has steadily broadened the range and scope of its lending outside the Union, helping to implement the financial aspects of the EU's co-operation policy towards third countries in Africa, the Caribbean and the Pacific under the Lomé Convention, as well as countries in the Mediterranean region, Latin America, Asia and Central and Eastern Europe, which have concluded co-operation agreements with the Community. Since the mid-1960s, the Bank's financing has increased notably in non-EU Mediterranean countries maintaining relations with the EU based on mutual geographical, historical and economic interests.Since 1981, starting point of EIB's operations in the country, the Bank has provided ECU 196 million towards key investments in Cyprus. This finance has been made available under four Financial Protocols (2) attached to the EEC-Cyprus Co-operation Agreement. Besides this financing, Cyprus benefited from ECU 37 million of EIB loans under the Horizontal Protocol of the EU's Redirected Mediterranean Policy (1992-1996).The most important part of EIB's finance, ECU 85.4 million, has gone to protect and enhance the environment of the island of Cyprus, with ECU 56.2 million for expanding and upgrading the supply of drinking water in three of the principal cities, Nicosia, Famagusta and Larnaca and ensure water supplies to an estimated 600 000 people by 2010. A further ECU 29.2 million helped finance the expansion of the Limassol sewerage system (ECU 10 million), the upgrading of the Nicosia sewerage system (ECU 4.2 million) and the construction of a sewerage network and treatment facilities for the Municipalities of Paralimni and Aya Napa (ECU 15 million).

Some 150 small and medium-sized industry projects have been financed through four global loans (ECU 77 million) to the Cyprus Development Bank (CDB), and the Cypriot Banking Sector Global loan on Risk Capital (ECU 4 million), which is operated through the Central Bank of Cyprus, acting as onlender to four banks, including CDB, Laiki Investments, Cyprus Investment and Securities Corporation (CISCO).

ECU 14.6 million went towards development of Cyprus's energy potential, and ECU 12 million for the new air traffic control centre at Nicosia, and control towers, radar installations and instrument landing systems at Larnaca and Paphos airports.The "Euro-Mediterranean Partnership", a new concept adopted by the European Union at Barcelona at the end of 1995, to bolster its co-operation with the non-member Mediterranean countries, has recently lead to a new lending mandate for the EIB, approved by the ECOFIN Council of Ministers in December 1996, making available ECU 2 310 million for the period 1997-1999 for financing investment projects in the 12 non-EU Mediterranean countries that have signed co-operation or association agreements with the Union. With its funding capacity and experience, the EIB will continue its major contribution to sustainable economic development in the region, balanced distribution of resources and, consequently, political stability.

(1) The conversion rates used by the EIB for statistical purposes during the current quarter are those obtaining on 30 September 1997, when ECU 1 = GBP 0.69, IEP 0.76, USD 1.113, CYP 0.58236.

(2) The Financial Protocols concerning EIB finance in Cyprus are as follows:

• 1st - 1979-1983: ECU 20 million EIB loans and ECU 4 million Special loans from budgetary resources.
• 2nd - 1984-1988: ECU 28 million EIB loans with an interest rate subsidy of 2%, from EU budgetary resources and ECU 6 million Special loans also from budgetary resources.
• 3rd - 1990-1995: ECU 44 million EIB loans with 1.5% interest subsidy from budgetary resources and ECU 5 million on Risk Capital resources also from budgetary resources.
• 4th since 1996: ECU 50 million EIB loans and ECU 2 million on Risk Capital resources.