In 1997, the European Investment Bank intensified its support for economic and social cohesion in Europe in the run up to Economic and Monetary Union. The Bank launched a special action programme to encourage job-creating investment to underpin the European Union's growth and employment policies, and expanded its financing for investment in key areas such as regional development and Trans-European Networks. Total lending in the year increased by 13%, to ECU 26.2 billion (of which ECU 23 billion was in the Member States of the Union) and the Bank borrowed ECU 23 billion on the international capital markets, making it the world's largest non-sovereign borrower.
EIB President and Chairman of the Board, Sir Brian Unwin said: "Our two top priorities during 1997 have been to step up our activities to help the European Union move successfully towards Economic and Monetary Union and the single currency and to prepare the way for the Union's enlargement. We responded rapidly and in a practical way to the resolution on growth and employment of the June Amsterdam Summit by launching our Amsterdam Special Action Programme (ASAP). This is now well under way with substantial financing operations already concluded in the areas of health and education and through a "special window" for venture capital, in the high-growth, technology oriented, small and medium-sized enterprise sector.
"At the same time we have now launched a special pre-accession lending facility to reinforce the process of integrating more closely the countries in Central and Eastern Europe and Cyprus, which are candidates for future membership of the European Union. This facility will double the scope of our activities for financing key investment in these countries and contribute substantially to helping them bring their infrastructure and industry up to European Union standards".
"I am glad that the Bank was also able to demonstrate its flexibility and capacity for rapid response by providing substantial emergency grant and loan assistance for reconstruction works in the areas seriously damaged by floods in Germany, Poland and the Czech Republic."
- Launch of the three-year ASAP aimed at investment in: health, education, environmental protection and urban renewal; new venture capital facilities for high-growth innovative SMEs; and additional support for large infrastructure schemes. The EIB's growth and employment plan is expected to generate an extra ECU 10 billion in lending.
- Two-thirds of lending in the EU focused on development of less-favoured regions.
- Continued strong support for Trans-European Networks and other large infrastructure projects with ECU 9.5 billion.
- Special emphasis given to investment by public-private partnerships and private finance initiatives.
- New external EU lending mandates approved, totalling over ECU 7 billion for the next three years.
- Additional ECU 3.5 billion pre-accession facility will double lending over next two years in ten Central and Eastern European countries and Cyprus.
- Start of new borrowing strategy to support future Euro with ECU 6 billion in benchmark Euro and "Euro-tributary" bond issues.
- Promoting borrowing in the capital markets of Central and Eastern Europe.
EIB activity in 1997:
Lending in the European Union
The European Investment Bank lent a record ECU 23 billion, up 10%, for investment representing 4.7% of gross fixed capital formation in the European Union. Well over two-thirds went towards the EIB's prime objective to support regional development. The Bank's contribution to economic and social cohesion and balanced development was given a further impetus following the Amsterdam European Council's resolution on growth and employment (June) with the launch of the Bank's Amsterdam Special Action Programme (ASAP). The EIB maintained a strong level of co-operation with banks and companies, with some 68% of outstanding loans in the private sector.
- Regional development: 1997 saw an increase in lending to ECU 14.4 billion (1) for investment in the less-favoured (assisted) areas of the Union, including for the first time in the Arctic region. Lending in the four Cohesion Fund Countries (Greece, Spain, island of Ireland, and Portugal) accounted for ECU 4 billion. There was a marked increase in regional development lending in Belgium, Finland, Sweden and the UK.
The Bank also provided an emergency aid package for reconstruction works in the regions hit by the catastrophic summer floods in Germany, Poland and the Czech Republic, including ECU 1.5 million in grants for immediate flood relief, and ECU 500 million in loans for flood-related construction works.
- Amsterdam Special Action Programme (ASAP): within six months of the June Amsterdam Summit's resolution, the EIB drew up and began implementing its action programme. By the year-end this amounted to a pipeline of ECU 2.2 billion in loans for projects in the labour intensive new EIB lending areas of health and education, together with the first commitments under a special "SME Window" for financing investment by innovative, growth oriented, small and medium-sized enterprises (SMEs). In total, contracts of ECU 880 million have already been signed - ECU 730 million for health and education projects and over ECU 150 million under the special "Window" for SMEs. The "Window's" facilities are to improve SMEs access to venture capital, complementing the EIB's traditional global loans to support SMEs activity. Risk funding arrangements through the "Window", including risk-sharing, subordinated lending, and equity capital, will be backed by up to ECU 1 billion from the Bank's surpluses and executed in co-operation with banking and financial institutions and the European Investment Fund (EIF). The Bank has already set up the ECU 125 million European Technology Facility, managed by the EIF, to help finance venture capital funds.
ASAP has also enabled the EIB in 1997 to increase financing in the traditional EIB areas of urban renewal and environmental infrastructure, as well as Trans-European Networks, by an additional ECU 1.6 billion. As part of ASAP, the EIB is also exploring ways to step up and fine-tune support for Trans-European Network infrastructure projects.
- Trans-European Networks (TENs): a total ECU 5.8 billion went for investment in transport and energy TENs, bringing EIB approvals for such projects over the past five years to some ECU 38 billion. During the year, ECU 1.6 billion went to transport and ECU 300 million to energy priority TENs defined by the Essen European Council (December 1994). A particular emphasis is given by the Bank to support for public private partnerships (PPPs) for transportation infrastructure projects, in line with the recommendations of the high-level TENs Working Group, of which the EIB is a member, chaired by European Commissioner Neil Kinnock. Examples of PPPs financed by the EIB in 1997 include the new Elbe Tunnel for Hamburg in Germany, Spata Airport, the Elefsis-Stavros section of the Patras-Athens-Thessaloniki motorway in Greece, Malpensa Airport in Italy, and the M6 motorway extension and Manchester Metrolink in the United Kingdom. Total lending for European communications infrastructure (including transport, energy and telecommunications TENs and other large infrastructure) increased by 28% to ECU 9.5 billion.
- Industry, Services and SMEs: over half the total ECU 5.4 billion advanced for industry and services went to large-scale projects, with a particular focus on innovative technology investment to boost European international competitiveness, ranging from motor vehicle plants in Germany and France, to a semi-conductor manufacturer in France, pharmaceuticals production in Denmark, Italy and France, and a TV monitor factory in the United Kingdom. ECU 2.2 billion went to 11 000 SMEs under the Bank's global loan arrangements with partner banks and financial institutions. The EIB also made its first loan for strengthening the competitiveness of the European film industry, lending ECU 70 million to PolyGram for the production and distribution of European films.
- Environment: lending increased by 23% to over ECU 7.2 billion, going in particular for water management and urban renewal schemes, as well as for investment within major regional environmental improvement programmes, such as the Mediterranean Environmental Technical Assistance Programme (METAP) and the Baltic Sea Joint Comprehensive Environmental Action Programme.
- Energy: ECU 2.6 billion went chiefly for electricity distribution schemes and electricity production from waste incineration, as well as for further development of a trans-European natural gas pipeline network, including pipelines bringing Norwegian and Algerian gas to the EU grid, and rational energy use investment in industry.
Breakdown of financing provided within the European Union by Community policy objective - 1997 (ECU million) (2)
||Global loan allocations
Environment and other infrastructure
Industry, agriculture, services
|European communications infrastructure
Roads and motorways
Air transport and shipping
|Environment and quality of life
Water conservation and management
Waste management and other
Measures to combat atmospheric pollution
Rational use and management of energy
International competitiveness and European integration of large firms
Investment by small and medium-sized enterprises
Sectoral breakdown of 1997 lending within the EU
The sectoral breakdown of financing (individual loans and allocations from ongoing global loans (3) was as follows: transport ECU 7.5 billion; telecommunications ECU 1.9 billion; water management and sundry infrastructure ECU 4.7 billion; energy ECU 2.1 billion; industry and services ECU 5.4 billion (including nearly ECU 2.2 billion in the form of allocations from ongoing global loans for some 11 000 SMEs).
Lending outside the European Union
A total ECU 3.2 billion supported investment within the framework of the Union's co-operation and development policies towards third countries. This represented a 41% increase on 1996, reflecting a catching up following the delay in concluding the new mandates. During the year, the Bank started immediately operations under the new three-year (1997- January 2000) lending mandates in Central and Eastern Europe (ECU 3.5 billion), the Mediterranean region (ECU 2.3 billion), Asia and Latin America (ECU 900 million) and South Africa (ECU 375 million). Where possible operations were co-financed with the European Commission and other multilateral financing institutions in order to maximise the impact of available resources.
- Central and Eastern European Countries (CEECs): the EIB advanced some ECU 1.5 billion in 10 countries, an all-time annual high, bringing EIB loans since 1990 in CEECs to ECU 6.3 billion. Lending focused on cross-frontier transport, energy and telecommunications infrastructure, linking the CEECs' economies more closely both to each other and to the EU.
The Bank also set up an additional ECU 3.5 billion pre-accession lending facility for the CEECs and Cyprus, which have concluded Accession Partnership Agreements with the EU. This will double the EIB's financing capacity in the region between now and the year 2000. Lending will be aimed at projects in all the ten CEECs and Cyprus to integrate these countries with the EU and facilitate the adoption of the "acquis communautaire". A particular emphasis will be given to environmental protection, as well as communications infrastructure (including TENs), industrial competitiveness and regional development. Financing will continue to be carried out in close co-operation with the European Commission to maximise synergies between the PHARE grant aid programme and EIB loans, as well as with other banking institutions.
- Mediterranean region: a record ECU 1.1 billion financed investment in ten non-EU countries, primarily in the framework of the Euro-Mediterranean Partnership. The emphasis was on projects encouraging the liberalisation and privatisation of their economies and helping the private sector to restructure and expand, in preparation for the gradual establishment of a free trade area with the EU by the year 2010. ECU 200 million financed joint-ventures in industry and investment to encourage development of the private sector, including risk capital facilities in Malta, Egypt and Tunisia. The Bank also funded a dozen new feasibility studies as part of its continued support for the Mediterranean Environmental Technical Assistance Programme (METAP) which aims at developing co-operation on environmental issues.
- African, Caribbean and Pacific (ACP) States: loans totalling ECU 60 million fully utilised the amounts foreseen for the EIB's mandate under the First Financial Protocol of the Fourth Lomé Convention. Further lending has been held back because of the delay in completing the ratification procedure of the proposed Second Financial Protocol, but the Bank has started preparing the way for this.
Republic of South Africa: lending under the previous mandate was concluded in 1997 - ECU 199 million going primarily for financing small-scale water treatment schemes, as well as small and medium-sized ventures under global loan arrangements with intermediary banks and financial institutions. Implementation of the EIB's new ECU 375 million lending mandate is also well under way.
- Asia and Latin America: total lending came to some ECU 380 million, completing a financing mandate covering the first half of 1997 and starting the first operations under the new three-year mandate. In Asia ECU 175 million and in Latin America ECU 205 million went to joint ventures and investment involving a specific European interest. Noteworthy joint ventures included a combined-cycle power plant in the Philippines, an optical fibre plant in Brazil and a glass factory in Mexico.
Activities on the capital markets
- In 1997, signed borrowing operations, before swaps, totalled 23.1 billion (+31%). 156 operations were concluded in 21 different currencies, with EU currencies strongly predominating (75%). After interest-rate and currency swaps, funding broke down into 12.3 billion in fixed-rate borrowings (54%) and 10.7 billion in floating-rate borrowings (46%), in 18 currencies, 85% of which were EU currencies.
- The EIB has been actively preparing for the advent of the euro. It was the first borrower to issue in the euro (in January/February 1997), for an amount of 1.3 billion. This 7-year issue included a consolidation clause devised by the Bank specifically to allow for incorporation with other euro operations offering the same features. This strategy was accompanied by a policy of euro-tributary issues in major EU currencies (NLG, FRF, DEM, PTE, GBP, ITL and LUF). It will subsequently be possible to consolidate these borrowings, which carry virtually identical terms and conditions, with other euro issues. In all, these euro and euro-tributary issues amount to some 6 billion, or a quarter of aggregate funding. When the single currency is launched, this strategy will establish the EIB's position as one of the leading players on the euro bond market, alongside governments (the Bank is destined to be among the five largest issuers in the European Union, and the leading non-sovereign borrower).
- The Bank has also pressed ahead with its operations on the financial markets of the countries of Central and Eastern Europe. With a view to the future accession of these countries to the EU, the Bank is seeking to develop their capital markets and to finance loans tailored to borrowers' requirements based on funds in local currencies. Thus, in 1997 it arranged a medium-term note programme in Hungary denominated in forints. Similarly, it placed a DEM issue indexed to the Polish zloty on the Euromarket. It was also present in the Czech koruny sector of the Euromarket. At the same time, the Bank continued its talks with the Polish authorities with a view to launching borrowings denominated in zloty.
- Opportunistic borrowings, which account for a third of funding, enabled the Bank to offer its investors a wide range of products, while substantially reducing funding costs. These operations were mostly carried out via medium-term note programmes. Targeting a broad range of institutional and retail investors, the Bank also sought to diversify into markets (AUD, NZD, HKD, ZAR) in which opportunities arose and on which it benefited from the very strong interest shown by investors in issuers of its quality. The EIB has therefore continued to act as an effective financial intermediary by disbursing funds raised on the international markets in loans denominated in national currencies (South African rand).
Breakdown of currencies borrowed (ECU million)
|Total non EU
Appointment: Ms Anneli Peshkoff is the new Director of Treasury as from 1 December 1997, succeeding Mr Luc Winand who has now joined the European Investment Fund.
Audit: In 1997 Ernst & Young started their 5 year assignment as the Bank's external auditors. The Bank further strengthened its audit structure with the creation of an Audit Recommendations Enactment Division.
EIB Forum 1997: the third EIB Forum, entitled "Bridging the Seas in Northern Europe", was held in October in Stockholm and brought together over 350 specialist to address issues of inter-regional co-operation in Northern Europe, in particular the Baltic Sea region. The EIB Forum 1998, to be held in London in October, will address the employment issue.
EIB Prize 1997: offered every two years to reward financial and economic research on the future scope of European integration by young economists, the first of the six prizes was awarded to the Belgian economists Bernadette Frédérick and Peter Vanden Houte for papers on exchange rate parities on the dawn of the Euro.
The EIB's balance sheet total on 31 December 1997 came to ECU 157 billion.
(1) As financing operations may meet several objectives, the amounts for the various headings for lending objectives can not be meaningfully added together.
(2) As financing operations may meet several objectives, the amounts for the various headings for lending objectives annot be meaningfully added together.
(3) Figures exclude individual global loan signature totals, but include allocations from ongoing global loans.