The European Investment Bank (EIB), the European Union's financing institution, is advancing a loan for DEM 88 million(1) to the German Free State of Thuringia via the intermediary of the Bayerische Hypovereinsbank and DGZ Bank. The proceeds of the loan will go towards extension of the engineering college at Schmalkalden, as well as construction of new central libraries for the Friedrich-Schiller University in Jena and for the new university campus at Erfurt.

Thuringia's Finance Minister, Andreas Trautvetter, and EIB Vice-President Wolfgang Roth signed the project completion agreement today. On the occasion of the signature ceremony, Mr Roth stated that the project marked the beginning of closer relations with this Free State and that further projects in the health sector were already in the pipeline.

The extension and new buildings are essential to provide the growing numbers of students with appropriate facilities for their work and will make these higher education and university establishments more attractive for students both from Thuringia and other parts of Germany. Furthermore, with an increased pool of qualified young people, Thuringia will be better placed to compete in bringing new industry and enterprises into the area.

The aim of the European Investment Bank in making these resources available is to foster economic development in the regions. In this respect, support for education sector infrastructure is one of the priorities contained in the Amsterdam Special Action Programme set up last year.

The project is to be funded on the basis of an alternative financing model. This provides for the banks to finance the works until completion, after which the project promoter, in this case the Free State of Thuringia, takes over the buildings and services the loans from budgetary resources. Through the use of this financing model, important infrastructure projects can be carried forward in spite of the widespread tight budgetary situation. In view of the general downturn in activity in the building sector in the eastern Länder, it is particularly important that work be continued on public-sector construction projects, thereby safeguarding jobs.

The EIB works in close liaison in Germany with partner banks from both the public and private sectors. Particularly in the case of alternative financing facilities, optimum terms and conditions for the project promoter can only be achieved through such cooperation, since the EIB's resources need to be tailored to the specific needs of individual clients.

The Amsterdam Special Action Programme (ASAP) was set up in response to the decision of the June 1997 Amsterdam European Council Resolution on Growth and Employment in Europe. The programme enables the Bank to extend the scope of its financing operations to infrastructure in the health and education sectors and to step up its support for investment to improve the quality of life in urban areas (environmental protection, urban renewal). Investment in these sectors is particularly labour intensive and thus makes a direct contribution to creating new job opportunities.

Since 1990, the EIB has already advanced loans totalling some DEM 18 billion in the new eastern Länder in support of other objectives, such as development of a modern telecommunications network, rehabilitation of power stations and the electricity grid, expansion of gas supply systems, establishment of a number of major companies, prevention of water pollution and water treatment. Of this amount, about DEM 2.6 billion has gone towards projects in Thuringia.

These figures also include lending for small and medium-sized enterprises, made available by the European Investment Bank not directly to the final beneficiaries but in the form of global loans, essentially lines of credit, which are deployed by its partners in both the public and private banking sector.

(1) As at 30 June 1998, ECU 1 = 1.98 DEM.