An international syndicate composed of twelve major European, American and Japanese banks(1) as well as the European Investment Fund has agreed to guarantee European Investment Bank (EIB) loans of ECU 168 million(2) to the Hungarian telephone company MATAV. The EIB, the European Union's loan financing arm, approved ECU 230 million since 1990 in support of MATAV's ten year investment programme for bringing the Hungarian telecommunications network to EU standard during the pre-accession period. Following privatisation of MATAV, the Republic of Hungary will be released from its guarantee obligations which are taken over by the syndicate arranged by ABN AMRO Bank.

Commenting on the guarantee agreement signed with the banking syndicate in Budapest today, EIB Vice-President Wolfgang Roth said: 'This is the first example of a large EIB loan in Hungary being guaranteed by commercial instead of Government guarantees. It follows similar arrangements recently applied to our financing in the Czech Republic and Slovakia, as well as for global loans in support of small and medium-sized enterprises and smaller-scale infrastructures in Hungary and Poland. The EIB intends to further develop these schemes as the Central European countries progress on the road to market economies and, in particular, as the financial and banking systems develop."

The EIB was established in 1958 under the Treaty of Rome and is the European Union's long-term financing institution. In 1996, the Bank provided loans totalling ECU 23.2 billion. Nearly 5 per cent of this was for projects in eleven Central and Eastern European countries: Albania, Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. Between 1990 and the end of 1996, the EIB lent nearly ECU 5 billion to projects in these countries. A new mandate for the years 1997-2000 earmarks another ECU 3.52 billion for loans in the region. In addition to this specific mandate, the EIB, at the request of the EU's Council of Ministers, will also create a substantial pre-accession lending facility to support preparations for EU-membership.

(1) ABN-AMRO Bank N.V., Bankgesellschaft Berlin AG., Bayerische Landesbank Girozentrale, Commerzbank A.G., Crédit Suisse First Boston, Citibank N.A., The Dai-Ichi Kangyo Bank Ltd., Deutsche Bank Luxembourg S.A., Dresdner Bank, ING Bank N.V., Raiffeisen Zentralbank Österreich A.G. and Sumitomo Finance (Dublin) Ltd.

(2) The conversion rates used by the EIB for statistical purposes during the current quarter are those obtaining on 30/6/1997, when ECU 1 = 0.68 GBP, 1.97 DEM, 1.13 USD, 0.75 IEP, 211.280 HUF.