In 1998 the European Investment Bank's (EIB) lending to Italy has increased by 30% over 1997 to ITL 8800 billion (EURO 4500 million). Lending to the Mezzogiorno topped ITL 3200 billion, a 35% increase, which brought total EIB lending to the Mezzogiorno during the last three years to some ITL 8500 billion.

EIB's 1998 lending helped to finance investment for a total of over ITL 35,000 billion, of which ITL 13,000 billion relate to projects located in the Mezzogiorno. It is estimated that, once completed, these investments will help create and stabilise some 46,000 jobs.

Details of EIB lending and borrowing activity in Italy during the year were outlined in discussions between Treasury Minister and EIB's governor Carlo Azeglio Ciampi, Bank of Italy's governor Antonio Fazio, and a delegation headed by EIB's President Sir Brian Unwin and Vice President Massimo Ponzellini. On the occasion of his visit to Italy, Sir Brian also signed an ITL 200 billion loan for ENI's development of important oil resources in Val d'Agri (Basilicata).

The most significant loans in the Mezzogiorno concerned TAV, the high-speed rail infrastructure between Rome and Naples (the Florence-Bologna section was also financed by the EIB), an ITL 530 billion loan for a first phase of works on the Salerno-Reggio Calabria motorway, an ITL 150 billion financing for the Naples underground. They also included the strenghtening of the telecoms network throughout the Mezzogiorno, and financing for Fiat's large plants in Melfi and Termini Imerese.

A third of total lending went to industry. Loans for individual industry projects amounted to ITL 1,200 billion and global loans, primarily in favour of SMEs, topped ITL 1,670 billion. A global loan is a financing instrument under which the EIB makes funds available on a long-term basis to a financial intermediary for onlending in lesser amounts to small and medium-scale enterprises. There are now 30 banks in Italy handling EIB global loans directly and 43 indirectly, via other financial institutions.

"Italy can draw on the widest network of financial intermediaries of EIB's global loans within the whole of the European Union", EIB's President Sir Brian Unwin underlined at a press conference at the Treasury in Rome. "In Italy we have also during 1998 intensified lending for infrastructure investment, particularly that in the urban renovation, health and education sectors included in the Amsterdam Special Action Programme (ASAP). To this end, we signed a global loan with Crediop for the financing of small and medium-scale ventures in the infrastructure sector, and other highlights included a loan to Florence, the first direct one to a local authority in Italy, and the approval of financing for two teaching hospitals. During the past year, in response to particular Italian needs, we also arranged an ITL 700 billion financing for urgent reconstruction works following the earthquakes in Umbria and Marche, and provided assistance to the Protezione Civile to coordinate studies of the hydro-geological conditions of the region of Sarno, following the floods".

After the first risk sharing global loan under the new ASAP venture capital "window" concluded in 1997 with IMI, the EIB made numerous contacts in 1998 with a view to identifying further operations aimed at developing the institutional base and expertise in the venture capital market.

On the funding side, new EIB bond issues launched in 20 currencies have raised total EIB borrowing in 1998 to over ECU 30 billion (+30% over 1997.) Euro-tributary issues, which will consolidate into euro in 1999, represent 47% of total new issues (ECU 14 billion). New ITL issues raised ITL 8,255 billion or 14% of total borrowing, maintaining the ITL as one of the Bank's most important currencies.

At the beginning of December, as part of its active strategy to promote the euro, the EIB launched a new benchmark with the first-ever pure Euro issue, for EUR 1 billion. With a payment date on 7 January 1999, this is the first fixed-income transaction in which all cash flows are to be settled in Euro.

"This historic benchmark is a further step in our strategy to help develop and establish a widely diversified and liquid market for the Euro. The issue continues the series of large EIB euro-transactions and is a bridge to the new era on capital markets which will begin when EMU is launched on January 1st 1999, commented Sir Brian.

The conversion rates used by the EIB for statistical purposes during the current quarter are those obtaining on 30 September 1998, when ECU 1 = ITL 1 939.74, GBP 0.69.