The European Investment Bank (EIB) provides loans in Hungary amounting to EUR 655 million in total on the eve of EU Accession. This record lending signed on one day (on 30 April) in Hungary brings the total amount of EIB loans granted in the country to EUR 4.1 billion.

The new loans cover the co-financing of projects supported by the EU Structural Funds (EUR 445 million), a loan for the capital city's education infrastructure and services (EUR 35 million), a financing of the upgrading of electricity networks operated by E.ON Hungary (EUR 125 million) and a global loan with Raiffeisen Bank Rt. (EUR 50 million).

The EIB has also signed an Amendment to the Memorandum on Cooperation with Hungary that is extending the annual amount of intended lending operations for financing Hungarian priority public sector investments to EUR 500 million from the previous EUR 300 million.

Loans provided by EIB in Hungary are on an increasing trend. While in 2000 the annual lending was EUR 240 million, it had increased in 2003 to EUR 741 million. To date, EIB loans in Hungary have financed projects in infrastructure (46%), followed by global loans supporting investments of SMEs and municipalities (27%), investments in industry (10%), water and environment sectors (10%) and energy (7%).

Mr. Wolfgang Roth, EIB Vice-President who signed the loans, stated: I am very pleased that the EIB signs these operations today, on the Eve of Hungary's accession into the European Union. These loans will contribute to further economic progress and be instrumental in deepening the integration of Hungary within the European Union. The EIB co-financing of EU Structural Funds will help Hungary utilise resources provided by EU membership thus further enhancing social and economic convergence within the EU.

Description of the individual loans:

EUR 445 million loan to co-finance projects funded by EU grants

The EIB provides to the Republic of Hungary a loan of EUR 445 million to assist in the implementation of projects that will be supported by the EU Structural Funds. The loan will finance projects in most of the priorities identified by the Hungarian authorities for EU Structural Funds financing. As EIB funds will normally be available prior to EU grants financing, they should help accelerate the implementation of projects already selected and the finalisation of those under preparation. This in turn will also help to step up local absorption of EU assistance under the Structural Funds.

The loan will help finance the national contribution of Hungary to EU Structural Funds. This is in the framework of the Hungarian Community Support Framework that envisages a total investment of EUR 2.7 billion in new investments for the period 2004 - 2006, of which EUR 2 billion will be granted by EU Structural Funds. The remaining EUR 700 million will be provided by the state budget (which is supported by the current facility) and the own contributions of local municipalities and SMEs.

The projects financed by the loan will contribute to the further enhancement of Hungary's social and economic convergence within the EU. They are directed at strengthening the country's (i) economic competitiveness (development of technical and technological capabilities of SMEs, improvement of R&D, technology transfer and cooperation among publicly promoted and non profit research facilities, development of information technologies and networks), (ii) human resources development (promoting public employment services, ensuring equal opportunities for disadvantaged pupils in education, developing infrastructure, structure and contents of education and training, fostering lifelong education), (iii) environmental protection: improvement of the quality of drinking and ground water, flood management and utilisation of environmentally friendly energy sources, and (iv) regional development: improvement of the accessibility of disadvantaged regions, regeneration of urban areas and development of tourism attractions.

The projects will be promoted - under the aegis of the National Development Office - by various ministries such as the Ministries of Environment & Water, of Economy & Transport, of Employment and Labour, Office of Regional Development, Regional Development Agencies and several other Intermediate Bodies involved in implementation of the Community Support Framework. Public institutions, local governments and SMEs will be the final beneficiaries of the loan.

EIB loan of EUR 35 million for Budapest Education infrastructure and services investments

The EIB loan of EUR 35 million helps the Municipality of Budapest in financing investments in educational infrastructure and services in an amount of close to EUR 50 million. The loan will cover school renovations, improvement of energy saving measures of education facilities and development of education related information and communication networks including corresponding hardware and software. Fifty-six schools and education facilities will benefit from this loan. This facility is the first tranche of a EUR 75 million financial envelope by EIB which will support some EUR 100 million of planned investments by the City of Budapest for education purposes in the next few years. The loan is part of the EUR 370 million framework facility that EIB has approved for financing Infrastructure and Services investments of Budapest, of which the loans for the Metro 2 Rehabilitation (EUR 125 million) and the Tramway Replacement (EUR 75 million) have already been signed in December 2002.

Loan of EUR 125 million for E.ON Hungária's investments

The EIB loan of EUR 125 million is the first tranche of a EUR 250 million facility that the Bank has approved for the part-financing via E.ON Energie AG of investments by E.ON Hungária Rt. in Hungary, part of the E.ON group. The project is focused on refurbishment of the electricity transmission and distribution networks owned and operated by E.ON Hungária, Rt. through its three regional distribution subsidiaries Dédász, Édász and Titász.

New Global Loan Facilities to support lending to municipalities

The EIB signs agreements with four Hungarian banks to promote lending to Hungarian municipalities through offering a combination of long term funding and EU grants.

The agreements including the recently established Municipal Infrastructure Facility and Municipal Finance Facility under global loan operations were signed with Central-European International Bank Ltd., Erste Bank Hungary Rt., Raiffeisen Bank Rt. and Magyarországi Volksbank Rt.. A new global loan of EUR 50 million was provided to Raiffeisen Bank Rt. at the same time. The mentioned banks are the first EIB's partner banks benefiting from the above mentioned municipal facilities.

The Municipal Finance Facility and the Municipal Infrastructure Facility are new schemes promoted by the European Commission that benefit from EU grants under the Phare Programme and provide incentives to the final borrowers - mainly municipalities - as well as to the intermediary banks to encourage municipal investment lendings. The Municipal Infrastructure Facility is focused on investments of municipalities in the area of environment, transport, health and education in the Nyugat Dunantúl border region. The Municipal Finance Facility promotes building, upgrading or refurbishing of small municipal infrastructure in the entire territory of Hungary.

Global Loans have been developed as a successful tool in providing long-term EIB funds for financing smaller projects implemented by the SME sector or by municipalities under favourable conditions. They represent credit lines to financial intermediaries - EIB partner banks - that on-lend EIB funds under their own management, at their own risk and own conditions but which should reflect the favourable lending condition of the EIB.

Since 1990, the EIB has lent a total of EUR 26 billion in Central and Eastern Europe to finance projects fostering European integration, approx. EUR 3.5 billion of this figure being provided through Global Loans. During the mentioned period the EIB has signed global loan facilities for a combined amount of approximately EUR 1 billion with 9 partner banks operating in Hungary.