The Saxony Urban Development Fund, a nationwide pilot project implementing the EU urban development initiative JESSICA (Joint European Support for Sustainable Investment in City Areas), was launched today by the different parties concerned. A key partner in this pilot project is the Municipality of Leipzig, on account of its extensive experience with the EU URBAN initiative, which expired in 2006. A Memorandum of Understanding was signed today by the European Investment Bank (EIB), Free State of Saxony, Sächsische Aufbaubank-Förderbank – (SAB) and Municipality of Leipzig.

The European Commission’s JESSICA initiative represents the first step towards using ERDF structural funds for urban development on a more sustainable basis than before. The Saxony Urban Development Fund will be tested and further developed during the support period 2007-2013. Previously, only grants were usually available for urban development. Now a variety of loans on favourable terms can also be offered for selected projects via the Fund. With a view to the reduction of subsidies after the expiry of the current support period in 2013, this alternative financing instrument offers advantages to all parties as the Fund’s resources can be granted repeatedly and will continue to be available after the end of the support period.

The EIB was tasked by the Commission with helping the Member States to implement tailor-made financing instruments and set up urban development funds pursuant to the new Structural Funds Regulation (EC) No 1083/2006. Revolving funds will serve to place the promotion of urban renewal on a broader and more sustainable basis as additional resources will be tapped from private and public sector sources. The Saxony solution could be implemented in other German Länder in a similar form. The Federal Ministry of Transport, Construction and Urban Affairs has picked up on the Commission’s initiative and created a special JESSICA working group in which Saxony’s interior ministry, SAB and KfW will also participate. If the pilot phase in Leipzig is successful, SAB will make the urban development fund available to all cities in the Free State.