New EIB initiative to help Europe’s Southern Neighbourhood and Western Balkans gets warm welcome from EU leaders

A new initiative from the European Investment Bank (EIB) to support regions outside of Europe that are significantly affected by the refugee crisis has been welcomed by EU heads of state and governments meeting in Brussels today. Responding to a request by the European Council in March, EIB President Werner Hoyer laid out how the EU Bank could step up its support and address the pressing needs of the regions with action to support growth, jobs vital infrastructure and social cohesion.

The EIB’s Crisis Response and Resilience Initiative is intended to build resilience and create more job opportunities in the EU’s Southern Neighbourhood and the Western Balkans regions by stepping up support for vital infrastructure and the private sector.

Speaking after the meeting with EU heads of state of government in Brussels, President Werner Hoyer said, “I am happy to say we received a warm welcome from EU leaders for the initiative that I presented today at the European Council. The current refugee crisis and in the longer term, migration, represent challenges both in the European Union and its neighbourhood. The EU must offer concrete solutions and not just ideas. Today I have offered a constructive contribution on behalf of the EU bank whose experience and expertise means we are perfectly placed to help and provide leadership if asked for.“

“It is crucial that Europe supports countries in its neighbourhood who are hosting large numbers of refugees. The EIB was set to deliver EUR 7.5 billion to these regions over the next five years. On top of this we now propose to deliver an additional EUR 6 billion of EIB lending to the public and private sectors, starting this year. This would catalyse another estimated EUR 15 billion of investment. Taken together, we are talking about more than EUR 35 billion of investments on the ground. With this we could provide services like clean water, energy and electricity in regions where services are stretched, and improve education, healthcare, local transport and urban services. This will help to help ensure that refugees and host communities alike have access to education and healthcare. We can also support the creation of jobs through more support for small businesses and micro-enterprises, encouraging them and other companies to take on more young people, to offer training and help to integrate refugees.“

President Hoyer added, “Today’s positive reception by EU leaders means we can now begin the concrete work to mobilise the necessary grant resources and I look forward to a swift review of the EIB’s External Lending Mandate. This will allow us to implement this ambitious initiative. The Bank’s initiative is mature and ready to be implemented. The needs are urgent. We see no reason to delay the delivery of vital financing to these regions“

"Our new Crisis Response and Resilience Initiative is fully complementary with the most welcome recent announcements from the European Commission and HRVP Frederica Mogherini on an Investment Plan outside of Europe. Indeed, it can be seen as a concrete “first step” to deliver on Europe's plan to tackle the broader challenge of migration and improve the EU’s development and external investment impact. This is a huge challenge over time. It is a marathon, but it must start with a sprint. We need to act now, and the EIB is ready to start.”

President Hoyer stressed today that the EIB’s External Lending Mandate will need to be extended and a part of the lending needs would need to be accompanied by grant financing.        

Background information:

In the light of the on-going refugee crisis, the European Council requested in March the European Investment Bank (EIB) to rapidly mobilise “additional financing in support of sustainable growth, vital infrastructure and social cohesion in Southern neighbourhood and Western Balkans countries.”

What can the European Investment Bank do?

The European Investment Bank, as the EU Bank, is proposing to step up its support for private sector development and social and economic infrastructure in the two regions by an additional EUR 6 billion over the next five years - over and above the EUR 7.5 billion already envisaged:

• EUR 2 billion of additional lending to the public and private sector within existing frameworks
• EUR 1.4 billion additional lending on especially favourable terms to the local public sector, to be accompanied by intensive technical assistance, addressing severe infrastructure needs
• EUR 2.6 billion for higher risk, higher impact financing to support private sector development and employment

The additional EUR 6 billion lending volume would catalyse up to EUR 15 billion in additional project finance in the regions concerned:  in total delivering more than EUR 35 billion in investments on the ground.

What will the EIB need to carry out this ambitious plan?

Additional guarantees for EUR 3.7 billion:

• A comprehensive guarantee covering EIB for a new EUR 1.4 billion public sector portfolio
• A political and commercial risk guarantee covering a new EUR 2.3 billion private sector portfolio

Guarantees could come from Member States or from an extension of the External Lending Mandate             

Grant resources of EUR 730 million

• EUR 300 million to finance a so-called “Impact Financing Envelope”, to finance private and public initiatives with strong social benefits but low financial return.
• EUR 340 million for investment grants to support concessional, especially favourable loans to the public sector.
• EUR 90 million for technical assistance to support capacity building and project implementation.

What resources can the EIB make available as a contribution to the financing of the plan?

The EIB would look at making extraordinary efforts to contribute to the funding of the initiative, including notably in bearing part of operating costs and contributing to technical assistance funding

Geographical scope:

Currently the EIB’s signed exposure/engagement in Middle East and North Africa, Turkey and Western Balkans stands at EUR 40 billion.

Our current proposal does not include Turkey because that is covered by a separate EU-Turkey agreement. The regional scope of the initiative (Southern Neighbourhood and Western Balkans) is in response to the explicit Council request.

When we talk about Southern Neighbourhood here we mean the Middle East and North Africa (MENA). This includes: Jordan, Lebanon, Egypt as well as Tunisia, Morocco, Gaza-West Bank, Syria (though no lending at the moment). In practice much of the focus would be on Jordan and Lebanon as the countries hosting the largest numbers of refugees. 

The Western Balkans region includes Albania, Bosnia and Herzegovina, FYROM, Kosovo, Serbia and Montenegro.

Examples of flagship projects/initiatives:

Egypt and Lebanon: Based on EU funds’ risk capital resources, the EIB is the cornerstone investor in the Euromena Fund supporting local companies/start-ups/SMES which, among others, invested in an Egyptian company that provides IT solutions. It has developed an e-learning solution for Syrian refugees that has been successfully implemented under a pilot phase in a refugee camp in Lebanon.

The EIB is also preparing a EUR 71.5 million microfinance facility for its Southern Neighbourhoods region, with an emphasis on projects in Jordan and Lebanon. It will be financed with a contribution from the European Commission and EIB’s own resources. The project should be ready to go ahead as of September 2016.

In Jordan: An EIB loan blended with EU investment grants, in favour of the Wadi Al Arab Water System II project aims to address water scarcity in the fourth most water-scarce country in the world, further exacerbated by the significant influx of Syrian refugees in the country. This project is in cooperation with Agence Française de Développement (AFD), and the European Commission through the Neighborhood Investment Facility (NIF).

For online publications: please see video of projects in Jordan.

• Microfund for Women http://www.eib.org/infocentre/videotheque/eib-supporting-entrepreneurship-microfund-for-women.htm
• Badia Impact Fund: supports technology, media and youth start-ups in Jordan http://www.eib.org/infocentre/videotheque/eib-backs-tech-and-youth-start-ups-in-jordan.htm