Opening address by Werner Hoyer, President of the European Investment Bank
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It is a great honour for me to be with you this afternoon. I would like to thank you very much for having me and thank especially Dacian [Cioloș] for organising this event, which addresses a very important aspect of Europe’s future development – the role of rural Europe.
That we meet here today virtually rather than in person reflects the fact that Europe and the world are going through an unprecedented public health crisis.
So before sharing with you the Bank’s approach and outlook on today’s topic, I would like to briefly update you on the EIB Group’s support to the EU economy in relation to COVID-19:
To date, we have approved financing of over €10 billion to help struggling companies. These funds are benefitting companies across Europe and are expected to mobilise around €34 billion of investment.
Supporting the real economy is where the EIB group is best placed to provide what Europe and its citizens need. That’s why we have proposed to establish a Pan-European Guarantee Fund in response to COVID-19 particularly to support the working capital and liquidity needs of SMEs. The financing to be generated by this fund, combined with other urgent measures announced by the EIB Group, can generate funding on a scale of around 1.5% of the EU’s GDP.
Let me also say a few words about the EU’s revised Multi-annual Financial Framework (MFF) and the Recovery Package. Mobilising financial means at an unprecedented scale, these initiatives represent an excellent opportunity to put the EU economy on track for a green, digital and inclusive transformation – and to sow the seeds for a stronger European economy. We welcome these new proposals and stand ready to support them.
Our position on this package focuses on what we know and do best: financial instruments and budgetary guarantees to support programmes such as EFSI, the European Fund for Strategic Investments, (in the current MFF) or InvestEU; the Just Transition Mechanism; and the Neighbourhood, Development and International Cooperation Instrument (NDICI) in the next MFF.
Such an ambitious plan, much needed and fully supported by us, requires however, a number of conditions to be met for the EIB Group to be able to successfully implement the Commission proposals at the magnitude currently discussed.
With the request to step up our financing activities, it is clear to us that we would need to receive a capital increase. Without it, the financial sustainability of the EU bank will be put at risk.
Let me sum up on this point. We are positive towards the recovery package, but I also have to be open with you on what needs to be done to ensure that the proposals can be implemented in a sustainable way.
This brings me to the subject of this webinar on addressing and harnessing the potential of the rural areas of Europe.
Agriculture and rural development are not only central to the EU Green Deal, but also in the context of the EIB’s ambition as the EU Climate Bank and to our role in implementing EU development policies.
This reflects of course the potential that this sector has to support the new Climate and Environmental Sustainability goals:
If managed sustainably, the bio-economy, for example through afforestation, can sequester huge amounts of greenhouse gases in soils, primary biomass at relatively low cost.
At the same time, the biological potential of land and the ocean to sustainably produce food and biomass will be severely affected by climate change.
And besides its ecological importance, rural development and the bio-economy are of course crucial for addressing the socioeconomic divide at regional and international level and for not leaving any region behind.
Against this background, EIB support to the bioeconomy over the last 5 years reached about €33 billion in total, and has remained stable at around 10% of total EIB lending.
We are in particular working with financial intermediaries that support access to finance for agricultural SMEs and young farmers, such as Agricover in Romania, PBZ in Croatia or Credit Agricole in France. Let me stress here that young farmers need to be supported as a priority. They are key for the future of a sustainable rural Europe.
The bioeconomy sector is also central to our lending in partner countries outside of the EU, according to the mandates that the EIB has in place with the EU Commission.
As the EU bank, the EIB's financing objectives for agriculture and the bioeconomy are aligned and aim to deliver EU policies and priorities. For example, a key requirement for a competitive and vibrant rural economy is additional investment in innovation and skills in all sub-sectors of the bioeconomy.
The EIB has been financing research and innovation aiming at making agricultural production systems more resilient through measures such as improved seeds, or alternative bio-pesticides for the EU market.
The EIB has also supported Circular Economy projects along the food value chains helping agro-industry to become more resource efficient, reduce food waste and substitute plastics with compostable biomaterials in packaging.
Rural development investments targeting afforestation, or the modernisation of rural infrastructure with a strong focus on IT connectivity and rural broadband are equally important to enable smart and eco-efficient agriculture. Such enabling investments are key to the attractiveness of rural areas to make them more vibrant. This also closely links to territorial integration objectives in the EU.
Recent examples of EIB financed projects include national contributions to Rural Development Programmes in several Member States, investment in rural broadband infrastructure, the improvement of irrigation (for example in Portugal), or the financing of flood protection schemes. With €5.7bn invested during the past 5 years, the EIB is also one of the largest providers of finance to the forest sector worldwide.
In addition to direct investment loans, support to SMEs and Midcaps is a strong priority for EIB finance. As previously mentioned, via financial intermediaries, around 80% of EIB Group lending to the sector is channelled to farmers, cooperatives and small SMEs along the bioeconomy value chain.
The response to a recent €700m Agriculture Programme Loan for SMEs & Midcaps reflects the difficult access to finance that is prevalent in this sector across the EU. It was taken up by the market within just a few months of its launch.
Let me add that to further address inefficiencies in access to finance, our Advisory Services and the European Investment Fund have been very actively developing new financial instruments based on national and structural funds, in close collaboration with the Commission (DG AGRI) and the national managing authorities for example in France, Ireland, Italy, Portugal, Greece and Romania.
Such agricultural mandates currently amount to approximately €2.5bn of targeted financing across EU countries. They provide access to loan finance in advantageous conditions to a huge number of farmers and SMEs along the agro-food value chain.
Of course, many policy objectives in agriculture still require subsidy based delivery mechanisms. But set against the background of reducing agricultural budgets at EU level, financial instruments are a cost effective way to enable viable investments in support of our vibrant, self-sustaining rural economies.
To conclude, it is vital to highlight that there is great potential and aligned interest to support the EC Green Deal and the new Common Agricultural Policy objectives through financing projects in the bio-economy. In the last 5 years, the EIB has increased the percentage of direct lending to the bioeconomy sector that qualified as climate finance, reaching the milestone of 50% climate action across all direct bioeconomy lending in 2019.
Enhancing our focus on these sub-sectors and activities should allow the EIB Group to further increase its contribution to “green” rural development objectives within the EU and beyond.
Thank you very much for your attention and let me wish you a productive afternoon.