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EIB says Greece lending can only grow if strong projects found

23 February 2015 19:10 (UTC+04:00)
EIB says Greece lending can only grow if strong projects found

By Bloomberg

The European Investment Bank will only be able to expand its lending in Greece if new projects can meet the bank’s standards, EIB President Werner Hoyer said Monday.

The EIB already has 16.9 billion euros ($19 billion) of exposure in Greece, representing about 9.4 percent of gross domestic product, he said. This shows the EIB’s ongoing commitment to Greece whether or not the project pipeline grows, he said.

Hoyer said the EIB is a strong supporter of Greece’s efforts to pull itself through the financial crisis. He welcomed efforts by Greece and European authorities to extend the nation’s current bailout program until June to avoid financing disruptions.

“I used to live for a while in Greece as a high school student, and at that time Greece was a bloody dictatorship,” Hoyer said. “I hope from the bottom of my heart that the process that has been given a new chance on Friday will lead to tangible results over the next four months, and first, of course, during the next 24 hours until the agreement has been done.”

The EIB has taken a lead role in the 28-nation European Union’s quest to spur growth after more than five years of financial crisis. The Luxembourg-based bank maintains that any efforts to boost investment must safeguard its credit rating, limiting the amount of risk it can take on.

“It is absolutely a no-go area for this bank to go into weak projects,” Hoyer said.

‘Breathtaking’ Volume

He said that in Greece, where new finance minister Yanis Varoufakis has asked the EIB to step up its involvement, “so far I don’t see more projects, but the volume is already breathtaking.”

EU Commission President Jean-Claude Juncker’s 315 billion- euro investment plan relies on the EIB to contribute seed money and help select projects that clarified. Hoyer said the plan is “only one part of a big jigsaw” and will require careful management.

For example, funds from the investment plan won’t be available for many of the more than 2,000 projects identified by an EU task force last year. Hoyer said the list has “many promising projects” as well as a lot of non-starters.

“The way this list came about was definitely arbitrary, and for some also a big temptation to put projects on that list which otherwise would not be financed,” Hoyer said. “Nice try. Some of them will never see the light of day.”

The EIB’s role now is to help connect liquidity and investment opportunities “at a time when impulses from monetary policy obviously do not reach the real economy any more,” Hoyer said.

State Subsidies

The EIB has been working with the EU commission’s antitrust arm to make sure lending activities don’t breach rules that ban big state subsidies if they would distort competition.

Hoyer said the Juncker plan shouldn’t run into state-aid trouble if the commission sticks to the terms of an agreement it reached with the EIB last year.

If state-aid rules start to apply to “more key sectors of European industry and development, we might be in trouble” Hoyer said. He said the EIB will work with competition authorities to show that “it is in their interest to come up with state aid decisions very quickly” so as not to hamper the investment initiative.

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