Besides hosting the European Court of Auditors and the European Court of Justice, Luxembourg is also home to a number of EU institutions, including the European Investment Bank (EIB).
The headquarters of these entities are all situated in the same part of Luxembourg City, very close to each other in the area known as the Kirchberg plateau. As a direct consequence of the EU's enlargement last year, all entities have been obliged to adopt plans to expand their premises.
Last month saw the laying of the foundation stone of a new building for the EIB, in what will be a substantial extension to its head office. The official ceremony was led by Jean Claude Juncker, Prime Minister of Luxembourg, who is also the governor of the EIB.
The EIB is the EU's long-term financing body, specifically set up to provide loans to finance capital investment projects that promote EU integration and social cohesion and which further EU economic objectives.
The EIB enjoys its own legal personality and financial autonomy within the EU system. It operates as a publicly owned international bank, its owners being the 25 EU member states which provide its subscribed capital. As its 'shareholders', the member states are represented on the bank's main decision-making bodies, namely the board of governors and the board of directors.
The EIB functions like a deve-lopment bank. It raises its resources on the financial and capital markets, mainly through bond issues or other specialised capital market operations. Over the years, it has grown into a major international financing institution, active not only within the EU but also in well over 100 other countries. In these 'third' countries, the EIB is closely involved in the implementation of the financial aspect of agreements concluded under European development aid and co-operation policies.
Over the last five years, the EIB has provided close to v200 billion as long-term loans in support of investment in a varied cross-section of projects such as roads and bridges, waste treatment and renewable energy schemes, water supply and other essential infrastructure, hospitals and housing, industrial facilities, research and development.
The EIB has a majority shareholding in the European Investment Fund (EIF) which acts as the EIB's venture capital arm, with a particular focus on small and medium-sized enterprises (SMEs). The EIF invests in venture capital funds supporting enterprises undergoing rapid expansion or operating in new technological sectors. It also provides portfolio guarantees for banks making medium to long-term loans to small enterprises. The EIB and EIF are together known as the EIB Group.
At its 2005 annual meeting, held just a month before the stone laying ceremony, the EIB's board of governors endorsed a set of general orientations establishing the bank's future strategy.
Although clearly seeking to build upon its established foundations and based upon insights derived from its past experience, these orientations provide the EIB with the framework necessary for the adoption of a new strategic outlook to guide its future activity.
This is, in fact, the message clearly spelled out in a document published by the bank immediately after its annual meeting, with the indicative title "Towards a new strategy for the EIB Group".
One of the key sentences in this document is the declaration of intent: "As regards (its) activity in Europe, the EIB Group should review its key priorities, introduce new instruments, focus more on the types of operations than on volume and allow for a controlled increase in the tolerance of risk in individual operations." A sentence that has much to say on the proposed future orientation of the EIB and which touches a number of points that are elaborated further in the remainder of the document and in its annexes.
Until now, the EIB's key operational priorities within Europe have been identified as: (a) Economic and social cohesion; (b) support for the implementation of the Innovation 2010 initiative (including the i2010 digital economy strategy that was featured in my last article); (c) development of the Trans-European and Access (transport and energy) Networks; and (d) environmental protection and rehabilitation.
These priorities have indirectly involved measures in support of SMEs but the new strategy proposes that SME development be acknowledged as a priority in its own right.
Quoting directly from the EIB strategy document: "Support for the small business sector in the EU, with its capacity to generate employment, is considered to be central to the mission of the EIB Group in pursuit of EU policy goals. It is now (therefore) proposed that SMEs be added to the bank's own key priorities, putting the combined strengths of the EIB and EIF to work more efficiently.
This will result in a better identification of the most appropriate product required to improve access to finance for SMEs, reflecting the variety of situations at national and regional level but also the specificity of the financial counterpart, thereby maximising the EIB's value added in favour of SMEs."
In one of the annexes to its document, the EIB refers to a recent communication from the European Commission that has stressed the need for additional public action (at a European and national level) which can act as a catalyst for the further development of sources of finance for SMEs.
In particular, this communication has identified the need for actions in three areas: (i) An improvement of the underlying conditions for SME finance with special reference to the financial markets in the new member states; (ii) an enhancement of opportunities for early-stage finance, in particular through the provision of suitable guarantees and through micro lending facilities; and (iii) greater opportunities for equity financing.
In addition to the added focus on SMEs, the EIB's strategic document also speaks of a "renewed partnership with the banking sector" that should seek to introduce greater flexibility in the way in which the EIB operates, particularly, in its relationship with the commercial banks.
The objective is to permit more 'tailor-made' lending initiatives by the EIB that can be better adapted to local market circumstances and to the characteristics of banking counterparts, in response to the specific needs of the intended beneficiaries.
Similarly the document also envisages greater co-operation with the European Commission in pursuit of EU policy goals, with particular attention to the Cohesion and Structural Funds. The aim is to better support the countries involved in their implementation of the Cohesion and Structural Funds through the provision of technical assistance by the EIB in the four phases of programming, project preparation, implementation and monitoring. Especially in connection with the desire to enhance the leverage of local funds, as part of the co-financing requirement but also as a way of maximising the potential for private sector participation.
The stated cornerstone of the EIB's lending policy is the notion of 'added value'. This stems from the EIB's ability to direct its lending activity in direct support of EU policy objectives, thereby maximising the benefits derived from the resources employed. It is envisaged that the new strategy, as formulated by the EIB board of governors, will further enhance this capacity; for the ultimate benefit of all of the countries involved and of their citizens.
There certainly is great potential for Malta to tap into the EIB. This is not only with respect to the structural funds, but also by the private sector in projects which further economic development and fall within the priorities of the EIB.
Late last year I attended a seminar by the EIB in Warsaw, dealing specifically with the structural funds, and it seemed that there was renewed keenness to especially help the new member states in the catching-up process with the older member states. These points on the just published new strategy of the EIB does indeed lend support to the view that the EIB is proving to be a crucial factor for the further economic development of the new member states.