EU bank calls for more Egypt, Tunisia funds

AP News
Posted: Feb 22, 2011 11:59 AM
EU bank calls for more Egypt, Tunisia funds

The European Investment Bank said Tuesday that it needs more money to support a transition to democracy in Tunisia, Egypt and other countries in the Arab region, though even the increase it requested from the EU would only allow it to keep investments at their current level.

If European Union governments sign off on an additional euro1 billion ($1.4 billion) of lending and allow the EIB to reinvest money being repaid from earlier projects, the bank could raise its lending to the region to euro6 billion ($8.2 billion) over the next three years, EIB President Philippe Maystadt said.

"We think with euro6 billion we could do something significant in the coming years," Maystadt said, adding that the priority for new projects must be the creation of jobs, especially for young people.

Many of them have been frustrated by the lack of job opportunities in their countries and were seen as the main drivers of the uprisings in Tunisia and Egypt.

In 2010, the EIB already lent a record euro2.6 billion to projects in the Arab region, making it the biggest provider of long-term financing there, Maystadt said.

But that payout, along with an overall increase in investment during the economic crisis, has depleted the bank's coffers. Of the euro8.7 billion ($11.9 billion) allocated between 2008 and 2013, only about euro2.8 billion ($3.8 billion) are left, Maystadt said.

"We are ready to do more," Maystadt said.

Along with the requested euro1 billion increase, the bank could lend about euro1.2 billion ($1.6 billion) to so-called investment-grade projects at its own risk, without EU guarantees. It also has euro700 million ($955 million) already allocated for climate-change projects and could invest euro200 million to euro300 million ($273 to $409 million) in funds being repaid from earlier investments, Maystadt said.

That would allow the bank to sustain the current level of support, Maystadt said.

The EIB focuses on three types of investments in the Arab area: direct investment in new enterprises, lending to small and medium-sized enterprises, and new transport and energy infrastructure necessary for future development.

To raise money it issues bonds, which are guaranteed by the EU against political risk. The EIB carries the regular credit risk.

Going beyond the euro6 billion would be difficult in the short-term, said EIB Vice president Matthias Kollatz-Ahnen. "That is approximately the maximum volume that can be accommodated" in the Arab region, he said.

The EIB has high standards for the projects it invests in, since "at the end of the day, the money needs to be repaid," said Kollatz-Ahnen.

Just quickly pumping a lot of money into new, untested projects would not necessarily yield the best results, he said. What is important is to build on existing projects and structures, which have the best chance of quick success, Kollatz-Ahnen said.

That kind of investments would be a first step in giving young people in the region new perspectives, but in the long-run those countries need to distribute the existing wealth fairly, said Kollatz-Ahnen.

"That's not something we can decide on our own," he said.

The EIB currently has projects in Morocco, Tunisia, Syria, Egypt, the Palestinian territories, Lebanon and Algeria. It has not been authorized to invest in Libya.