Since June 2000, the European Investment Bank (EIB) and the European Investment Fund (EIF) have together constituted the EIB Group. The reform established the European Investment Bank as the EIF's majority shareholder and operator.

In 2000, EIB financing for projects supporting European Union policy objectives totalled EUR 36 billion (up 13% on 1999). EUR 30.6 billion went to projects within the EU Member States and close to EUR 3 billion to those in the Accession Countries, while lending in other countries ran to over EUR 2.4 billion. To fund these activities, the EIB borrowed EUR 29 billion on the world's capital markets.

On 31 December 2000, the EIB's balance sheet stood at EUR 219.2 billion, with outstanding borrowings totalling EUR 160 billion and outstanding loans amounting to EUR 199 billion.

Highlights in 2000:

  • the new "Innovation 2000 Initiative" (i2i) underpinning a European economy based on knowledge and innovation,
  • substantial increase in finance for SMEs and environmental projects,
  • vigorous support for less advanced regions, which received over two thirds of individual loans granted within the EU,
  • 24% growth in lending to the Accession Countries and buoyant activity in other countries neighbouring the EU.

Innovation 2000 Initiative

The EIB launched this initiative to promote the Lisbon Strategy decided by the European Council (March 2000), which aims to build a Europe based on knowledge and innovation. Through this initiative, the EIB Group is directing lending towards the following objectives: development of SMEs and entrepreneurship, diffusion of innovation, research and development, information and communications technology networks, and human capital formation. i2i also embraces investment in European audiovisual projects in order to strengthen the financial base of Europe's audiovisual and film industry and its capacity to adapt to the challenges of digital technology.

Since May 2000, loans worth EUR 1.6 billion have been signed under i2i for investment in communications networks (EUR 965 million) and education (450 million), notably computer literacy and teaching. Furthermore, venture capital operations of some EUR 215 million in favour of innovative SMEs have been concluded.

Over the next three years, the EIB expects to lend between EUR 12 billion and EUR 15 billion under this initiative in addition to funds earmarked for developing venture capital operations through the EIF.

Substantial increase in finance for SMEs and environmental projects

EIB support for SME investment came to EUR 6.2 billion (up 44% on 1999), of which over EUR 5.7 billion via traditional global loans (credit lines to local partner banks), fostering investment by some 27 000 SMEs. Another EUR 450 million contributed towards financing 24 venture capital funds in 10 EU countries, which acquire participations in and help to strengthen the capital base of innovative SMEs in the high-tech sector.

In June 2000, the Bank's Board of Governors doubled the scope for EIB Group venture capital operations to EUR 2 billion up to 2003. The Group's venture capital operations are entrusted to the EIF, the Group's subsidiary specialising in venture capital and SME guarantees. The EIF's activity focuses on the Member States, although its venture capital operations will now gradually be extended to the Accession Countries with a view to assisting the emergence of high-tech companies.

The Bank's lending for environmental projects showed a marked increase to EUR 6.4 billion (up 39% on 1999). Finance for projects safeguarding the natural environment (water management, waste treatment and reduction in harmful emissions from industry) totalled EUR 3.6 billion. Urban environmental projects received EUR 2.8 billion in loans, particularly in the fields of public transport and urban development.

Regional development

In line with its core mission of underpinning balanced regional development, the EIB pressed ahead with its support for the modernisation of industry and infrastructure in less advanced regions. Aggregate lending in these areas came to EUR 20 billion, comprising EUR 13.7 billion in the form of individual loans (representing 73% of total individual lending operations in the EU) and EUR 6.2 billion in global loan financing promoting small-scale SME ventures and local infrastructure schemes. 45% of individual loans went to projects in the Cohesion Countries (Spain, Greece, Ireland and Portugal).

EIB support for regional development forms an integral part of the EU's structural and cohesion policies. In January 2000, the EIB and the Commission signed an agreement on even closer coordination of their regional development assistance over the period 2000-2006 in both the Member States and the Accession Countries, and particularly on co-financing investment projects (EIB loans and EU budgetary grant aid).

TENs and human capital

Lending for transport, energy and telecommunications infrastructure projects totalled EUR 6.6 billion and loans for health and education, EUR 1.2 billion. In these sectors, the EIB stepped up its involvement in Public Private Partnership financing (for example, communications infrastructure projects in the United Kingdom, Greece, Portugal and Germany as well as in the Accession Countries; education schemes in the United Kingdom).

Lending in regions neighbouring the EU

EIB lending in the Accession Countries focused strongly on transport and telecommunications projects linking the region with the EU (Crete and Helsinki corridors) and thus enabling it to participate in and integrate with the EU's internal market, while catching up economically. Of EUR 3 billion in total loans, 960 million went to transport infrastructure projects, notably roads and motorways (EUR 765 million), while EUR 175 million was advanced for rail schemes. The Bank also placed special emphasis on industrial modernisation, including SMEs. Increasing attention was given to projects helping the Accession Countries to meet the environmental standards laid down in the acquis communautaire. Lending for environmental projects amounted to EUR 745 million, equivalent to almost a quarter of aggregate EIB financing in these countries (water and waste treatment schemes attracted EUR 190 million and projects enhancing the urban environment, especially public transport schemes, over EUR 305 million, while EUR 250 million went for flood damage reconstruction in Romania).

The EIB will continue to expand its activity in support of the pre-accession process, backed by a EUR 8.7 billion lending mandate from the EU (2000-2007) and its own EUR 8.5 billion Pre-Accession Lending Facility (2000-2003), entirely at the Bank's risk. This will further consolidate the EIB's position as the major source of external finance for projects in Central and Eastern Europe.

To prepare for enlargement, the EIB merged its lending directorates for the EU Member States and the Accession Countries, so helping to facilitate operations.

In the Mediterranean region, the EIB lent a total of EUR 1.2 billion in non-EU countries, mainly under the "Euro-Mediterranean Partnership". The focus was on modernising the private sector, including SMEs, and strengthening development of the local financial sector, plus enhancing infrastructure and the environment. The Bank resumed its activities in Syria and continued to back investment underpinning the Peace Process in the region by financing projects in Gaza-West Bank and Jordan. Of overall EIB lending in the region, EUR 575 million went to projects in Turkey, largely under the "Turkish Earthquake Rehabilitation and Reconstruction Assistance" (TERRA) programme.

The EIB contributed to the Stability Pact for South-Eastern Europe by making available a total of EUR 154 million in the region. The Bank is participating in the so-called Quick-Start and Near-Term programmes, in which the European Commission, World Bank and EBRD are also involved. In particular, the EIB assisted reconstruction of Bosnia and Herzegovina's power transmission and distribution systems, building of the Danube bridge linking Bulgaria with Romania, and upgrading of Albania's main North-South road corridor. A framework agreement for EIB financing in Croatia was established at the end of 2000 and an EIB lending mandate for the Federal Republic of Yugoslavia is currently under consideration by the Council.

Lending in other countries

In Latin America, lending totalled EUR 400 million and in Asia, EUR 130 million. More than a quarter of loans was directed towards private-sector investment, underpinning joint-ventures with European companies and banks.

Particular emphasis was placed on financing private-sector investment in the ACP countries, benefiting both large and small firms. Of the total EUR 400 million lent, 210 million took the form of risk capital drawn from EU budgetary resources. In the Republic of South Africa, the Bank lent an additional EUR 140 million for small infrastructure schemes, telecommunications and productive-sector investment.

Under the Highly Indebted Poor Countries (HIPC) initiative, the EIB is contributing up to EUR 70 million in debt relief for some 12 countries.

Borrowing

The EIB must aim to optimise borrowing costs in order to be able to advance funds on the most favourable conditions to project promoters, thereby encouraging investment. In 2000, the EIB borrowed EUR 29 billion through 149 operations, raising funds in 11 currencies, of which 49.5% in GBP, 23% in EUR, 21% in USD and the remainder in CHF, Central and Eastern European currencies, HKD, JPY, TWD and ZAR. After swaps, the EIB's resources were raised in three main currencies: EUR, 42.5%; GBP, 38%; and USD, 13.5%.

The substantial borrowing in GBP reflects the very cost-effective funding opportunities which the Bank was able to seize (including favourable conditions for swapping GBP into EUR). The Bank thus consolidated its standing as a non-sovereign benchmark issuer against a background of reduced new UK Government issuance.

Funding in euro declined in 2000 because of less advantageous borrowing conditions. These resulted, not least, from the ongoing depreciation of the euro and the consequent falling demand on the part of US and Asian investors for euro denominated bonds.

Despite less receptive market conditions, the EIB further increased its existing euro benchmarks (EARNS - Euro Area Reference Notes) by regular reopenings (new bond issues with the same interest rate and maturity as existing ones, so bolstering their volume and liquidity) and the issuance of additional bonds with maturities up to 2010. Outstanding EIB benchmarks now range from 2003 to 2010 with a volume of between EUR 2 billion and EUR 6 billion each, and totalled approximately EUR 29 billion at year end. The EIB's efforts to continue boosting the liquidity of its benchmarks and to complete its yield curve underline its commitment to the euro as well as its leading role as a supranational issuer in this currency. The EIB is now the only non-sovereign borrower offering an entire euro benchmark curve traded on MTS platforms.

The USD remained an important currency for funding in shorter maturities and for taking advantage of favourable opportunities for currency swaps, in view of the transparency, size and unmatched liquidity of the dollar market. New issuance was carried out by adding to existing benchmark issues.

The Bank was also present on the Asian markets and succeeded in establishing itself as a prime borrower in Hong Kong and Taiwan.

The EIB pursued its efforts to borrow in the currencies of the Accession Countries, both on domestic markets and the Euromarket. By virtue of its top credit rating, the Bank continues to be able to issue longer-term bonds denominated in such currencies, thereby contributing to the development of deeper capital markets. Funds raised in such currencies are on-lent to project promoters in the region concerned. Scope for project promoters to borrow in local currency eliminates exchange risks, serving as a strong incentive for investment which, in turn, assists the Accession Countries in catching up with the productivity and income levels of the EU.

Loan contracts signed in 2000 and from 1996 to 2000
(EUR million)

2000

1996-2000
COUNTRY amount % amount %
Belgium (BE) 503 1.4 3 384 2.3
Denmark (DK) 991 2.8 4 060 2.8
Germany (DE) 6 038 16.8 23 281 15.9
Greece (GR) 1 712 4.8 5 335 3.6
Spain (ES) 4 199 11.7 16 667 11.4
France (FR) 3 323 9.2 15 684 10.7
Ireland (IE) 419 1.2 1 165 0.8
Italy (IT) 5 640 15.7 21 718 14.8
Luxembourg (LU) 200 0.6 510 0.3
Netherlands (NL) 260 0.7 2 161 1.5
Austria (AT) 735 2.0 2 744 1.9
Portugal (PT) 1 852 5.1 7 604 5.2
Finland (FI) 525 1.5 2 356 1.6
Sweden (SE) 621 1.7 3 600 2.5
United Kingdom (GB) 3 303 9.2 15 877 10.8
Other 321 0.9 1 286 0.9
Total European Union 30 644 85.0 127 341 86.8
Accession Countries 2 948 8.2 10 398 7.1
(of which Pre-Accession Facility) 1 618 4.5 4 455 3.0
Total Accession Countries 2 948 8.2 10 398 7.1
Mediterranean Countries (excl. Cyprus, Malta) 1 214 3.4 4 595 3.1
ACP-OCT-South Africa 541 1.5 2 459 1.7
Asia, Latin America 532 1.5 1 627 1.1
Balkans 154 0.4 318 0.2
Total Third Countries 2 441 6.8 8 999 6.1
Grand Total 36 033 100.0 146 828 100.0