From Rome to Lisbon. Reading the European Integration Process - - PowerPoint PPT Presentation

From Rome to Lisbon. Reading the European Integration Process through the EIB Investments Priorities (1958-2010).

René Leboutte Jean Monnet Chair University of Luxembourg

• The Treaty instituting the European Economic

Community (signed in Rome on March 25, 1957) had a key-objective: the establishment

• f the Common Market which implies the

progressive integration of the economies of the six founding Member States.

• This objective was and still is difficult to fulfill

because of the different economic structures

• f the six countries.
• January 1st 1958: the European Investment

Bank

• The difficults were recognized in the first

report of the EIB (1958):

• “this integration would meet with a number of
• bstacles, among others: certain regions

relatively less developed, low productivity in various sectors, sometimes inadequate communications, future lack of electrical power, etc. To overcome these obstacles, as well as to give birth to the new activities and installations necessary on the scale of the Community, big investments have to be made.”

The origins of the Investment Bank

• The project of setting up a special investment

tool had been formulated in 1948-1949 by the French authorities in the arena of the European Organization for Economic Cooperation (Marshall Plan)  no décision taken.

• The debate again started during the

negotiations of the Treaty of Rome (1955- 1957)

Why a European Investment tool?

• The World Bank (initially called International

Bank for Reconstruction and Development) founded in 1945 was already active. This institution should act as a EIB…

• But after debates, the conclusion was that the

main mission of the World Bank was not to facilitate investments in Europe in a long term perspective.

European Investment Fund versus European Investment Bank

• “by choosing for this task [facilitating the realization
• f big projects in the Community], not a fund which

would simply have distributed its allocations, but a bank which can itself make loans, by allocating a capital of a thousand million units of account […], the six member countries set aside more direct financial intervention methods which no doubt would not in the long run have enabled adequate resources to be raised.”(EIB report 1958)

Treaty of Rome 1957

• “the task of the European Investment Bank

shall be to contribute, by having recourse to the capital market and utilizing its own resources, to the balanced and steady development of the common market in the interest of the Community.

• For this purpose the Bank shall, operating on a

non-profit-making basis, grant loans and give guarantees which facilitate the financing of the following projects in three sectors of the economy:

• 1. projects for developing less developed

regions;

• 2. projects for modernizing or converting

undertakings or for developing fresh activities called for by the progressive establishment of the common market, […] projects that cannot be entirely financed by the various means available in the individual Member States;

• 3. projects of common interest to several

Member States which are of such a size or nature that they cannot be entirely financed by the various means available in the individual Member States".

EIB’s operation = Leverage effect

• "The projects to which the Bank has agreed so far,

belong to the category of development investments intended for increasing basic productions which, in turn, contribute to increased demand, production and investment in many related fields. They are nearly all situated in the less developed areas of the Community, require fairly large amounts and are by their very nature, highly capital-intensive.“

• EIB 1959 Report

Overview of the breakdown of loans by sector 1959-2012

Agricultre 0% Infrastructure 2% Energy 15% Telecom 6% Transport 25% Urban infrastructure 3% Water 6% Industry 10% Service 3% Health, Educ. 5% Credits lines 25%

Loans 1959-2012 breakdown by sector

Finance contracts signed Breakdown by sector 1959-2011

0.00 50,000,000,000.00 100,000,000,000.00 150,000,000,000.00 200,000,000,000.00 250,000,000,000.00

Two Categories of EIB’s operation

• Common Interest to the European Community

–  transnational operations

• Regional Development

–  regional, local operations (Mezzogiorno)

Breakdown by categories

20 40 60 80 100 120 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 %

Two main tasks 1960-2011 (%)

common interest Industry, services regional dev

• This chart clearly indicates that the operations
• f the EIB greatly changed during the 50 year

period according to a changing European Community confrontated :

– to the implementation of the Common Market in the 1960s, – to the economic downturn in the 1970s-1980s, – to the new objectives like the implementation of the Single Market or the waves of accession of new Member States.

Communication 33% Environment 11% Energy 20% industry, service 12% Global loans 24%

Loans by sector 1959-1997

Regional development 44% Infrastructure 17% Environment 13% Energy 14%

• Indus. Competitiv.

4% SMEs 8%

Loans by objectives 1959-1997

5000 10000 15000 20000 25000 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

Loans within the EU in ECU million 1959-1997

Communications Environment Energy industry, service Global loans

5000 10000 15000 20000 25000 30000 35000 40000 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

Objectives in ECU million 1959-1997

SMEs Industrial competitiveness Energy Environment Infrastructure Regional development

The three Ages of the EIB

• 1959-1972 : Golden Sixties
• 1973-1989: Hard Times
• 1990-2010: The Age of big changes

1959-1972 : Golden Sixties

• Equal breakdown between the common

interest projects and the regional development operations.

• The two main domains of activity of the Bank

were on one side infrastructures, energy, and transport networks (category 1 common interest) and the regional devolpment, mainly projects concerning the Mezzogiorno (category 2).

Breakdown by categories

20 40 60 80 100 120 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 %

Two main tasks 1960-2010 (%)

common interest Industry, services regional dev

Agriculture 0% Energy 17% Transport 25% Telecom 11% Water 5% Urban infrastructure 1% Industry 37% Services 0% Global loans 4%

Loans by sectors 1959-1972

• The development of the Common market

could not take place to the detriment of the less developed regions of the Community.

• The famous statement of the Treaty of Rome

is clear about this: "an ever closer union". It was the main mission of the EIB to set up a regional development scheme, especially before the setting up in 1975 of the European Regional Development Fund.

Regional Development & Industrialization

• During the 1960s the EIB was concerned by

the industrialization of regions like the Mezzogiorno and the modernization of industrial areas (chemical industry for instance).

• During this period most of the EIB’s operations

dealt with Italy.

Mezzogiorno first

• It was not by chance that the two first

Presidents of the EIB were Italians.

– Pietro Campilli was the chief executive of the Italian Banking Federation and also responsible for the Ministry Committee of the Mezzogiorno. – In June 1959 his successor was Paride Formentini who remained President of the EIB until September 1970. He had an excellent knowledge

• f financial and industrial affairs (Willaert Emilie).

• During this period, the breakdown by sectors

(table 1) shows that the three main sectors (transportation, industry, and energy) were in fact the tangible, concrete building up of the Common Market.

Breakdown by sectors 1960-1972

energy transport industry telecom 1960 40 40 50 1961 27 31 36 1962 17 26 53 1963 21 30 46 1964 17 29 44 3 1965 21 25 39 3 1966 18 26 40 2 1967 15 28 40 4 1968 14,4 30,8 36,6 4,8 1969 16,2 30,9 38,4 8,2 1970 13,7 20,8 41,5 9,7 1971 7 26,1 50 12,1 1972 19,1 31,2 32,8 16,2

10 20 30 40 50 60 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 %

Breakdown by sector 1959-1972

agriculture energy transport industry telecom water

Hard time 1973-1989

• During the second period 1973-1989, the

balance between common interest and regional development dramatically changed in favour of the common interest's projects. Many reasons explained this inbalance.

Breakdown by categories

20 40 60 80 100 120 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 %

Two main tasks 1960-2010 (%)

common interest Industry, services regional dev

Reasons

• 1. the economic crisis in the Community due to

the oil shocks (1973, 1979) obliged the EIB to support projects dealing with energy supply.

• 2. Accession of UK  setting up in 1975 of the

European Regional Development Fund which will play an increasing role alongside the second mission of the EIB, the regional development.

1973 Report

• 3. The last change that did not appear in this

chart was the development of global loans since 1968. Global loan is a package given to an institution like the Cassa per il Mezzogiorno, institution which dispatches the loans for small and medium sizes projects.

10 20 30 40 50 60 70 80 90 100 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Energy

Nuclear power stations

• In 1976-1980, more than 75% of the EIB's
• perations dealt with energy production and

supply.

• It was the time of EIB investments in nuclear

power plants. For instance the EIB invested in nuclear power station projects like Bugey in the Rhône-Alpes (1965-1979), at Biblis and Neckarwestheim in Germany, in the Eurodif project at Triscastin (the Rhône-Alpes).

Biblis

Triscastin

Breakdown by sectors 1973-1989

agriculture energy transport industry telecom water tourism R&D environment 1973 27,9 10,9 43,1 15,8 0,4 0,2 0,1 1974 0,1 47,9 9,1 35,4 7,2 0,3 1975 0,1 35,7 15,1 14,7 21,6 12,5 0,2 1976 85,9 3,7 5,9 4,5 1977 75,8 5,5 6,1 12,1 0,5 1978 82,4 17,6 1979 85,3 3,5 9,8 0,8 0,6 1980 90,9 7,1 0,2 1,4 0,4 1981 50,3 10,7 14 10,6 8,1 0,3 0,2 1982 84,1 10,9 6 0,2 2,8 0,4 1983 30,7 9,8 6,6 10,8 4,7 1984 58,4 7,1 30,4 4,1 1985 39,5 14,7 7,7 10 7,7 1986 35,8 18,7 12,8 8,2 5,1 0,2 0,3 1987 26,2 16,7 12 5 9,8 1988 20,7 18,8 28,2 15 7,9 2,8 2,9 1989 15,7 20,5 30,2 15,5 7,2

20 40 60 80 100 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 %

Breakdown by sector 1973-1989

agriculture energy transport industry telecom water tourism R&D

The Age of big changes, 1990-2010

• The next period from 1990 until 2010 presents

a better balance of the breakdown between common interest (70-80%) and regional development and industry (30-20%). The importance given to the common interest projects (transnational projects) is due mainly to the implementation of the Single European Market (Single European Act (1986) and the Treaty on the European Union (1992).

Breakdown by categories

20 40 60 80 100 120 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 %

Two main tasks 1960-2010 (%)

common interest Industry, services regional dev

10 20 30 40 50 60 70 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 %

Breakdown by sector 1990-2004

energy transport telecom water industry education environ/urban services

10 20 30 40 50 60 70 %

Breakdown by sector 1990-2010

energy transport telecom water industry education environ/urban services

10 20 30 40 50 60 70 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Communications

Telecom transport

2 4 6 8 10 12 14 16 18 20 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

water

Some major changes in the philosophy of the EIB (1973-2010)

Global Loans System

• The EIB is an institution that must adapt itself

to structural changes.

• From 1968 onwards, the EIB became more

and more interested to support indirectly small and medium size projects. But officially it was not the mission of the bank; therefore a new tool had been created: the Global loans system.

Global Loans System

• To financial institution and commercial banks

to cover:

– in the less favoured areas: small and medium- sized industrial, service and tourism ventures in particular; – investment in industrial small and medium-sized enterprises; – investment to develop advanced technology throughout the EU (start-up)

EIF

• The creation of the European Investment Fund

in 1994 also modified the approach of the EIB concerning start-up enterprises and SMEs. "The EIF provides venture capital for small firms (SMEs), particularly new firms and technology-oriented businesses. It also provides guarantees to financial institutions (such as banks) to cover their loans to SMEs"

Maastricht

• The Treaty on European Union, signed at

Maestricht in 1992, assigned new responsibilities to the EIB, mainly contributing to the implementation of the Single Market and promoting the economic and social cohesion.

Protocol to the Maestricht Treaty

• A Protocol to the Treaty reaffirms “that the

promotion of economic and social cohesion is vital to the full development and enduring success of the Community”.

• “The European Investment Bank should

continue to devote the majority of its resources to the promotion of economic and social cohesion” (1992)

And the EIB…

• Interestingly enough, the economic objectives
• f the EU coincide with those of the EIB.

According to the 1991 annual report, "the Protocol on economic and social cohesion reaffirms that the main task of the Bank is to provide funding for economically worthwhile investment in regions lagging most seriously behind in their development.

• In addition, the Treaty calls for a common

policy in areas in which the Bank is already heavily committed and of which it has pertinent experience: the creation of trans- European transport, telecommunications and energy supply networks, increasing industrial competitiveness, environmental protection and Community development cooperation with third countries"

TENs

• At the Essen European Council in December

1994 the concept of Trans-European Networks (TENs) has been formulated and the Bank has become the leading source of bank finance for these major networks like roads and motorway construction.

The EIB and the Lisbon Strategy

• The EIB launched a new model: the joint

action with other EU institutions in 2005

• Corporate Operational Plan : concretely, four

initiatives were taken:

– JESSICA – JEREMIE – JASMINE – JASPERS

• JESSICA : Joint European Support for

Sustainable Investment in City Areas (EIB, European Commission, Council of Europe Development Bank)

• JEREMIE: Joint European Resources for Micro

to Medium Entreprises Initiative (European Investment Fund and European Commission)

• JASMINE: Joint Action to Support

Microfinance Institutions in Europe (European Investment Fund and European Commission)

• JASPERS (Joint Assistance to Support Projects

in European Regions) wich is a key instrument

• f cooperation between the European

Commission, EIB, European Bank of Reconstruction and Develoment.

• One example of Jaspers cross-border regional cooperation is the Baltic Sea

Region programme.

Back to regional policy

In 2006, the European Commission joined forces with the EIB and the European Bank for Reconstruction and Development and set up JASPERS (Joint Assistance to Support Projects in European Regions) to improve the preparation of projects proposed for grant financing by the EU Structural Funds and to help Member States to use the grants provided by the Union more rapidly and more effectively.

The EIB and the enlargements

• The annual report 1990 mentioned for the

first time the operations undertaken in the former German Democratic Republic, which

• fficially disappeared on 3rd October 1990.
• The annual report 2002 summarized the
• perations undertaken by the bank since 1990

in favour of new pre-accession countries. "Since 1990, the EIB has granted loans totalling over 20 billion in the Accession Countries.

Financial interventions outside the European Community

• -1963-1972: loans are dealing with the ACP

and Overseas territories, and Mediterranean countries (especially Greece and Turkey)

• -1973-1989: the field of interventions was

enlarged due to the accession of Great-Britain, Denmark (with Greenland), Spain and Portugal

• 1990-2004: the field of intervention was

enlarged to Central and Eastern European countries.

200 400 600 800 1000 1200 1400 1600 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

Breakdown by regions. ACP & Mediterranean countries

Mediterranean ACP/OCT

Thank you very much!