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 of 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 of the six countries. • January 1 st 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 obstacles, 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 of 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 = L everage 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 Loans 1959-2012 breakdown by sector Agricultre 0% Infrastructure 2% Energy 15% Credits lines 25% Telecom 6% Health, Educ. 5% Service Transport 3% 25% Industry 10% Water 6% Urban infrastructure 3%
Finance contracts signed Breakdown by sector 1959-2011 250,000,000,000.00 200,000,000,000.00 150,000,000,000.00 100,000,000,000.00 50,000,000,000.00 0.00
Two Categories of EIB’s operation • Common Interest to the European Community – transnational operations • Regional Development – regional, local operations (Mezzogiorno)
Breakdown by categories Two main tasks 1960-2011 (%) 120 100 80 % 60 common interest Industry, services regional dev 40 20 0 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
• This chart clearly indicates that the operations of 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.
Loans by sector 1959-1997 Global loans 24% Communication 33% industry, service 12% Environment 11% Energy 20%
Loans by objectives 1959-1997 Indus. Competitiv. 4% SMEs 8% Energy 14% Regional development 44% Environment 13% Infrastructure 17%
10000 15000 20000 25000 5000 0 1959 1960 1961 1962 1963 1964 1965 1966 Communications Loans within the EU in ECU million 1959-1997 1967 1968 1969 1970 1971 1972 Environment 1973 1974 1975 1976 Energy 1977 1978 1979 1980 industry, service 1981 1982 1983 1984 1985 Global loans 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
Objectives in ECU million 1959-1997 40000 35000 30000 SMEs 25000 Industrial competitiveness Energy 20000 Environment Infrastructure 15000 Regional development 10000 5000 0 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997
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 Two main tasks 1960-2010 (%) 120 100 80 % 60 common interest Industry, services regional dev 40 20 0 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
Global Loans by sectors 1959-1972 loans Agriculture 4% 0% Services 0% Energy 17% Industry 37% Transport 25% Urban infrastructure 1% Water Telecom 5% 11%
• 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 of 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 0 1961 27 31 36 0 1962 17 26 53 0 1963 21 30 46 0 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
Breakdown by sector 1959-1972 60 50 agriculture 40 energy % 30 transport 20 industry telecom 10 water 0 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972
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 Two main tasks 1960-2010 (%) 120 100 80 % 60 common interest Industry, services regional dev 40 20 0 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
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