European Investment Bank funds to help offset Brexit impact

The European Investment Bank (EIB) is seeking to help alleviate the impact of Brexit on the Irish economy by opening up new funding channels for businesses in Ireland, its vice-president has said.

Speaking in Brussels ahead of the opening of the first EIB office in Ireland next week, Andrew McDowell said that Ireland could benefit from new financing opportunities offered by the Luxembourg-based bank.

“Brexit will have a big impact on business and consumer confidence in Ireland. There is need for European support in Ireland to improve financing conditions, not only for infrastructural projects but also for enterprises,” he said.

Mr McDowell, a former economic adviser to Taoiseach Enda Kenny who was appointed as Ireland's nominee to the EIB in July, made his remarks as the European Commission published an assessment of the so-called Juncker plan, its flagship investment programme announced in November 2014.

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Known as the European Fund for Strategic Investments (EFSI), it is run by the EIB, and works by leveraging an initial fund provided by the EU budget and member states to attract private investment.

“Because we have more risk-taking ability under the Juncker plan, we now have the capacity to lend directly to small and mid-size companies in a way that we could not do in the past.”

In particular, the EU’s investment bank is looking to increase partnerships with the Irish banking sector to open up funding channels for SMEs.

Housing projects

Across a number of European companies, financial institutions have been appointed as ‘intermediaries’ to offer cheap funding to small and medium-sized companies, a key policy of the commission’s Juncker investment plan. But few Irish banks have signed up to the scheme.

"We haven't had a strong relationship with the Irish banks, in the same way that we have in Italy and Spain, " said Mr McDowell.

“Now that they’re in the position to increase lending, we certainly think there is a lot of potential to work with the commercial banks to provide funding.”

Active discussions are also ongoing between the EIB and the Government about investing in broadband infrastructure and the agribusiness sector.

Another prospect is collaboration on housing projects, whereby the bank would offer cheap, longer-term financing. The EIB has recently participated in housing projects in France and Britain, which are part financed by investors and local authorities.

The EIB is owned by the EU’s 28 member states and offers low-interest rate long-term financing for infrastructural projects across the EU and further afield.

The EIB invested about €755 million in Ireland last year, mostly for transport, higher education and other large projects.

Mr McDowell said that part of the reason for opening the office in Dublin was to address the relatively low level of financing Ireland received from the EIB on a per capita basis.

"The EIB has expanded its business in Ireland over the last five to seven years, particularly during the sovereign debt crisis when other banks were contracting in Ireland, but if you look at EIB exposure on a per capita or percentage of GDP basis, compared to other countries like Italy, Portugal and Greece, there is a potential to do more."

Mr McDowell was appointed to a €270,000-plus position on the EIB's management committee in September. As well as responsibility for Ireland, Austria and Romania, he will also manage programmes in Norway, Iceland, Switzerland, Liechtenstein, and the former Yugoslav Republic of Macedonia.

Evaluations

His role also involves the EIB’s work in southern

Asia

, focusing primarily on

India

, but also

Bangladesh

,

Nepal

and

Sri Lanka

. Further work by the bank in

Afghanistan

,

Iran

and

Iraq

will also fall under his remit.

Earlier this year, the Juncker plan’s scope and duration was extended to 2020, with the initiative expected to leverage more than €600 billion by 2020.

The European Commission said on Tuesday that three independent evaluations, including an EY report earlier this month, had found that the EFSI had encouraged investment across EU member states through improving access to financing and mobilising private capital.

But in a separate report earlier this year, HSBC questioned whether the investment plan had succeeded in attracting new investors into financing higher risk projects.

Mr McDowell said that the Juncker plan had allowed the EIB to expand its financing over the last year.

“We certainly think that the amount of high-risk lending we are doing has increased dramatically under the Juncker plan. We were doing high risk lending of approximately €3-€4 billion. That has been scaled up to €15 billion this year and €20 billion next year. There is no way we would have had the capacity to do that without the EFSI.”

Among the projects that were financed through the Juncker plan via the EIB was a €70 million investment in Irish life sciences company Malin which was announced last month.