Republic to receive €867m in funding from EU bank

European Investment Bank announces funds but warns it will be hit hard by Brexit

The European Investment Bank (EIB) will provide €867 million in funding for various projects in the Republic this year, on a par with 2017, its president Werner Hoyer has told The Irish Times.

Mr Hoyer was in Dublin last week to announce two more funding projects for the EIB here: €84 million invested in a renewable energy fund operated by NTR, and a €100 million facility with Gas Network Ireland to help it modernise its infrastructure.

This compares with annual funding of just €210 million to Ireland a decade ago by the self-dubbed “EU bank”, which was founded in 1958 and offers low-cost financing on a long-term basis to companies and projects in the 28 member states and other nations.

“It can be difficult to get financing for small growth firms and difficult to get longer tenures,” Mr Hoyer said. “We can refinance on the capital markets by selling our bonds for long periods. That’s the advantage of the EIB. The Irish have known what to do with the money they have borrowed from us.”

Trade tensions

In parallel with delivering this positive news, Mr Hoyer sounded warnings on Brexit, the rise of populist political parties in the EU, and the growth of global trade tensions.

On Brexit, Mr Hoyer said: “Obviously, this is the most stupid decision since [Roman emperor] Caligula named his horse a consul in Rome 2,000 years ago. Brexit is Brexit, that’s what the British people are learning the hard way.”

He said the EIB would be “one of the hardest hit [by Brexit] of the institutions” in the EU. “The reason is that we not only lose a member who has 16 per cent of the capital . . . a country which has a portfolio of outstanding quality in the UK, we not only lose a member which relies upon the EIB more than other big nations because the UK does not have a national commercial bank . . . we also lose a partner which is best when it comes to development policies or activities outside the EU.

“The main thing is that we lose the British callable capital” and the leverage that this provides for the EIB’s balance sheet and own borrowing requirements, said Mr Hoyer. “The trust of the investors is there that if something goes wrong the member states of the EU would step in.”

Mr Hoyer said that if the British capital was not replaced by other member states, the EIB’s maximum lending space would be reduced by €100 billion. “Since we have exhausted the lending space, we would have to reduce the bank considerably, beginning next year,” he added.

British capital

Mr Hoyer said he was “confident” the 27 other member states would replace the British capital but this has yet to be done.

Under the terms of the withdrawal agreement between the UK and the EU, Britain would get back €3.5 billion from the EIB spread out over 12 years.

Mr Hoyer said it is not clear if the EIB would lend to the UK in the future as it will be subject to negotiation with the EU.

On the rise of populist politics across the EU, Mr Hoyer said: “We must overcome the renationalisation of our thinking in many parts of the EU. This is very, very important.

"People are longing for European leaders who can sell Europe across the entire union and currently there are not very many. We must tell our stories better."

On the likelihood of a global recession, given trade tensions between the US and China, and recent stock market wobbles, Mr Hoyer said: "It is not unlikely. If we cannot stop this trend towards the return of protectionism . . . we are going to live in a much less comfortable continent and world very soon."

He said the prosperity and peace enjoyed in Europe over the past seven decades was due in part to due to being “open minded and always in search of consensual solutions”.

Ciarán Hancock

Ciarán Hancock

Ciarán Hancock is Business Editor of The Irish Times