World Economy

Germany to Raise Billions for EU Investment Plan

Germany to Raise Billions for EU Investment PlanGermany to Raise Billions for EU Investment Plan

The German government has compiled a list of schemes it’s willing to support within a large-scale EU investment plan presented by Brussels. Infrastructure projects take precedence.

Germany is planning to raise 89 billion euros ($109 billion) for investment projects within a European Union-wide offensive to fuel sluggish growth and create more jobs,  DW quoted the Suddeutsche Zeitung daily as reporting on Monday, referring to a list of government priorities it had been able to analyze.

It says the list makes it abundantly clear that Berlin aims to focus on promoting faster Internet connections across the country, including underprivileged rural areas. The plan is to use initial public incentives in order to have private companies invest some 24 billion euros in that field over the next couple of years.

Another 13.5 billion euros are to be spent on projects in support of wind energy in the country. Ten billion more euros will be channeled toward extending Germany’s Autobahn highway network, the report said.

  Berlin-Paris Cooperation

Suddeutsche said the list comprised altogether 58 projects as Germany’s contribution to an EU investment plan which is to be backed by 60 billion euros in loans from the European Investment Bank (EIB) and some 250 billion euros to come from the private sector.

Germany and France had recently announced they’d also launch a number of joint investment projects to help kickstart growth in the 28-member bloc and reduce unemployment.

According to Suddeutsche, France as the eurozone’s second-largest economy is willing to make investments worth 145 billion euros within the EU offensive.

  What Does EIB Do?

The primary task of EIB is to lend money to project developers for projects that are in line with EU economic, social and environmental criteria.

For example, developers of railways, hospitals, wind farms, college campuses, urban waste management or sewer system upgrades, among many others, can apply to EIB for credit. Both private and public sector project developers are eligible to apply.

EIB doesn’t generally provide a loan that would cover the whole cost of a project; on average, EIB financing covers about one-third of total project costs. Beyond lending, EIB also offers “blending” - it advises borrowers how they can tap other financing sources, especially EU funds.

Loans for projects whose total costs exceed 25 million euros can be negotiated directly with the EIB by project developers. Smaller loans, in contrast, are generally intermediated by local banks or credit unions, which have been granted credit lines by EIB. The local banks decide whether or not to tap their credit lines with EIB to fund projects proposed by local developers.

A special subsidiary of EIB Group called the European Investment Fund (EIF), also headquartered in Luxembourg, helps look after the higher-risk financing needs of small and medium enterprises.