Bloomberg News

EU Investment Bank Seeks More Capital as Leaders Tilt to Growth

May 15, 2012

The European Union’s project- financing bank sought extra capital as the least expensive way for cash-strapped governments to advance the growth agenda pushed by new French President Francois Hollande.

Werner Hoyer, head of the European Investment Bank, said a refusal by governments to provide the extra funds would force the bank to scale back lending as the economy skirts recession.

“With the EIB’s current level of capitalization, we have no choice but to gradually reduce lending volumes to protect the financial strength of the bank,” Hoyer told EU finance ministers in Brussels today, according to an e-mailed statement. “A strengthening of our balance sheet is necessary if we want to substantially step up our activities across the entire EU.”

An EIB boost has the backing of France’s Hollande, who made the growth plea in his inaugural speech today before flying to Berlin to meet German Chancellor Angela Merkel. A proposal to put an additional 10 billion euros ($13 billion) into the EU- owned bank could unleash 60 billion euros in loans to co-finance projects worth as much as 180 billion euros, according to the European Commission.

The Luxembourg-based bank signed loan agreements worth 61 billion euros in 2011. Finance ministers made no decision on the capital increase today. It is on the agenda for a June 28-29 summit and would require approval of all 27 EU leaders.

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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