Cause and Effect in European Politics and Law

ECOFIN Council Approved the Creation of Project Bonds

Ralitsa Kovacheva, July 11, 2012

The Council of EU finance ministers approved the launching of a pilot phase of the so-called project bonds. The Council and the European Parliament agreed on the creation of the new instrument on 22 May. The project bonds will be emitted by private companies and will be guaranteed by the European budget which will ensure higher credit rating and will make the projects sounder and more attractive for investors. For the purpose the EU will set aside 230 mn euros for guarantees, while in the same time it is expected to mobilise over 4.5 bn euros of private investments. Up to 200 mn euro will be allocated for transport projects, up to 10 mn euro for energy projects and up to 20 mn for ICT and broadband projects.

Attracting private funding is crucial because the investment needs in these areas for the period 2010-2020 are estimated to be 1.5 trillion euros. The project bonds have been included in the European Growth Pact, adopted by the leaders at their summit on 28 and 29 June. The new instrument will be tested as early as this year and next year before becoming an integral part of the next multiannual financial framework (MFF 2014-2020). If the pilot phase is successful, the money for the project bonds may be increased and can be used in support of the Connecting Europe Facility in the next seven-year budget, the European Council decided in June.