EIB Group will rapidly mobilise up to 40BN euro to fight crisis caused by Covid-19

Written by on March 16, 2020 in Europe - Comments Off on EIB Group will rapidly mobilise up to 40BN euro to fight crisis caused by Covid-19

The European Investment Bank Group (EIBG) has proposed measures to be taken in co-operation with the European Commission and national partners in support of European companies, health expenditure, and the EU economy as a whole, the EIBG said on March 16.

“Covid-19 is exacting a tragic toll in human suffering across Europe and the world. The Bank, and I personally, are close to the people hit by the contagion. The pandemic is also having a devastating economic impact which is already showing,” EIB president Werner Hoyer said.

“We need a strong European response and we need it now. Europe needs another ‘whatever it takes’ moment. The EU bank will help in this crisis as it did in every past moment of hardship in Europe, be it due to economic downturns or natural catastrophes,” Hoyer said.

“We will immediately focus on assisting small and medium companies and mid-caps. They badly need help, and they need it quickly. In partnership with the member states, the European Commission and other financial partners, including most notably national promotional banks, we want to develop a substantial financial package that can be rolled out straight away, without recourse to new legislation.”

The EIB Group has proposed a plan to mobilize up to 40 billion euro of financing, the statement said .

This will go towards bridging loans credit holidays and other measures designed to alleviate liquidity and working capital constraints for SMEs and mid-caps. The EIB Group, including the European Investment Fund (EIF) which specialises in support for SMEs, will work through financial intermediaries in the Member States and in partnership with national promotional banks.

The proposed financing package consists of:

  • Dedicated guarantee schemes to banks based on existing programmes for immediate deployment, mobilising up to 20 billion euro of financing;
  • Dedicated liquidity lines to banks to ensure additional working capital support for SMEs and mid-caps of 10 billion euro;
  • Dedicated asset-backed securities (ABS) purchasing programmes to allow banks to transfer risk on portfolios of SME loans, mobilising a further 10 billion euro of support.

All these actions can be implemented quickly to ease liquidity shortages and will be implemented in partnership with National Promotional Banks wherever feasible, the statement said.

Hoyer called for member states to set up a significant and scalable additional guarantee for the EIB and national promotional banks to ensure that access to finance for SMEs and midcaps remains open.

The guarantee would offer a pan-European solution of credible size and usable immediately. “This would help reassure markets and citizens at this time of unprecedented uncertainty,” Hoyer said.

While it would be for member states to determine where the funds for the guarantee would come from, Hoyer suggested they could be drawn from the European Financial Stability Mechanism (EFSM), or could be pooled by member states themselves into a temporary new fund.

In addition, the EIB Group will use existing financial instruments shared with the European Commission, primarily the InnovFin ‘Infectious Disease Finance Facility’, to finance projects that work towards halting the spread of, finding a cure, for and developing a vaccine against coronavirus. The EIB Group will also support emergency measures to finance urgent infrastructure improvements and equipment needs in the health sector, using existing framework loans or undisbursed amounts from existing health projects. The EIB Group’s current pipeline of projects in the health sector amounts to about five billion euro.

Hoyer said: “We will build on what we already do for the health sector. We are already in contact with companies and organisations seeking to fund the search for Covid-19 vaccines and medication. We are all living through trying times, and the EIB Group will work without pause to ensure the EU bank contributes to the rapid resolution of this terrible crisis.”

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