EU may issue "project bonds" with EIB - Barroso

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Wednesday September 08, 2010 07:03:11 AM GMT

STRASBOURG, France, Sept 7 (Reuters) - The president of the European Commission unveiled plans on Tuesday to raise new sources of finance to fund EU infrastructure projects.

In a speech to the European Parliament, Jose Manuel Barroso offered few details on the initiative but said it would involve the establishment of EU "project bonds" issued in conjunction with the European Investment Bank (EIB).

"We should also explore new sources of financing for major European infrastructure projects," Barroso said in his speech.

"For instance, I will propose the establishment of EU project bonds, together with the European Investment Bank. We will also further develop public-private partnerships."

The EIB, a triple-A rated institution, frequently raises money on international markets which it on-lends to European businesses and local and national governments to finance expansion and major projects.

In 2009, the bank raised about 79 billion euros ($100 billion), disbursing more than 54 billion euros to countries in the EU and to partner countries outside the bloc of 27 member states.

The European Commission, the EU's executive, has also raised money on international markets in the past. That borrowing, underwritten by EU member states, has also been AAA rated.

Barroso's initiative hints at the possibility of the Commission and the EIB together issuing bonds that would be used to fund major infrastructure projects -- such as the construction of new dams, bridges, railways and ports.

Such projects could help boost employment and investment across the EU at a time of high unemployment and low growth.

Public-private partnerships involve private sector companies working with government authorities to finance and operate services such as schools or large construction projects.

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