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European Commission wants extra €50bn for infra

The ‘Connecting Europe Facility’ will be unveiled next week and will focus exclusively on trans-European transport, energy and ICT projects. Between 15% and 20% of the proposed €50bn in spending will be leveraged through financial instruments and public-private partnerships.

Next week, the European Commission (EC) is set to unveil an ambitious proposal as part of the 2014-2020 European Union (EU) budget negotiations that aims to channel an extra €50 billion to help fund cross-border infrastructure across the EU’s 27 member states, Antoine Quero-Mussot, adviser to the EC’s director of budget, revealed yesterday at a conference promoted by insurer Marsh.

In June, the EC explained that about €10 billion of the ‘Connecting Europe Facility’ – as the proposed spending initiative is known – would come from the EU’s Cohesion Fund. According to Quero-Mussot, about €22 billion would be used to finance trans-European transport projects, with €18 billion split equally between cross-border projects and ICT projects.

“We have identified a specific list of trans-border corridors to establish a single market for electricity, gas and mobility. These €50 billion will be eligible for member states to use to help fund these corridors” Quero-Mussot told attendees yesterday. However, he warned that the €50 billion figure being proposed by the EC “still has to be negotiated with other European organisations, so there will be haircuts [to that figure].”

Importantly for the private sector, Quero-Mussot told Infrastructure Investor that between 15 percent and 20 percent of the €50 billion is earmarked to be leveraged via financial instruments – including the EC and the European Investment Bank’s Europe 2020 Project Bond initiative – as well as public-private partnerships (PPP).

“We can only facilitate and/or encourage member states to use PPPs, but we can’t force them,” Quero-Mussot explained. “How can we encourage them? We are designing new rules to better this process, including an EU-level concessions directive. So from 2014 onwards, there will be an EU concessions framework in place. We will also create equity funds and guarantee mechanisms for PPPs,” he added.

Funding cross-border EU infrastructure projects has so far proven a challenge both for the private and public sectors. In a report published on the EU’s Trans-European Transport Networks (TEN-T) last October, the EC pointed out that only four of the 92 projects due be completed between 2007 and 2013 were being procured as PPPs. Earlier this year, the European PPP Expertise Centre (EPEC) highlighted that EU grants, by design, are not easy to channel to PPPs. 

On the public side of the equation, regulation can present a serious challenge to supranational projects. This is particularly evident in the energy sector, where cross-border links face the regulatory and political challenge of trying to convince national regulators to set tariffs that will go towards financing EU-wide projects.

To its credit, the EC is aware of the obstacles ahead: “The Connecting Europe Facility is not just about money,” Querot-Mussot stresses, “it’s also about governance. There is going to be a regulatory push to make [cross-border projects] happen as part of the proposal.”

To read more about funding of EU cross-border infrastructure, check out our special report on EU transport in the October 2011 issue of Infrastructure Investor magazine.