ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(77)300
Vol.1977/0102

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COMMISSION OFTHEEUROPEANCOMMUNITIES
COM(77)300 final .
Strasbourg,15 1977 »
COMMUNICATION TOTHEEUROPEANCOUNCIL
INVESTMENT ANDBORROWING INTHECOMMUNITY
COM (77)300final

INVESTMENT ANDBORROWING INTHE COMMUNITY
1. Thedevelopment ofinvestment isanecessary precondition
foranypolicy aimed atfighting unemployment onthe "basis ofinflation -
free growth .
-TheMember States with "balance ofpayments deficits must establish
"balance growth based onacombination ofinvestment andexports *The
Member States with surpluses must develop their domestic demand tand
particularly investment ,onareasonable basis *
–Production structures intheCommunity must bemodernized and
adapted onanunprecriented scale todeal with changes intheworld
economy *Thus ,in'hefield ofenergy alone ,investment totalling more
than EUA 250000million isanticipated between nowand1985 *
2* However |thetrend over recent years hasnotbeen favourable :
theshare ofgross fixed capital formation inGDPfell from 23$ ,theaverage
rate for197^1973 ,to20*5 /5in1977 *Intheproductive sector ,investors
remain hesitant ,even where profit margins areimproving .
3* This situation calls forrapid improvement *Itwasforthis reason
that theEuropean Council held on25March 1977 agreed toinitiate Coamunitv
action inorder toachieve ahigher level ofinvestment intheMember States *
Forthis purpose ,theEuropean Council invited ontheonehand theCommission ,
particularly through more effective useofCommunity instruments ,andon
theother hand theEuropean Investment Bank ytoseek means ofimproving
the effectiveness oftheir activities *

4. Looked atfrom the "broadest angle ofperspective ,this goal
implies firstly that ,by "backing uppolicies torestore stability by
fighting inflation andachieving asufficient consensus ,the Corjnunity
must encourage ther&-establishment ofaclimate ofconfidence and the
creation ofanenvironment which will favour investment .TheCommunity
must also help toimprove understanding ofthecentral role ofinvest­
ment within thecontext ofapolicy toimprove employment through lasting
andhealthy growth .
These various aspects will beinoluded inthework being pursued
bytheCouncil ofMinisters forFinancial Affairs .
5. Prom theangle oftheCommunity 'sspecific contribution tothe
development ofinvestment ,through better use ofCommunity instruments *
–TheCommission hastaken thenecessary measures tostrengthen the
consistency ofintervention policies and toimprove coordination of
available resources ,whether budgetary orobtained onthecapital market .
Itwill pursue this action with determination .
–Italso believes that theCommunity caneffectively contribute
tothecarrying outofinvestment projects which ,without itsintervention ,
would have been postponed orcancelled .Itisthis latter aspect which
will bedealt with particularly inthis memo .
6. Community action tosupport investment cannot take theplace of
action byindustry orbygovernments .What theCommunity must do,in
well defined areas ,istofacilitate oradvance thesetting upofuseful
operations ,tomake possible thefinancing ofpriority programmes at
Community level ,andtoactasacatalyst ,with areal leadership and
financial impact going well beyond theapparent volume ofCommunity
intervention involved . •

7. This contribution totherecovery ininvestment must lead to
increased recourse toborrowing ,because of itsobjective andthelimits
ofdirect budget inancing .(despite theforthcoming application ofthe
system ofownresources ).
TheCommunity 'scontribution will bebased onstrengthening
existing financial instruments (ECSC ,EURATOM andtheEIB).Forthis
purpose ,their development should beplanned according toajointly
determined plan .This communication has ,moreover ,been drawn upin
complete compatibility with theEIB'sworking hypotheses .
8. Howeveri
–capital restrictions (EH)andrestrictions which limit their
field ofaction (ECSC andEURATOM )donotallow theextension ofcommitments
beyond certain thresholds .Afurther name onthemarkets could therefore
contribute towarC janenlargement ofCommunity loan possibilities .
–the >■nature oftheinterventions envisaged ,onthebasis
ofprogrammes tosupport given policies ,justifies recourse toamechanism
which isitself specific and adapted tothis type ofaction .
9. Consequently ,theCommission proposes thesetting upofanew
instrument designed toborrow onthefinancial markets and togrant loams
onthe same .conditions ,for thefinancing ofstructural investment
projects inline with theCommunity 'spriority objectives .
This newinstrument ,which would bebased onArticle 235ofthe
EECTreaty ,should bedeveloped gradually .This approach would take account
ofwhat thefinancial markets canprovide ,thetiming ofinvestment projects
with aCommunity interest and ,bearing inmind theexpected development
ofoperations bytheECSC ,EURATOM andtheEIB ,theneed tomaintain the
Community 'scredit –worthiness onthemarkets *

10« Inorder tomake thetest possible use ofCommunity credits
–There must becoordination ofthevarious financial interventions ,
both within theCommission andwith theEIB (this coordination isalready
carried outwith regard tothevolume ofloans envisaged each year and
thetimetable forissues ).
–Account must betaken ofwhat themarkets canprovide *Inthis
respect ,itmaybeestimated that thevarious European "names 1*could ,gradually
raise thetotal from S3-3.5 toS4.5 bi.llion ayear onthelong -
term fixed-interest market over thenext three years .This does notallow
much room formanoeuvre inthe short term compared totheexisting level
ofCommunity borrowing .
TheCommunity could nodoubt borrow considerably greater sums on
thevariable interest market ,but this would lead tounforeseeable costs .
For this reason theCommunity hasnotused floating rate loans except as
aninterim measure ,forexample tomake possible thebalance ofpayments
financing programme .
11* Inthelight ofthis analysisand using thesame kind oftechnique
aswasused intheCommunity loans fopovercoming balance ofpayments pro­
blems /theCommission envisages amechanism base on :
«-standing borrowing powers uptoaceiling ofEUA 10U0million of
capital
–theprinciple ofonly activating borrowing powers later with the
approval ofthe Council tranche bytranche .
12. Each tranche would have aspecified purpose ,depending onthekind
ofprogramme undertaken .Thefirst tranches would beapplied giving
priority tostructural investment programmes having aCommunity interest
inthefields ofenergy ,industrial reconversion andinfrastructure ,taking
acocunt oftheregional impact ofthelatter .•

L
13. TheCommission would beresponsible forraising theloans and
would take thefinal decision ontheeligibility ofloan requests .For
simplicity andefficiency ,theCommission would give theEIBpower to
make the individual loans foreligible projects .
+
+ +
14* Inconclusion ,theCommission asks theCouncil toapprove the
creation ofanew Community loan instrument tofinance priority Community
structural investments .
The Commission will later define how the new instrument will
operate andinduecourse make aformal proposal totheCouncil .