No C 347/18 Official Journal of the European Communities 22. 12. 87 
Opinion on the proposal for a Council Decision on financing of major Community infrastruc­
ture projects(!) 
(87/C 347/07) 
On 16 January 1987 the Council decided to consult the Economic and Social Committee, 
under Article 198 of the Treaty establishing the European Economic Community, on the 
Proposal for a Council Decision on financing of major Community infrastructure projects. 
The Section for Economic and Financial Questions, which was responsible for preparing the 
Committee's work on the subject, adopted its Opinion on 6 October 1987 in the light of the 
report by Mr Hancock. 
At its 249th Plenary Session (meeting of 22 October 1987) the Economic and Social Committee 
adopted the following Opinion by a large majority with 3 votes against and 1 abstention. 
1. General comments 
1.1. It is agreed that the launching of large-scale 
infrastructure projects is a necessary condition for Euro­
pean integration and development and will represent 
an important contribution to strengthening economic 
and social cohesion in the Community and also to 
unifying the internal market. By large-scale infrastruc­
ture projects we are referring to projects on the scale 
of the Channel tunnel, the European high-speed rail 
network, the cleansing of the river Rhine, a broadband 
telecommunications network for Europe and other 
transnational projects of similar magnitude. 
1.2. Consequently there is an accord with the Com­
mission that an enhanced programme of major Com­
munity infrastructure projects is a necessity if the Com­
munity can be assured that it will achieve a number of 
vital aims, namely: 
— increase the accessibility of the peripheral regions 
of the Community and also those countries adjacent 
to the Community, 
— decrease the disadvantages for business located out­
side the central regions of the Community, thus 
optimising industrial competitiveness by reducing 
transport and energy costs, improving communi­
cations and the flow of scientific and technical infor­
mation, 
— draw together the disparate communications sys­
tems, of varying efficiency, present in the individual 
Member States, 
— improve the quality of life for citizens of the Com­
munity in terms of both environment and safety, 
— create more opportunities for employment, 
especially in the construction industry which is 
facing problems in all Member States, and in the 
development of the new technologies, 
— increase the ability of European corporations to 
work cooperatively, on a consortia basis, on large 
scale projects. This should simultaneously increase 
efficiency and reduce costs. 
(!) OJ No C 20, 27. 3. 1987, p. 7. 1.3. A programme properly drawn up by the Com­
mission could help the Community remain a first rank 
economic power into the next century. This will have 
positive consequences, not only for future generations 
but also for an unstable world. 
1.4. The support also given to the Commission's 
view by the round table of European industrialists, 
the Standing Committee of the European Construction 
Federation (FIEC), 'The Action Programme for the 
European Building Industry' adopted by the European 
Federation of Building and Woodworkers (EFBWW), 
the 'Telesis'-report on 'Promoting and Financing Large 
Scale Infrastructure Projects in the Community', and 
the social partners at their Val-Duchesse meeting on 
6 November 1986, indicates a wide measure of agree­
ment on the need for such a programme. Further, 
the agreement in December 1986 by the Transport 
Ministers of five Member States, regarding the estab­
lishment of a high speed rail network, demonstrates 
that parts of the infrastructure programme are growing 
in political importance. 
1.5. However amongst the major obstacles to its 
realization are: 
— The 15- to 20-year-period between the initial pro­
posal for a project and its commencement, perhaps 
even longer for transnational projects which can, of 
itself, be of sufficient discouragement to the private 
investor; whilst a range of suitable financial instru­
ments are evolving, particularly in the field of non­
recourse financing (that is financing where the only 
loan guarantees are provided by the project itself), 
the length of project makes the terms of franchise 
or concession criticial to the completion of a suitable 
financial package. 
— Taxation and other fiscal differences in relation to 
investment between Member States. 
— The problem of coordinating such large projects 
which could involve several governments as well as 
financiers, contractors and other interested parties, 
together with the lack of common experience by 
22. 12. 87 Official Journal of the European Communities No C 347/19 
sponsors, governments, contractors and financial 
institutions in the field of the private financing of 
infrastructure projects. 
— Pressure from affected groups, political, environ­
mental, and other changes in policies at some future 
date. 
1.6. It is pointed out that the evaluation criteria to 
be employed for large-scale projects whenever geo­
graphically situated should not contribute to an increase 
in the disparities between levels of development already 
in existence within the Community. Such a result could 
not be tolerated as it would work against the whole 
programme for attaining better integration of periph­
eral areas and for reducing economic disparities within 
the Community. 
1.7. Experience shows that the launching of infra­
structure projects will not, in isolation, be enough to 
generate development. However, the existence of an 
improved infrastructure normally provides the basis 
that is essential for any development policy. Differences 
in standards between infrastructures is one important 
reason why industry and services tend to concentrate 
in the central regions of the Community, where better 
levels already exist. 
1.8. The planning and/or authorization of infra­
structure projects is a matter for national, regional 
and local authorities. The Commission proposal should 
make it easier to carry out projects of Community 
interest, and especially cross-frontier projects. The 
planning and authorization procedures, particularly 
with regard to environmental impact assessment and 
social consequences, will be unaffected by the proposal. 
Improved financing mechanisms could strengthen Com­
munity coordination of infrastructure projects of trans­
national significance. 
1.9. On the questions of new financial instruments 
and coordination, in view of the imprecision of the 
Commission document, more precise recommendations 
have been made as part of the detailed comments. It 
was most regrettable and a serious cause for concern 
that the Committee's ability to comment properly was 
adversely affected on two counts. Firstly the more pre­
cise ideas contained in the Commission document 
Financial engineering (COM(86) 723 final) were not 
included in this proposal for a Decision. Secondly, the 
Opinion of the Committee was not sought on the last 
named document. 
1.10. The evaluation of this type of project should 
be based on the range of economic and financial criteria 
employed by the European Investment Bank (EIB) and 
the Commission in relation to infrastructure projects. 
In addition, however, the indirect benefits of large scale 
projects in less developed areas of the Community 
should be given greater consideration. The EIB could 
perhaps play an important role in the financial co­ordination of certain transnational projects where pub­
lic financing and/or fiscal concession are involved. Par­
ticularly because its 'Triple A'-status will add to inves­
tor confidence. Any such co-ordination should not pre­
vent a separate and totally private financing arrange­
ment where no fiscal concessions are involved. Logically 
this will lead to a situation where some infrastructure 
projects will be wholly privately financed, others par­
tially, and a third category exists where a dominant 
role will have to be played by the Community and/or 
Member States. 
1.11. Considering that these are the most far-
reaching proposals, in terms of coordinated European 
development since the signing of the Treaty of Rome, 
there is a need at the outset to prove the proposed 
structures. To this end, it is recommended that only a 
short list of projects receive initial approval affecting a 
maximum number of Community regions, on the basis 
of socio-economic priorities. 
When the preliminary and financing stages of a suf­
ficient number of these projects have been completed, 
there should be a total reassessment of the programme 
and long-term plans drawn up in the light of the experi­
ence gained. 
1.12. It is to be hoped that the indeterminate nature 
of some of the Articles in this draft Decision does not 
reflect a lack of confidence by the Commission in their 
acceptability to a majority of Member States, rather a 
desire to stimulate debate. Whilst appreciating that 
some Member States might have reservations about 
the possible diversion of funds away from national 
programmes, nevertheless, the hope must be that they 
will support these proposals as a long-term contribution 
to a more dynamic Community. This is particularly so 
in that the number of schemes requiring major 
financing, during the next five years, will be strictly 
limited. It is clearly necessary that greater political will 
is an essential if real progress in this area, as opposed 
to that of Transport, is to be made. Attention is drawn 
to repeated calls for positive action by the Council in 
relation to the transport infrastructure programme. 
2. Specific comments 
2.1. Finance 
2.1.1. One of the two major problems is in regard 
to who is to provide financing. In the 19th century a 
majority of infrastructures, notably canals and rail­
ways, were financed by private capital. In this century, 
for good economic, political and social reasons, the 
financing of such projects fell upon governments. In 
particular, the massive reconstruction required after the 
damage caused by two wars. More recently there has 
No C 347/20 Official Journal of the European Communities 22. 12. 87 
been private financing of oil production facilities, gas 
pipelines, telecommunications cabling etc., but these 
have been projects with relatively low levels of market 
uncertainty because there was, in each case, an assured 
long term end user. Nevertheless, the majority of infra­
structure projects have continued to be financed by 
national governments. For a number of reasons it is now 
advisable to encourage as much private participation as 
possible in the financing of projects, without the essen­
tial role of government being relinquished in areas 
where projects are of major social importance. 
2.1.2. The financing needs of infrastructure projects 
of general public benefit are so great that they cannot 
possibly all be met, given current public sector budget 
constraints. Clearly only governments can finance pro­
jects where the return is insufficient to amortize the 
costs. Profitable projects on the other hand, where costs 
can be amortized by means of tolls, can be financed by 
private capital. The toll system does of course have 
certain disadvantages—although these can be limited 
to the period of amortization—but it also has the 
advantage of increasing total investment available for 
projects of this kind—with all that that entails. 
Some projects can be made suitable for private financing 
simply by the granting of a concession. Others are 
difficult to finance, either because they are not quite 
profitable enough, because they are too risky or because 
the amortization period is rather too long. In such cases 
it seems quite legitimate for the authorities, either at 
national or Community level, to give a helping hand, 
e.g. in the form of tax advantages, to make these 
projects viable. Official intervention is justified by the 
benefits accruing to the general public from projects of 
this kind. 
2.1.3. The claim of the Commission that there is 
sufficient alternative private finance available, given a 
suitable legal and fiscal structure and appropriately 
attractive financial instruments, would appear well 
founded. At the end of September 1986, EEC Savings 
Banks had total deposits of 625 billion ECU. In the 
previous twelve months they had taken in deposits of 
3,2 billion ECU. Overseas, Japan enjoyed a trade sur­
plus in 1986 of 82,66 billion dollars. In 1984, 40 billion 
dollars of tax exempt bonds were issued in the USA for 
infrastructure projects. At this stage, it would appear 
likely that the Channel tunnel, a project estimated to 
cost 52 billion French francs, will be entirely privately 
financed, without government guarantees. Nonetheless, 
the example of the Channel tunnel cannot be applied too literally to other large infrastructure projects, given 
that it enjoys certain unique advantages such as high 
prestige, the priority that has been accorded to this 
project in the EEC as well as the political and economic 
interest of the project for the two countries directly 
involved. The problem is not, therefore, a shortage of 
private funds for investment but rather their mobili­
zation. 
2.1.4. The primary obstacles to mobilizing financing 
for any kinds of infrastructure projects are: 
— Economic uncertainty; varying degrees of risk 
between one project and another, particularly where 
they replace existing facilities rather than tapping 
a new potential market; also market uncertainty, 
specifically the tendency for cost over-runs in major 
construction projects, making the exact calculation 
of rates of financial return difficult. 
— Financing problems caused by the long pay back 
periods, with heavy operating deficits in the early 
years after completion, and the length of project 
being too long to attract normal bank financing. 
Even if obtained, there would usually have to be a 
later refinancing, with all the uncertainties that this 
entails. 
In relation to infrastructure projects of European inter­
est some specific obstacles require consideration: 
a) the fragmentation of European capital markets and 
the restrictions that still exist on the movement of 
capital. This latter factor should only influence the 
period up to 1992, when financial integration within 
the Community should be complete; 
b) the worldwide competition for private capital. This 
programme, to be successful, will need to offer 
through appropriate financial instruments, incen­
tives competitive with those available elsewhere for 
alternative applications; 
c) differences in tax treatment between residents and 
non-residents including withholding taxes in certain 
Member States which can effect investment from 
outside the Community; 
d) the possible concern by some Member States, 
already referred to, that projects within this pro­
gramme might divert funds from the financing of 
their domestic priorities. However, in view of the 
length of time necessary to bring each project to the 
point when it requires major quantities of finance, 
it is reiterated that this should not be a practical 
problem; 
e) the political risks whereby a change of government 
in a Member State could lead to a situation where 
the laws governing the operation of a project could 
be changed. If the basis for the tariffs charged was 
changed, the financial rate of return could alter 
dramatically; 
22. 12. 87 Official Journal of the European Communities No C 347/21 
f) the absence of a European corporate structure for 
a company operating across national boundaries; 
g) whereas government investment decisions can take 
account of the indirect benefits of new infrastructure 
projects, private ones must disregard any benefits 
that do not provide revenue. 
There is a need for the Commission to examine possible 
impediments that might affect the private financing of 
infrastructure projects. 
2.1.5. In spite of the above difficulties it is agreed 
that the European institutions have a major role to 
play in overcoming the above problems relating to the 
attraction of private finance, namely: 
2.1.5.1. in the identification and preliminary 
appraisal of potential projects, it is proposed that a 
Commission Task Force be created for this purpose 
and specific criteria be established for designating pro­
jects as of potential European interest. In this way, a 
more logical and comprehensive programme should 
eventually result. 
To ensure both full information and transparency it is 
suggested that the Commission submit an annual report 
to the Council, the Parliament and this Committee on 
the progress being made under this programme. 
When a project has been so defined, then the Com­
mission should make arrangements for the production 
of independent studies regarding its financial viability. 
On completion of this a notice of 'Invitation to partici­
pate' should be published in the Official Journal so that 
private sector consortia could indicate their interest in 
proceeding to the next stage. 
2.1.5.2. The initial construction phase, together with 
the early period of operation is the most critical. Each 
project will have different characteristics and levels of 
risk, leading to widely differing levels of debt. No one 
type of financial package will therefore be appropriate 
for all conditions. Community support for this phase 
is going to be essential but, its form will have to be 
decided on a case-by-case basis. 
2.1.5.3. The granting of subordinated guarantees for 
EIB loans and the raising of specific Community loans, 
so as to supplement the financial package would appear 
to be a sensible use of Community financial resources 
and standing. There is a need, however, to introduce 
greater precision into the proposals regarding guaran­
tees, specifically under what conditions guarantees will 
be triggered and, to what extent. 
2.1.5.4. In certain instances, projects are unlikely 
to produce sufficient revenue in the early years of 
exploitation but, are necessary for the completion of a European infrastructure network. Under these restric­
ted circumstances the Commission and/or the Member 
States should ensure that maximum social and econ­
omic benefits are derived from the project, overcoming 
the problem of finance in the socially most satisfactory 
manner. 
2.2. The raising of private finance 
It is easy to overcomplicate discussions regarding the 
question of private financing of long term infrastructure 
projects. All have risks, the question is as to who is 
best suited to take that risk. Private funds can be 
brought into almost any project, the question is as to 
how that capital is to be funded. This is the area in 
which sensible solutions have to be found. 
2.2.1. Relying on national markets to arrange private 
finance in an uncoordinated manner is unlikely to be 
effective. More logical would be for the EIB to carry 
out a similar function to that performed in relation to 
the financing of projects in the African, Caribbean and 
Pacific States (ACP), and other schemes outside the 
EEC. 
2.2.2. For necessary projects with a particularly high 
risk, the EIB could have a role in the promotion of 
co-financing, together with sources of private capital. 
There could also be a role here for Community Funds. 
It has to be pointed out however, that there is an 
extreme doubt as to whether the European Regional 
Development Fund (ERDF) can legally contribute to a 
project otherwise wholly private financed, even though 
all other necessary criteria are met. A way does however 
need to be found of combining the two systems: e.g. 
the general system for promoting private investment 
in infrastructure and the specific system of aid for 
infrastructure development in disadvantaged regions (a 
scheme designed to promote cohesion in the Com­
munity). This will ensure that these regions are not 
excluded, indeed that they benefit to the full from the 
Commission's proposals. 
2.2.3. Financing should be through a combination 
of bonds and equity. Offered for sale at least in all 
Community countries, denominated in ECU and issued 
under rules specific to these instruments which should 
be binding on all Member States. Denomination in ECU 
would both reduce exchange risks for investors and 
ease the problems of projects costing for transnational 
projects. 
It is recommended that some specific measures are 
adopted to attract private funds to the acquisition of 
bonds and shares. There is agreement with the Com­
mission proposal that these should enjoy most favoured 
security status in all Member States. 
No C 347/22 Official Journal of the European Communities 22. 12. 87 
2.2.4. For projects with a particularly high risk, the 
Commission's proposal, in point 3.2, to provide signifi­
cant funding, could be most valuable but should only 
be applied as a last resort where it has proved impossible 
to attract private finance on economic terms. A further 
condition should be that the project is an essential 
component of the Community infrastructure. Other­
wise, such supplementary financing should be the 
responsibility of the Member State, or States. In that 
some of the projects are going to be only part of a 
larger project, consideration has to be given as to how 
their eventual operation can be transferred to the oper­
ators of the overall project. 
2.2.5. The proposals regarding bonds and equity are 
only stated in general terms. There is a need to examine 
the possibility of proving a wider range of financial 
instruments to meet the specific needs of insurance 
companies, pension funds and other institutional inves­
tors. 
2.2.6. There can be some apparent loss of tax rev­
enues by Member States through the application of 
fiscal advantages. Calculations as referred to in the 
'Telesis'-report would however indicate that these 
losses would be largely offset by a reduction in unem­
ployment benefit and other social costs. 
2.2.7. Concern is felt about the' obstacles to free 
movement that are created by the levying of tolls. Also 
the distortions that are caused by some Member States, 
five at present, employing such a system whilst the 
others do not. 
This is a matter that cannot be divorced from a more 
general examination of vehicle taxes, excise duties and 
other forms of vehicle taxation. It is noted that the 
Commission intends to submit proposals in this area 
shortly and, in consequence, more detailed comments 
are reserved until these proposals are available. 
2.3. The declaration of European interest 
2.3.1. It is believed that through such a Declaration 
the Community will demonstrate its willingness to sel­
ect and support the most effective projects in terms of 
European development. It follows that it is essential 
that the criteria laid down should, whilst acting as a 
filter not be an inhibitor to the general programme. 
The attention of the Commission and Council is drawn 
to previous Opinions submitted on this subject, particu­
larly that on the role of the Community in developing 
transport infrastructure (OJ No C 138, 9. 6. 1981, p. 61 
to 63). 
2.3.2. The criteria laid down in Article 2.3, are too 
vague. Specific mention should be made of such impor­
tant areas as environmental considerations, employ­
ment, worker and public safety and regional policy. 2.3.3. In respect of the various environmental pro­
jects referred to by the Commission, only that concern­
ing the cleaning of the Rhine appears sufficiently con­
crete to be considered at this stage. Even this presup­
poses the agreement of the government of Switzerland 
to cooperate with the project. It is believed that the 
polluter pays-principle should apply to such projects in 
accordance with the Committee's Opinion on the 
4th Environmental Programme and with the Pro­
gramme itself. 
2.3.4. In that public funds are involved, it is rec­
ommended that only projects which qualify to be 
declared as of European interest, should be able to enter 
this programme. 
2.3.5. The proposal, in Article 5.1, that project sub­
missions be made either directly or, through the inter­
mediary of a Member State, appears illogical. If they 
are likely to be of European interest they should surely 
be submitted direct to the Commission. This should 
not preclude a Member State's involvement in any 
project as an integral partner. 
2.3.6. Article 5 must be amended in such a way that 
the Economic and Social Committee is given the same 
right to information as is afforded to the Council and 
the European Parliament under paragraph 2 of the 
abovementioned Article. 
2.4. The European Infrastructure Agency 
2.4.1. It is noted that the Commission has raised 
this question, regarding the coordination of projects, 
without providing any worthwhile solutions. It is clear 
that the idea has been tabled, as with certain others, to 
generate debate, particularly in relation to authorities 
on the US model. For example the Tennessee Valley 
Authority adopts such an approach. So, whilst not all 
projects are economically viable, the total programme 
shows an acceptable rate of financial return. 
Whatever the precise method employed, this would 
make for an integrated financial coordination of differ­
ent projects, whether in central or peripheral areas. 
The consolidation of financial returns from all projects 
could avoid the selection of projects solely on the basis 
of market criteria, which could frustrate the legitimate 
expectations of those Member States where it would 
be difficult to select projects solely on the basis of their 
potential earnings in the early years of operation. It 
has, nevertheless, been pointed out that there are other 
methods such as the initial financing and then, sale 
or leasing, whereby the promotion of the necessary 
marginal project may be ensured. 
2.4.2. Whilst financing needs to be coordinated on a 
Community wide basis, to attempt to do the same for 
planning, construction and operation would be likely 
to lead to bureaucracy, delays and consequentially, to 
increased costs. To avoid the problems of trans-frontier 
22. 12. 87 Official Journal of the European Communities No C 347/23 
organization there would appear to be the need for an 
entity which includes the project owners or franchise 
holders to cover all aspects of each project except 
financing and to be in a position to report to the 
EIB, as the financing agency. It is suggested that these 
proposals would be more likely to lead to proper 
decision making and financing in respect of a range of 
projects of European interest. 
2.4.3. Self standing authorities, on the US pattern 
would not seem to be the best solution. Indeed investi­
gations show that there is no one US pattern. Further, 
it has to be pointed out that the use of tax free bonds 
is declining. The proposed Florida high-speed rail link 
will not involve tax free bonds and will be entirely 
privately financed, using a range of instruments to be 
suggested by the private sector. Gifts of federal land 
together with some grants will be available if required to 
ensure viability. A Community infrastructure financing 
organization should be the least costly possible, efficient 
and orientated towards socio-economic cost-benefit 
analyses of the means available. 2.4.4. Further it is recommended that the Com­
mission institutes an early investigation into the juri-
dicial and technical aspects involved in the implemen­
tation of the proposals contained in this Opinion. The 
creation of a European infrastructure agency as such is 
not opposed, providing that it is small and flexible, and 
that it does not become involved in construction and 
project management. It should also be considered 
whether non-Member States could also participate as 
associated partners in such an agency, where appropri­
ate. The preference for a clear division between 
financial and project coordination has been made clear. 
2.5. Specific additional comments on the Commission 
Document 
2.5.1. It is submitted that it would be logical for the 
Committee to be given the same rights, as are proposed 
for the Parliament, in regard to consultation under 
Article 7.3. 
2.5.2. In the English text, under Section II. 1.3, there 
is a reference in paragraph two to 'equity capital'. 
The French language version speaks of 'fonds propres'. 
These terms are not synonymous and the point requires 
clarification. 
Done at Brussels, 22 October 1987. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT 
Opinion on the proposal for a Council Directive coordinating the laws, regulations and 
administrative provisions relating to the application of Community rules on procedures for 
the award of public supply and public works contracts 
(87/C 347/08) 
The Council of the European Communities, acting in pursuance of Treaty Article 100 
letter a, decided on 14 July 1987 to consult the Economic and Social Committee on the 
abovementioned proposal. 
The proposal was referred to the Section for Industry, Commerce, Crafts and Services. The 
Section adopted its Opinion on 30 September 1987. 
At its 249th plenary session the Economic and Social Committee adopted unanimously less 
5 abstentions the following Opinion: 
1. Introduction 
1.1. Competitive access to public contracts for goods 
and services generates substantial savings. There are 
various estimates of the exact magnitude of the savings, but the latest estimate — in the Padua-Scioppa report 
— puts the saving at up to 25 % for the large Member 
States, 1-2% of the Community's GNP, and 2-4 times 
as much as the Member States spend on development 
aid.