Communication from the Commission - A European initiative for growth: Investing in networks and knowledge for growth and employment - Interim Report to the European Council
Date: 2003-10-01
Institutions: European Commission
Subjects: EU financing, EU growth strategy, European Investment Bank, European Investment Fund, investment promotion, research and development, trans-European network, transmission network

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 1.10.2003
COM(2003) 579 final

COMMUNICATION FROM THE COMMISSION

A European initiative for growth

Investing in networks and knowledge for growth and employment

Interim Report to the European Council

   
COMMUNICATION FROM THE COMMISSION

A European initiative for growth

Investing in networks and knowledge for growth and employment

Interim Report to the European Council

TABLE OF CONTENTS

1.

2.

2.1

2.2

3.

3.1

3.2

4.

Introduction.................................................................................................................. 3

The Scope, Scale and Impact of the European Initiative for Growth .......................... 4

Why focus on networks and knowledge? .................................................................... 4

Current levels of investment and scale of additional investment envisaged................ 5

Taking the Growth Initiative forward: developments since July 2003 ........................ 8

Policy developments since July 2003 .......................................................................... 8

Mobilising financial resources ..................................................................................... 9

Recommendations for the European Council ............................................................ 12

ANNEX 1 : A roadmap for knowledge and networks ............................................................. 16

ANNEX 2 : Summary of Actions / Indication of relevant EU resources ................................ 18

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1.

INTRODUCTION

In  Thessaloniki,  the  European  Council  endorsed  “the  Commission's  intention  to  launch  an
initiative  in  cooperation  with  the  European  Investment  Bank  to  support  growth  and
integration  by  increasing  overall  investment  and  private  sector  involvement  in  TENs  and
major R&D projects”. It called for this work to be taken forward under the Italian Presidency.

It  did  this  against  a  background  of  stalled  growth,  weakened  business  and  consumer
confidence, subdued investment and signs of a cyclical rise in unemployment.

The Union remains poised on the edge of growth but something more is needed. The Lisbon
Strategy sets the right roadmap for how to put Europe back on track towards strong sustained
growth  and  greater  cohesion.  The  structural  reforms  within  that  Strategy  need  to  be
implemented in their entirety with commitment, innovation and political resolve, in order for
growth to resume on a sustainable basis.

The  Commission,  with  its  present  proposal  for  an  Initiative  for  Growth,  highlights  and
promotes certain key elements within Lisbon and invites other European Institutions and the
Member  States  to  strive  for  its  success.  The  Commission  and  the  Member  States’
governments  must,  in  the  current  economic  situation,  give  a  strong  signal  of  economic
governance  in  order  to  boost  confidence  in  the  Union’s  economic  potential  and  consolidate
economic  growth.  With  this  Initiative,  they  can  also  provide  a  further  steer  to  the  Lisbon
Strategy through addressing current gaps in Europe’s physical and knowledge infrastructure,
seeking for a selected push to investment, and improving the regulatory framework and public
support in order to encourage businesses to innovate and invest.

The Commission  sketched out the first  contours  of  this  Initiative  for  Growth  early  in  July1.
The  Commission’s  paper  sets  out  the  financial,  regulatory  and  other  barriers  which  all  too
often  hold  back  and  delay  investment,  particularly  private  investment  in  Trans-European
Networks (TENs) and in research, development and innovation.

The Commission proposes to boost private investment in support of networks and knowledge,
by  setting  the  appropriate  Community  regulatory  framework,  inviting  Member  States  to
pursue the invitation made in the new Broad Economic Policy Guidelines 20032 to continue
refocusing their public expenditure without increasing the overall public budgets, and making
the best use of existing Community funding in support of a common programme of specific
growth- and job-enhancing investments in physical and human capital and knowledge.

Member  States  share  the  concerns  inspiring  the  Commission’s  Initiative  and,  since
Thessaloniki,  have  started  to  prepare  concrete  proposals  for  action.  Italy  presented  its  ideas
before the summer, focusing primarily on reinforcing transport links. France and Germany in
a joint presentation in September have confirmed their commitment to the Lisbon reforms and
identified  ten  investment  projects,  grouped  around  telecommunications  and  broadband
networks, research and development, transport links and environmental development.

The challenge in front of us is to put the Union best poised to build its future. The European
Initiative for Growth represents a partnership for investment in networks and knowledge and

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2

An initiative for growth: investing in Trans-European Networks and major R&D projects, SEC(2003)
813, 09.07.2003
COM(2003) 170 final/2 of 24.07.2003

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can therefore make a difference. It can allow the European Council and, crucially, businesses
and citizens to send a vote of confidence in the long-term growth potential of an enlarged and
integrated European Union. The Commission will also assess the longer term consequences of
this  Growth  Initiative  in  terms  of  Union  financing  in  the  preparation  of  the  next  Financial
Perspectives.

In this Interim Report, the Commission:

–  recalls the scope, scale and potential impact of the investment required;

–  reports on Progress seen on individual actions outlined in the July paper;

–  sets out Recommendations for the October European Council.

2.

2.1

THE SCOPE, SCALE AND IMPACT OF THE EUROPEAN INITIATIVE FOR GROWTH

Why focus on networks and knowledge?

The European  Initiative  for  Growth  focuses on key  infrastructure  investment  areas  that  will
facilitate  and  enhance  the  comprehensive  package  of  economic,  social  and  environmental
reforms  identified  in  the  Lisbon  Strategy.  By  mobilising  investment  within  a  stable  macro-
economic  framework  in  two  key  Lisbon  areas  –  networks  and  knowledge  –  the  Union  can
send  a  powerful  signal  in  support  for  the  reforms  underway.  The  main  positive  short-term
effects on growth will come from its contribution to boosting confidence in European Union’s
potential.  In  the  medium  term,  new  investment  will  pay  off  in  terms  of  gains  in  terms  of
production  and  transport  time  savings,  improvements  in  quality,  speeding  up  the  rate  of
innovation,  increased  competition  and  greater  scope  for  location  choices.  Finally,  there  will
be  a  further  positive  impact  in  terms  of  cohesion  in  the  enlarged  Union,  as  countries  and
regions  lacking  adequate  infrastructure  or  with  limited  access  to  knowledge  and  innovation
are  given  the  opportunity  to  participate  in  a  really  integrated,  knowledge-driven,  economic
area.

A first analysis conducted by the Commission services with the help of econometric models
suggests  that  the  effect  of  raising  public  investment  by  one  percent  of  GDP  could  initially
lead to an increase in GDP by 0.6 percent, with that increasing to around one percent in the
medium term if  the  effort can be maintained and  favourable conditions were  to  persist3.  As
regards research and innovation, reaching the 3 % of GDP objective for R&D could result in
an estimated gain of 0.5 percent of GDP and 400.000 additional jobs every year4.

–  More  integrated  energy,  telecoms  and  transport  markets  will  translate  into  greater
economic competitiveness, more and better jobs and also supports environmental goals, for
example, by reducing congestion. Moving ahead with TEN-T suggests substantial gains for
the Union’s economy and for society, which in the long term could amount to an estimated
0.23 % growth in GDP. Losses due to congestion are estimated to be in the region of 0.5 %

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4

Such simulations assume that there is no significant crowding out of alternative investment, and that the
additional  spending  does  not  induce  an  increase  of  the  public  deficit.  The  financing  of  a  significant
amount  of  additional  public  investment  through  the  deficit  could  trigger  tighter  monetary  conditions
and/or reduce consumption because consumers would anticipate a tax increase at a later period, which
could reduce the positive effect of public investment on growth in the long run
Commission  communication  “Investing  in  research:  an  action  plan  for  Europe”,  COM(2003)  226  of
30.04.2003

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of  GDP,  the  delay  in  investment  in  transport  TENs  cost  the  economy  at  least  €8  billion
each  year  measured  in  terms  of  cost  of  lost  time  and  account  for  2%  of  transport
emissions.5

–  Infrastructure  investments  offer  a  considerable  potential  to  stimulate  growth  and  job
creation.  GALILEO,  which  constitutes  the  first  concrete  element  of  a  European  space
policy, is an example. A contribution from public funds in the order of €2 billion is set to
generate  a  new  market  worth  several  hundred  billions  euros  leading  to  the  creation  of
several hundred thousands of new jobs.

–  Broadband communications and the  new  services that such  infrastructure  makes  possible
will  be  a  major  source  for  job  creation  in  industry  and  services,  will  give  a  thrust  to
accelerate  technological  innovation,  and  will  be  aphysical  backbone  for  the  knowledge
economy. Widespread availability of broadband infrastructure will also impact on growth
by  improving  the  performance  of  services  that  change  the  way  companies  and  public
administrations work.

–  Promoting  investment  in  research,  development  and  innovation6  through  a  favourable
regulatory,  policy  and  financial  framework  at  the  Union  and  national  level  will  strongly
support  the  competitiveness  of  European  industry  and  will  contribute  to  sustained  high
growth and employment in line with the Lisbon strategy.

Developing these areas, however, must go hand in hand with pushing ahead with the whole of
the Union’s reform agenda. By focusing our efforts on clearly defined investment targets, we
will help to ensure that results are achieved and improve the credibility of this effort.

2.2

Current levels of investment and scale of additional investment envisaged

This  Interim  Report  provides  a  snapshot  of  current  progress  and  needs  in  building  up  the
comprehensive  array  of  investment  proposals  and  their  financing  that  the  Commission  will
present to the European Council in December.

2.2.1

Trans-European Transport Networks (TEN-T)

Since  1996  progress  on  implementing  the  TEN-T  network  has  been  unequal.
Reasonable  progress  on  completing  national  sections  of  TEN-T  projects  has  been
offset by delays affecting trans-national links and, particularly, cross-border sections,
mainly  for  rail.  While  by  2010,  almost  all  of  TEN-road  projects  will  have  been
completed, only around half of TEN-rail links will have been completed.

Drawing  the  lessons  from  previous  initiatives  on  TENs,  it  appears  that  the  main
reasons for the delays (on average five years) observed for these projects and hence,
their slow progress have been:

(cid:1)  The lack of coordination of structures, methods and instruments often leading to
unequal progress and fragmentation of efforts, especially in the implementation of

5

6

NEA’s  study  of  Extended  Impact  Assessment  of  the  proposal  to  modify  the  TEN-T  Guidelines;
01.10.2003
While  the  Thessaloniki  conclusions  focused  on  “major  R&D  projects”,  the  Commission  believes  the
focus on knowledge to be broadened to encompass  support for innovation and innovative  companies.
The third element in this initiative is now defined in terms of research, development and innovation

5

                                                
trans-frontier  projects.  The  Commission  proposes  to  remedy  this  by  introducing
the Declaration of European Interest and the notion of a “coordinator”7.

(cid:1)  The  slow  progress  until  recently  in  opening  rail  networks  to  competition  which

distracted investors from key priority projects.

(cid:1)  International  network  benefits  have  often  been  largely  disregarded  by  national
public investors as they were not compensated for them in form of an appropriate
burden  sharing.  The  German  and  French  governments  have  also  highlighted  the
problem by proposing to link up the two national high speed rail networks.

Following  the  work  of  the  High  Level  Group  chaired  by  Mr  Van  Miert,  the
Commission  has  brought  forward  a  new  proposal  completing  the  list  of  priorities,
both  in  terms  of  geographical  coverage  and  in  scope  (“highways  of  the  sea”,
GALILEO). The overall level of investment required to realise these links amounts
to  €220  billion  up  to  2020,  with  75%  of  this  required  between  now  and  2010  and
40%  before  2006.  This  requires  innovative  financial  solutions  and  political
commitment that will allow private as well as public finances to be mobilised.

2.2.2

Broadband and eTENs

The  European  Union  has  established  a  goal  of  ensuring  widespread  access  to
broadband  communications  by  2005.  There  are  currently  about  17.5  million
broadband connections across the European Union; twice as many as in July 2002.

In relation to 3G mobile services which provide a mobile link to high speed Internet
the  launch  of  services  is  still  at  an  early  stage8,  reflecting  the  impact  of  economic
uncertainty on the mobile sector over the last two years.

In  the  case  of  broadband,  investment  is  primarily  industry  led  in  response  to
increasing  market  demand.  Nevertheless,  public  authorities  can  play  a  role  in
stimulating both supply – particularly, in remote, rural or disadvantaged regions, and
demand.  The  Structural  Funds  can  play  a  role.  Over  the  period  2000-2006  around
€5.5 billion of support is available for information society goals.

In  addition, the  eEurope 2005  Action Plan  and  specific  programmes  promoting  the
development  of  new  services  and  content  are  also  playing  a  role  in  stimulating
demand  and  the  conditions  for  investment.  The  Growth  Initiative  specifically
identified in this context the eTENs Programme, which has been refocused to better
support the objectives of the eEurope 2005 Action Plan. It provides financial support
(€400  million)  over  five  years  for  deployment  of  potential  new  services  and
applications  in  areas  from  eHealth  to  eGovernment  and  eInclusion.  It  focuses  on
practical  projects  that  can  stimulate  demand  for  broadband  infrastructure  and
contents9.  The  German  and  French  governments  also  highlight  the  need  for
digitalisation of terrestrial TV and radio broadcasting.

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COM(2003)564 adopted on 01.10.2003
By  August  2002  Member  States  had  awarded  a  total  of  62  3G  licences.  One  operator  was  already
providing 3G services and reported a total of 300 000 subscriptions in three Member States
eTENs supports up to half the costs of feasibility studies for such services and, in principle, up to 10%
of  the  cost  of  deploying  the  necessary  systems  and  infrastructure.  This  limit  has,  however,  proved  to

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2.2.3

Research and Development and Innovation

The transition to a knowledge-driven economy is at the heart of the Lisbon strategy.
However,  despite  positive  initiatives  in  some  Member  States,  measures  to  increase
the  volume  of,  and  improve  the  environment  for,  research  investment  have  been
fragmented  and  sluggish.  In  some  countries  the  proportion  of  public  spending
devoted to research has even decreased. This is notwithstanding the target set by the
European Council in 2002 to raise investment in research and development to 3 % of
GDP  with  two  thirds  of  that  investment  to  come  from  the  private  sector.  Reaching
the  3%  target  implies  boosting  public  and  private  investment  by  8%  per  year  and
creating over one million more science jobs.

Enhancing  across  the  board  the  ability  of  European  economies  toinvest  in  research
must  remain  the  focus  of  European  policies  and  accompanying  investments.  While
latest  available  figures  (2001)  show  overall  R&D  investment  in  EU15  increasing
slowly  and  approaching  2%  of  GDP,  its  highest  level  ever,  the  average  annual
growth rate of 1.3% remains far insufficient to meet the 3 % target. Furthermore, the
R&D  investment  gap  with  the  United  States  has  continued  to  widen  from  €120
billion in 2000 to €140 billion in 2001. Major European firms also warn that most of
their  planned  increases  in  R&D  investment  will  be  made  outside  the  European
Union,  unless  the  conditions  to  support  such  investments  drastically  improve.  The
ability of SMEs to make an increased use of technology transfer and for small young
research  intensive  enterprises to invest and innovate is also at stake.  In this regard,
the  Commission  will  examine  the  need  for  public  support  to  small  young  research
intensive companies in relation to competition and state aid rules.

In  terms  of  Community  funding,  while  the  Sixth  Research  Framework  Programme
provides  €17.5  billion  for  research  over  four  years,  mobilising  private  investment
that can be estimated at a similar amount, this represents on annual basis only around
7%  of  national  public  research  spending  and  in  the  order  of  5%  of  what  industry
spends.  Furthermore,  over  the  period  2000-2006,  the  Structural  Funds  have  made
available about €10 billion in support of activities related to research, technological
development and innovation.

The  European  Initiative  for  Growth  focuses  more  clearly  on  the  research  and
technology  needs  of  specific  industrial  sectors.  This  builds  on  experience  of
developing a strategic research agenda for aeronautics, , the railways and similar on-
going  initiatives  in  nanotechnologies  and  road  transport.  The  first  European
Technology Platforms are bringing together key stakeholders  to shape  research and
broader  sector  priorities  for  the  coming  decade  and  beyond.  The  recent  European
Partnership  for  a  Hydrogen  Economy,  promoting  the  use  of  alternative  energy
production  and  distribution  technologies  and  clean  vehicles  is  a  further  example.
They offer a framework for partnership and consensus building between public and
private research, industry, policy makers, investors and citizens. They help build and
implement  coherent  approaches  for  the  development  of  key  technology  sectors  by
combining  efficiently  research  with  deployment,  implementation  and  regulatory
measures. This will help optimise return on investments, ensure Europe’s mastering
of the key technologies, support their best use in businesses and by governments.

low to encourage the use of Community support for the deployment phase of services and a proposal to
raise that to 30% is currently before Council and the European Parliament

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Promoting environmental technologies and in particular renewable energy is a major
component  in  a  strategy  to  combat  climate  change  and  meet  the  Gothenburg
objectives.  Many  companies  in  the  sector  are  held  back  by  a  weak  capital  basis.
These weaknesses should be addressed to unlock further growth in a sector with high
technology content and innovative potential.

3.

TAKING THE GROWTH INITIATIVE FORWARD: DEVELOPMENTS SINCE JULY 2003

There have been a number of important policy developments in relation to the specific areas
for action identified last July. Important first steps have been taken, but others should follow
in line with the recommended timetable in Section 4.

3.1

Policy developments since July 2003

Trans-European Networks

– 

In  July  the  Commission  tabled  a  proposal  to  modify  the  Eurovignette  system.  Once
adopted  it  should  provide  greater  certainty  for  investors,  while  contributing  to  making
transport  more  sustainable.  It  should  also  encourage  private  participation  in  road
transport  projects  and  would  allow  revenue  raised  from  the  system  to  be  re-invested  in
the  overall  transport  network.  The  proposal  for  a  Directive  on  the  interoperability  of
electronic road tolling systems10 together with the Galileo satellite radio navigation system
will greatly reduce the inconveniences of tolls systems.

–  The  Commission  has  proposed  a  new  modification  to  the  guidelines  and  financing
rules for TEN-T projects. This will confirm the priority projects for an enlarged European
Union,  will  seek  to  ensure  Community  funding  provides  better  incentives  for  investment
by raising  the  maximum  rate  of  assistance  from  10  to  30%  in  the  case  of  cross-frontier
links,  and  ease  the  process  of  approving  and  co-ordinating  projects  in  a  cross-border
context.

–  Finally, the Commission is examining the possibility of developing a specific Community

Guarantee Facility for TEN-T projects (see below).

Broadband and eTENs

–  At  the  end  of  July  the  new  telecommunications  regulatory  framework  came  into
force,  designed  to  boost  competition  and  thereby  create  conditions  for  further
investment.  Effective  application  of  the  new  framework  will  now  be  critical  to  improving
the prospects for this sector.

investment 

–  July also saw the publication of updated Guidelines on the use of Structural Funds to
support 
in  broadband  and  other  communication  network
infrastructures. These are designed to help regions in evaluating and selecting possible
investment  projects  in  particular  in  the  light  of  the  forthcoming  mid-term  review  of  the
Structural Funds programmes and the subsequent allocation of the performance reserve
– amounting to 4% of each programmes total budget.

–  At  their  informal  meeting  in  Viterbo  (3-5  September),  Telecommunications  Ministers
confirmed  that  they  would  publish  national  broadband  strategies  for  rolling  out  high
speed Internet access by end of year as requested by the European Council.

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COM(2003) 132 final of 23.4.2003

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Research, Development and Innovation

–  The  Council  endorsed  the  Commission  action  plan  “Investing  in  research”11  on  22
September and called on Member States to contribute to its prompt implementation.

–  The  Commission  and  the  Member  States  have  taken  forward  work  to  benchmark
progress towards  the  3%  target,  share  experience  and  prepare  reforms  in  a  mutually
consistent way, with a view to reach a first series of results by mid-2004.

–  At the beginning of September, building on the experience of early European Technology
Platforms, the Commission decided to launch a European Partnership for a Hydrogen
Economy  to  develop  a  roadmap  for  this  key  fuel  of  the  future12.  Further  technology
platforms  are  being  set  up  in  key  areas  of  technology  and  a  first  progress  report  is  in
preparation.

– 

In the area of Space research, the Council reached an agreement on Sept. 22 on a EU-
ESA framework agreement that will lay the basis for coordinated investment in this key
sector.

–  A Group of Personalities has been set up to establish a vision on a secure Europe and to
give  guidance  on  the  orientation  of  future  security  research.  A  preparatory  action  on
European  industrial  potential  in  security-related  research  will  be  launched  in  2004.
Work is well advanced in bringing forward first proposals from the beginning of 2004 with
Community funding €65 million over three years.

3.2

Mobilising financing resources

The  European  Initiative  for  Growth  identifies  new  and  innovative  proposals  to  mobilise
available financial resources to match the Union’s political ambition as aimed at in the Lisbon
Strategy of increasing the overall investment and private sector involvement in networks and
knowledge  (TENs  transport  and  energy,  broadband  and  eTENs  as  well  as  RDI).  Currently
savings affluence  and  the top-rating of  the  EIB  loans in  the  world  financial  markets  offer  a
unique opportunity to mobilise all the potential available to work. We will therefore gear the
tack  even  more  firmly  towards  building  the  Union’s  future  and  commit  to  the  efficient
investment projects listed above, with a longer  yield horizon and that lie at the very core of
Europe’s current and future competitiveness and cohesion.

Particular progress has been made, together with the EIB, on how Community funding can be
channelled in support of this initiative.

The Community budget contribution

The  Initiative  is  inspired  in  an  even  more  active  role  of  public  authorities  at  national  and
Community level.  It  exploits  any  further  room of  manoeuvre  offered  by  public  resources  at
Community  level  within  the  current  Financial  Perspectives  in  order  to  mobilise  private
funding for priority Community-wide investment projects. No overall increase within public
budgets is sought. The Initiative offers guidance and a sound rationale for Member States to
examine the scope for reallocating public spending to the priority investment projects.

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COM(2003) 226 of 30.04.2003
The  work  of  these  Platforms  is  supported  through  the  Research  Framework  Programme  or  might  be
structured  around  specially  formed  “Joint  Undertakings”.  The  Advisory  Council  for  Aeronautics
Research  in  Europe  brings  together  around  30  key  actors  and  has  a  budget  of  €2.5  million  over  two
years. The budget for the European Rail Research Advisory Council is just €800.000

9

                                                
The Community Budget and the European Initiative for Growth

–  The TEN-budget line contributes with some €600 million yearly to fund up to 10 percent

of total project costs.

–  Over  the  current  period,  the  Structural  Funds  are  foreseen  to  support  infrastructure
investment  (energy,  transport  and  telecoms);  research;  technological  development  and
innovation up to around €54 billion. Notably, the Cohesion Fund resources can mobilise
up to €1.5 billion yearly for infrastructure investment in the four countries of Cohesion, in
addition  to  the  contribution  of  the  European  Regional  and  Development  Fund  (ERDF);
€10  billion  have  been  made  available  in  support  of  activities  related  to  research,
technological  development  and  innovation;  and  the  European  Social  Fund  (ESF)  is
providing €20 billion for ICT skills and €7 billion for entrepreneurship skills.

–  The  6th  Research  Framework  Programme  is  devoting  €17.5  billion  over  four  years  to
supporting R&D investment in Europe. Its work programmes are currently being adapted
to  ensure  that  implementation  supports  the  relevant  actions  of  the  Growth  Initiative,
notably the setting up of European technology platforms, within the  broader orientations
of the Programme.

–  The Commission is considering to set up an innovative Guarantee Facility to facilitate
private  sector  funding  in  PPPs  on  TENs  projects.  The  Guarantee  Facility  would
provide time-limited coverage for specific risks in the immediate post-construction phase
that are currently insufficiently covered in the financial markets. Initial estimates show that
resources  allocated  to  this  Facility  could  provide  up  to  three  times  higher  financial
capacity.  The  new  Guarantee  Facility  should  partly  be  financed  from  the  TENs  budget
appropriations  and  the  payment  of  risk  premia  by  beneficiary  promoters  as  well  as
interest  earned  by  the  Guarantee  Facility.  The  Facility  should  be  matched  by
corresponding commitments by the Member States and could be complemented by EIB
loans/guarantees.  Action  should  also  be  taken  to  strengthen  the  application  of  PPP
techniques in the field of research.

The role of the European Investment Bank Group

Support from the EIB has been identified by several governments as a key factor in ensuring
the  financial  viability  of  longer-horizon  investments,  and  particularly,  in  providing  the  glue
that  can  help  to  mobilise  private  funding  and  structure  public-private  partnerships  (PPPs).
There are clear synergies between some policy initiatives announced in the Initiative and the
work of the EIB. For example, it may be able to support the practical collaboration between
different  companies  and  organisations  within  the  6th  Research  Framework  Programme,  the
European  Technology  Platforms,  and  to  facilitate  broadband  deployment  in  areas  where
infrastructure  is  inadequate.  Improvements  to  the  regulatory  framework  for  large-scale
projects or for European scale venture capital funds may help to lower costs and risk, opening
up new opportunities for the EIB Group to contribute.

The EIB has played a particular role in taking forward both Trans-European Networks and in
supporting progress  towards the  Unions  Lisbon  goals.  Over  the  last  decade,  it  has  provided
€50 billion in loans for Trans-European Networks within the Union and a further €10 billion
of loans have been approved for the accession countries. It has an established track record of
assisting  public-private  partnership  infrastructure  projects  through  loans  of  more  than  €10
billion in recent years as well as guarantee and other support. A further €15 billion committed
to Lisbon’s knowledge objectives during the first phase of its i2i initiative.

It has made a clear commitment, within its existing planning, to make available around €50
billion  up  to  the  end  of  the  decade  to  support  TENs  investment  through  a  new  Investment
Facility  and  an  additional  €40  billion  in  support  of  research,  development  and  innovation
through  the  continuation  of  its  Innovation  2010  Initiative  in  support  of  the  transition  to  the

10

knowledge  economy  (including  broadband  and  eTENs).  These  specific  facilities  would  be
complemented  by  its  continuing  support  through  guarantees  and  its  Structured  Finance
Facility, as well  as  continuing support via  the  European  Investment  Fund  to  venture  capital
funds investing in innovative, high tech businesses in seed, start-up and development stages.

In  addition,  the  EIB  also  finances  investments  with  indirect  RDI  component,  for  example
training  activities.  This  is  crucial  for  enabling  the  labour  force  to  apply  and  develop
innovation and new technologies. The EIB has provided significant lending (€1-1.5 billion per
annum) over the last few years to education and training activities.

The EIB and the European Initiative for Growth

–  EIB is prepared to commit €50 billion in loans under a TENs Investment Facility (TIF) in

support of TENs priority projects.

–  EIB  investments  in  research,  development  and  innovation.  EIB  has  already
committed €15.3 billion since its i2i initiative was launched in 2000. It intends to continue
and  develop those  activities in support  of  Research,  Development  and  Innovation  (RDI)
under  its  Innovation  2010  Initiative  that  also  includes  broadband  and  eTENs  related
applications  as  well  as  training.  This  will  deliver  up  to  an  additional  €40  billion  by  2010
and offer a broader range of instruments better adapted to needs.

–  EIB is prepared to reinforce its financing capacity under the Structured Finance Facility

(SFF) that is of importance both for its support to TENs as well as to RDI.

–  Supporting innovation through risk capital. EIF support for risk capital funds including
the Community scheme “ETF start-up facility” represents €2.5  billion spread  across  185
risk capital funds, supporting 1500 high technology businesses to the tune of €10 billion.
The  EIB  is  committed  to  earmark  to  the  appropriate  reserve  an  additional  €500  million
that will allow the EIF to raise its level of investment by around a further €1 billion under
the Risk Capital Mandate.

Proposals to enhance action further

In addition to those ongoing commitments, a wide range of innovative financial proposals is
being explored, namely:

(cid:1)  The  possibility  for  the  EIB  to  use  (part  of)  its  annual  surpluses  to  fund  reserves  to
strengthen  the  Structure  Finance  Facility  (SFF)  and  to  bear  more  risk  sharing  in  priority
investment  projects.  For  example,  an  allocation  to  the  SFF  reserve  in  the  order  of  €200
million  allows  for  up  to  €1.3  billions  in  new  SFF  operations  under  the  present  capital
allocation requirements. Moreover, EIB will review the key parameters on the SFF such as
to increase its overall capacity, all while remaining within sound banking practices.

(cid:1)  The EIB could earmark a further €500 million in its reserves to enhance EIF’s potential for
investment in venture capital. This would mean some €1 billion extra capacity. Moreover,
the EIF will be  allowed to  also fund  projects in development status  beyond the  seed and
start-up phases.

11

(cid:1)  The  EIF  intends  to  be  more  active  in  venture  capital  and  guarantee  domains  in  spite  of
current  market  conditions.  The  EIF  will  reinforce  its  advisory  and  technical  support  to
SMEs,  covering  the  commercialisation  of  research  and  development,  venture  capital,
guarantee  schemes  as  well  as  micro-credits  and  generally,  the  establishment  of  financial
engineering schemes. Moreover,  the  Fund is  prepared to undertake  a  feasibility study  of,
and  define  the  operational  modalities  of  a  new  type  of  risk  capital  investment  vehicle
linking centres of excellence from different European countries and aimed at bridging the
financing gap between research and early stage investment.

(cid:1)  The EIB intends to present a proposal for a specific instrument to meet the needs of mid-
size companies’ investment projects that exceed the global loan ceiling (€25 million ). This
would also benefit investment in RDI.

(cid:1)  The  EIB  intends  to  play  a  more  active  role  and  strengthen  its  institutional  role  in
collaboration with Member States and private sector to share its extensive experience and
expertise in the development of  PPPs both  at  policy  and  project  level  where appropriate.
Furthermore,  it  could  play  a  role  in  developing  securitisation  financing  mechanisms  for
infrastructure.

(cid:1)  The  EIB  and  the  Commission  intend  to  explore  further  the  scope  for  expansion  of

guarantees with the insurance industry and capital markets.

(cid:1)  The  Commission  intends  to  explore  with  the  EIB  Group  suitable  instruments  to  support

increased equity investment in environmental technologies.

4.

(1) 

(2) 

RECOMMENDATIONS FOR THE EUROPEAN COUNCIL

In view of the developments since the European Initiative for Growth was launched in
July  2003,  the  Commission  proposes  the  following  recommendations  ahead  of  the
October European Council.

Recommendation 1: The European Council could endorse the scope and scale of the
European Initiative for Growth as a means of strengthening the Union’s commitment
to growth, jobs and enhanced competitiveness.

Progress is rapidly needed on key pending proposals before Council and the European
Parliament in order to identify the priorities for Trans-European Transport Networks,
mainly rail projects, to maximise the impact of TENs funding for transport, energy and
new communications services, to provide greater certainty for investment in transport
projects,  to  make  the  regulatory  framework  for  public  procurement  compatible  with
the  needs  of  complex  infrastructure  projects  such  as  TENs  and  to  complete  and
improve  the  regulatory  framework  in  other  ways  that  will  encourage  R&D  and
innovation by making them more rewarding for the private sector.

Recommendation  2:  The  European  Council  could  invite  the  Council  and  European
Parliament before the Spring European Council 2004 to:

–  adopt the proposed changes to financing regulations for Trans-European networks

including eTENs;

12

–  reach  a  common  position  on  the  new  TEN-T  Guidelines  with  a  view  to  their

adoption by the end of 2004;

–  adopt  the  legislative  package  which  modernises  the  public  procurement  acquis
and  which  in  particular  will  create  the  possibility  for  competitive  dialogue
between contracting authorities and bidders;

–  adopt the Community patent Regulation.

Before June 2004

–  adopt the proposal modifying the system for the Eurovignette;

–  reach  a  common  position  on  proposals  on  taxation  in  relation  to  parents  and

subsidiaries and in relation to mergers.

(3) 

In order to maximise the potential impact of Community funding in attracting private
financing towards investment, the Commission, the EIB and the Member States must
reinforce  their  ongoing  efforts  while  continuing  to  develop  innovative  solutions  that
can stimulate investment.

Recommendation 3: The European Council could invite:

a) The Member States to:

–  include  in  their  Reports  on  the  implementation  of  the  2003  Broad  Economic
Policy  Guidelines  how  they  have  pursued  the  objective  of  “(…)  redirecting,  i.e.
while  respecting  overall  budgetary  constraints,  public  expenditure  towards
growth-enhancing investment in physical and human capital and knowledge”13;

–  take  advantage  of  the  mid-term  review  of  the  programmes  supported  by  the
Structural  Funds,  and  the  allocation  of  the  performance  reserve  in  2004,  to
reinforce the Lisbon related activities in favour of research and innovation. In this
respect,  the  performance  reserve  for  regions  outside  Objective  1  amounts  to
almost € 1 billion;

–  implement national strategies to stimulate the roll out of broadband by increasing
coverage  in  “underserved”  areas,  accelerating  the  provision  of  broadband  to
public  administrations,  schools  and  hospitals,  stimulating  government  usage  and
the development of broadband-enabled services;

–  step  up  the  benchmarking,  sharing  of  experience  and  preparation  of  mutually
consistent reforms to progress towards the 3% of GDP target for R&D, in order to
reach a first series of results by mid-2004.

b) The EIB Group to:

–  speedily  implement  its  part  of  the  European  Initiative  for  Growth  and  take  the
necessary  decisions  to  adjust  its  financial  instruments  to  the  targeted  sectors’
needs, within the limits of sound banking practices;

13

Recommendation 14 (p. 8 in COM (2003) 170 final/2 of 24.07.2003)

13

                                                
–  strengthen  the  Bank’s  capacity  for  financing  investment  and  bear  more  risk  in
priority  investment  projects,  including  if  necessary  a  significant  increase  of  the
SFF dedicated reserve;

–  exploit  available  room  for  manoeuvre  within  its  current  financial  facilities  to
support  national  action  for  a  rapid  implementation  of  the  priority  projects
identified in this Initiative;

–  strengthen  the  European  Investment  Fund’s  potential  for  investment  and,  to  that
end, to take the necessary steps to raise its financing capacity by up to €1 billion
and also fund projects in development status beyond seed and start-up phases;

–  introduce  a  specific  instrument  to  meet  the  needs  of  mid-size  companies’
investment projects that exceed the global loan ceiling (€25 million). This would
also benefit investment in RDI;

–  explore  all  options  and  prepare  proposals  to  bring  forward  a  new  range  of
innovative schemes in order  to widen the  array  of  tools  available  for  supporting
public and  private  investment in  the  venture  capital  and  guarantee  fields  and,  to
that  end,  to  reinforce  its  capacity  to  issue  guarantees  and  to  use  its  advisory
services for structuring innovative SME financing schemes;

–  assess  the  feasibility  of,  and  define  the  operational  modalities  of  a  new  type  of
risk  capital  investment  vehicle  linking  centres  of  excellence  from  different
European countries and aimed at bridging the financing gap between research and
early stage investment.

(4) 

The Commission, the Council and the EIB too will work further to refine this initiative
ahead of the December European Council and to move forward on those policy actions
identified last July.

Recommendation  4:  The  European  Council  is  invited  to  note  the  Commission’s
intention to:

By December 2003

–  report on the implementation of the European Initiative for Growth and develop a
detailed roadmap for outstanding measures ahead of the December 2003 European
Council;

–  propose  a  preparatory  action  for  security-related  research  with  a  budget  of  €65

million between 2004-2006;

–  simplify  the  procedures  related  to  State  aid  to  SMEs  including  rules  for  aid  to
R&D,  according  to  the  draft  Regulation  currently  in  consultation  and  due  for
adoption by the  end of 2003.  The  Commission will  examine the need for  public
support  to  small  young  research  intensive  companies  in  relation  to  competition
and state aid rules;

–  propose a modification to existing company law to facilitate cross-border mergers.

–  examine  the  feasibility  of  an  innovative  Guarantee  Facility  to  support  private

sector funding in PPPs on TENs projects.

14

By June 2004

–  publish  a  Green  Paper  on  regulatory  issues  associated  with  public-private

partnerships;

–  develop  proposals  for  a  possible  harmonised  European  fund  structure  to  ensure

tax transparency for risk capital operations;

–  complete  the  process  of  launching  a  first  wave  of  European  Technology

Platforms.

15

Annex 1 : A roadmap for knowledge and networks

By December 2003

–  Simplification of procedures related to State aid to SMEs including rules for aid to R&D

(Commission)

–  Launch of a preparatory action for security-related research

–  TENs  proposals  :  priorities  for  transport  networks  and  adjusted  financing  rules  for

transport and energy TENs.

–  Proposals  for  changes  to  existing  company  law  provisions  to  facilitate  cross-border

mergers

–  Implementation of national broadband strategies

–  Mid-term review of Structural Funds

–  Review of initial progress by December European Council

By March 2004

–  Political  agreement  on  priority  projects  for  Trans-European  Transport  Networks  and  on

financing rules for transport, telecoms and energy TENs

–  Final  adoption  of  the  pending  measures  on  public  procurement  rules  and  on  the

Community Patent

By June 2004

–  Final adoption of the proposals modifying the system for the Eurovignette

–  Agreement  on  proposals  on  tax  treatment  of  parents  and  subsidiary  companies  and  of

mergers

–  Green Paper on public-private partnerships and public procurement law

–  Commission  proposals  on  a  possible  harmonised  European  fund  structure  to  ensure  tax

transparency for risk capital operations

–  Commission to complete setting up first wave of European Technology Platforms

By December 2004

–  Final  adoption  of  priority  projects  for  Trans-European  Transport  Networks  and  on

financing rules for transport, telecoms and energy TENs

In addition, the Commission will continue to work closely with the EIB to shape proposals for
the European Initiative for Growth.

16

EIB/EIF Roadmap

April  2003  /  June  2003:  Board  of  Directors  and  Board  of  Governors  approve  launch  of
Innovation 2010 Initiative

October 2003: Proposal to Board of Directors concerning new allocation for Venture Capital
operations  (500  m)  and  for  SFF  Operations  (250  m);  subsequent  proposal  to  Board  of
Governors

October 2003: Proposal to Board of Directors concerning launch of a specific instrument for
mid-size  companies’  investment  projects,  notably  in  RDI;  related  working  guidelines  to  be
established with Commission

December 2003: Approval of EIB Corporate Operational  Plan 2004-2006 (COP), including
EIB  contribution  to  Growth  Initiative.  TENs  Investment  Facility  (TIF)  formally  launched.
Innovation 2010 Initiative refocused in line with Growth Initiative.

December 2003: EIF to launch (with DG Research funding) the feasibility study / operational
arrangements for a new type of risk capital vehicle for centres of excellence and bridging the
gap between research and early stage investment. This could lead to implementation of pilot
scheme mid-2004.

December  2003:  Approval  of  EIF’s  COP,  including  proposals  for  new  range  of  innovative
schemes supporting public and private venture capital investments, on the model of the EIF-
ERP Facility concluded  in  Germany,  in  order  to  boost  investments  in  RDI.  COP  to  include
also  proposals  to  enhance,  in  2004,  guarantees  and  advisory  capacity  for  SME  related
business.

March 2004: Progress Report on the Growth Initiative, with measures put in place and first
ongoing or identified operations (in view also of Spring European Council)

June 2004: Mid-term review of COP and of EIB contribution to Growth Initiative; Report to
Board of Governors

December 2004: Approval of EIB Corporate Operational Plan 2005-2007, including possible
adjustments to EIB contribution to Growth Initiative

17

Annex 2 : Summary of Actions / Indication of relevant EU resources

This  table  summarises  the  main  actions  in  the  Growth  Initiative.  It  indicates,  where
applicable,  relevant  EU  resources  while  bearing  in  mind  that  the  key  role  in  investing  in
networks and knowledge must be played by the private sector.

ACTION

Networks

Transport

Priority projects and updated
financing rules

RELEVANT RESOURCES

Total investment required up to 2020 €220 billion (€160 billion to
2010)

Current Community support
EU TENs-Transport
€600 million p.a.

EIB TENs Investment Facility (TIF)
€50 billion 2004-2010

Cohesion Fund
Possible €1.5 billion for infrastructure investment (2000-2006)

Eurovignette proposal

N/a

Galileo

EU TENs-Transport
€550 million (2002-2005)

6th R&D Framework Programme
€100 million 2003-2006

Broadband and eTENs

eEurope 2005 Action Plan

eTENs Financing Decision

Structural Fund support for broadband and other telecoms networks
€5.5 billion (2000-2006)

eTENs Programme
€400 million (2000-2005)

6th RTD Framework Programme,
€4 billion directed to Information Society Technologies (2000-2006)

Action to facilitate cross-border
projects

Tackling regulatory issues
associated with public-private
partnerships (Green Paper)

Proposals for tax treatment of
parents and subsidiaries and of
mergers

N/a

N/a

18

Knowledge

Research and Development

6th Research and Development Framework Programme
€17.5 billion (2003-2006)

European Technology Platforms in
key sectors, for example, in
aeronautics, hydrogen,
nanotechnologies, etc.

Support for start up and high tech
SMEs

Structural Fund support for research, technological development and
innovation amounts to €10.5 billion (2000-2006)

EIB i2i and Innovation 2010 Initiative
+/- €50 billion (2000-2010)

EIF support for risk capital funds, including the Community scheme
ETF Start up facility €2.5 billion (to be increased by €1 billion)

Innovation and research-related
training

European Social Fund
€20 billion for ICT skills and €7 billion for entrepreneurship skills
(2000-2006)

Preparatory action for security-
related research

EU budget
€65 million (2004-2006)

Simplification of rules relating to
State aid for Small and Medium-
sized Businesses

N/a

Possible harmonised European risk
capital fund structure

N/a

19