Wednesday 20 September 2017

EIB draws up Brexit plan for Ireland

EIB’s Andrew McDowell
EIB’s Andrew McDowell

Sarah Collins in Luxembourg

The European Investment Bank (EIB) is ready to "significantly" boost lending to Ireland to help the country cope with the Brexit fallout.

While no specific loans or projects have been identified, EIB vice-president Andrew McDowell - Taoiseach Enda Kenny's former economic adviser - said the bank was drawing up a precautionary lending plan for Ireland to cover infrastructure spending and low-cost loans to small companies.

"We didn't put a number on it, but I think the ministers went away clear in their minds that there is additional - and significant additional - support potentially available from the EIB," Mr McDowell said.

"We would end up taking, at the European level, a significant part of the risk in order to try and provide firms that breathing space they need to make the investments, to diversify their product range, diversify their markets and make them less vulnerable to the downside risks of Brexit," he added.

He said there was an EU-wide acknowledgement that "Ireland is unique when it comes to its potential exposure to Brexit".

Minister for Finance Michael Noonan and Minister for Public Expenditure Pascal Donohoe travelled to the EIB's head office in Luxembourg to appeal to the bank for help to deal with Brexit.

Mr Noonan said he wanted to "expand their involvement in infrastructure" and "see can we get more cheap money from the EIB for SMEs in Ireland".

"As well as that, we'd like to see some kind of safety nets and precautionary programmes that would be involved if Brexit gave us unexpected problems in different sectors - I'm thinking in particular about food processing," Mr Noonan added.

The EIB lent €830m to Ireland last year, out of its yearly envelope of around €80bn, but says it can "significantly increase that" in the light of Brexit.

"There's a potential to significantly increase that in the context of the challenges facing the Irish economy, both on the infrastructure side and the enterprise side," said Mr McDowell.

Over the years, the EIB has helped to fund the M17/M18 Gort-Tuam motorway, the new Dublin Institute of Technology campus at Grangegorman, the Luas cross-city link and several local schools and health centres.

Extra lending from the EIB would beef up the Government's capital investment plan, which has committed €47bn between 2016 and 2022 to infrastructure spending.

A review of that plan is now underway and is due to be completed by the end of this year.

Mr Donohoe indicated that transport, higher education, and research and development would be priorities under that review and for extra EIB money.

However, it is unclear if the bank would be able to fund the proposed Cork-Limerick motorway, which is in Mr Noonan's constituency, as it is not clear if tolling will apply. Mr Donohoe admitted that projects which generate revenue, such as toll roads or social housing, would "open up more options for EIB engagement".

"It'll go ahead, alright, the question is when," Mr Noonan said of the new road.

The ministers also discussed the prospect of the EIB helping to fund the proposed Dublin city metro system, which would be the largest infrastructure project in the history of the State.

Officials from the EIB - which set up a new office in Dublin in late last year - will meet Irish civil servants next month to flesh out the new lending plan and put a figure on it. The EU has repeatedly advised the Government to invest more in infrastructure, particularly water, transport and housing, but Mr Noonan said EU budget rules had hamstrung spending.

"We can get huge amounts of money now very cheaply because our borrowing is at very low interest rates internationally, so it's not the lack of money that's inhibiting investment in infrastructure, it's the fiscal rules, which don't allow us to spend enormous amounts of money," Mr Noonan said.

He added that the Government had been working to get flexibility on the EU's fiscal rules, and pointed to "provisions we haven't availed of yet" which "may arise depending on how the Brexit negotiations go".

He was referring to a clause in the EU's budget rules that allows for governments to bypass spending and borrowing limits if there is an "unforeseen" or "unusual" event affecting the economy. "That could lead to more flexibility on investment," Mr Noonan said.

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