Government seeking €1bn annual loans from EIB for building
Capital expenditure would be 'big boost for economy and jobs'
New roads, schools and other vital infrastructure projects that could create thousands of jobs are being promised by the Government as it seeks to borrow as much as €1bn a year for the schemes.
Finance Minister Michael Noonan said he wants to double the average amount Ireland currently borrows every year from the European Investment Bank (EIB) to give the economy a much-needed shot in the arm. His department is currently working with the EIB to iron out a number of technical issues that would pave the way for the stimulus.
"It would have an impact on the infrastructure, it would make our economy more productive and it would lead to the kind of job creation we need," said Mr Noonan.
EIB president Werner Hoyer and a contingent from the bank was in Dublin yesterday to formally sign off on a €100m loan package that will be used to construct and extend 35 primary and 12 secondary schools around the country. It will result in 550 more classrooms and is part of a wider €1.5bn capital programme.
Mr Noonan said the latest EIB funding would bring more confidence to the economy by getting school-building work going in towns and villages.
"The overall objective is that we want to continue to grow our economy. We know we need to invest in essential pieces of infrastructure to grow our economy faster, but the bottom line is jobs. We want to get people back to work," he said.
"If you take an overall view of what we're doing in the economy, we're repairing it section by section. Every couple of weeks we're repairing, and the economy is moving back to where we want it to be," he added.
The Luxembourg-based EIB, which is owned by EU member states, borrows money on capital markets and then lends it out at low interest rates to recipients for use in a variety of projects. It has lent billions of euro to projects in Ireland over the past number of years. Last year, the EIB lent €475m to projects here, compared with just €241m in 2010, and slightly more than €1bn in 2009.
A key advantage to the country is that loans from the EIB are kept off the State's books. That gets around strict borrowing limits imposed on the State under the EU-IMF bailout deal.
At Government Buildings yesterday, Taoiseach Enda Kenny hailed the arrival of the EIB bankers and said he did not want to put any upper limit on how much the State would borrow. "We will work very closely with the EIB to achieve the maximum for us," he said.
However, Mr Hoyer sounded a cautionary note by saying that "nothing was limitless".
"We are very optimistic that more can be done. We all want to make the development in Ireland a success story and we are ready to be part of that," he said.
In most cases, the State will need to attract private investors to match the EIB funding. The biggest stumbling block has been the poor credit rating of our banks -- which makes the EIB reluctant to lend to projects they are involved in. But the Government is considering using money from the planned sale of €3bn of state assets to provide as collateral to the EIB in these cases.