Econostrum | Economic News in the Mediterranean

Flavia Palanza: “There is a serious discrepancy between the needs of southern countries and their ability to borrow”

Written by Gérard Tur on Monday, September 30th 2013 à 14:59 | Read 1072 times

A consequence of political and military crises, after two years of high levels of funding, 2013 has seen a slow-down in the level of EIB investment on the southern and eastern shores of the Mediterranean. FEMIP (the Facility for Euro-Mediterranean Investment and Partnership) brings together all of the EIB’s work supporting socio-economic development in Mediterranean partner countries (Algeria, Egypt, Gaza-West Bank, Israel, Jordan, Libya, Morocco, Syria, Tunisia and soon Libya). Its director, Flavia Palanza, has the power to carry out substantial funding, but there has been a decline in the take-up and use of new lending by partner countries.

Flavia Palanza: “There is a serious discrepancy between the needs of southern countries and their ability to borrow”

A guarantee system for SMEs There have been various political and economic crises in the Mediterranean region over the past three years. How have you adapted to this sometimes-chaotic situation?

Flavia Palanza: “The EIB still has significant presence in most of the countries in the Femip region. Since the Arab springs, our lending capacity has increased from €2 billion to €10 billion over the period 2007 to 2013. The European Union added €2 billion to this amount to subsidise technical assistance in projects financed by us. We have therefore lent €3 billion during 2011 and 2012 and have invested more than €30 million in technical assistance over the same period”.

Have you frozen cooperation projects in certain countries?

“Even though we have a large lending capacity and a significant pipeline of projects, we are restricted by the pace of progress of the democratic debate in most countries and, sadly, by the dramatic events in Syria and Libya. We have suspended all activity in Syria since 2011, at the request of the European Parliament and the Council. We were the largest single investor in the country. In Libya, we are awaiting the signing of a framework agreement with the country’s new leaders. The situation there remains very unclear, causing a considerable decline in economic activity. Up until 2012 we did a great deal of work with Egypt and Tunisia, less so now. We haven’t withdrawn from Egypt but we are waiting for the European Council’s resolutions on the scope of our actions there. In Tunisia, politicians are wary of signing up to international loans on the eve of elections, the date of which is still to be decided.
On the flip side, are some countries now benefitting from easier access to EIB loans and projects?

“We have responded to Morocco’s requests with up to one billion euros in 2012 alone. Tram systems, underground railways, regeneration of deprived areas, irrigation…we have financed a number of projects in Tunisia, Egypt, Morocco and Jordan.

A guarantee system for SMEs

Do you think that the political instability in certain countries is diverting those involved in economic cooperation away from the Mediterranean region?

“Not at the moment. We are still seeing the arrival of new stakeholders such as Berd. The need is great and there is room for any committed parties working in the field of development. But there is a serious discrepancy between the needs of southern countries and their ability to borrow. I am more cautious over the medium term as, after a period of great enthusiasm, I see a certain “political fatigue”; countries further north are disillusioned with the Mediterranean region. The transition to democracy is not as easy as some hoped and it will be drawn-out. In this context we must try to avoid two pitfalls: indifference and rejection. We are focussing on this with our multilateral and bilateral development partners and we are listening to transition governments. There is still significant international cooperation, on the Euro Med level in Brussels, at the CMI in Marseille, at the heart of the Union for the Mediterranean in Barcelona and in the context of the Deauville partnership.

We are going to continue to develop technical assistance missions as far as possible with countries that request them. For instance, we are helping Tunisia, Morocco, Libya and Egypt on matters such as the planning of their logistics systems, vocational training, and the move to a concession-based model and to PPPs (public-private partnerships). We are also keen to bring (or bring back) private investors to the region. We are involved in implementing a guarantee system for SMEs at a regional level and we are consulting on a risk-sharing mechanism in relation to PPPs.” Last but not least, alongside the loans we offer to banks in local financial centres for the financing of SMEs, we are actively looking at putting into place on-the-ground technical assistance and mentoring aimed at helping SMEs develop their business ventures.

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