The Role of the European Investment Bank in Times of COVID-19

Abstract

The COVID-19 pandemic represents Europe’s worst humanitarian and economic crisis since the Second World War. However, initial responses by European Union (EU) institutions to the pandemic in general – and the European Investment Bank (EIB) in particular – were limited: national governments and National Promotional Banks reacted much more quickly and to a greater extent than the EU institutions. It took the European Council (EU Heads of governments and states) over a month from the beginning of the pandemic in March 2020 to reach an agreement on additional potential lending (at the end of April), due to the divided positions of Member States on the guarantee and risk-sharing financial arrangements to respond to the economic impact of COVID-19. Though the EIB introduced in March an early – but limited – Emergency Package, it was not until end April that it assumed – although not yet operational – a substantial role in responding to the crisis via the Pan-European Guarantee Fund (EGF). Funded by the EU Member States, the bulk of EGF finance is oriented to funding enterprises, particularly Small and Medium-sized Enterprise (SMEs) and, to a lesser extent, on measures to halt the spread of COVID-19. Most of the EGF funding implemented by the EIB is to be made available through financial intermediaries, namely, National Promotional Banks and private commercial banks. For the EIB’s role in responding to the crisis to be truly effective, it needs to focus more on the final beneficiaries of projects during this crisis, rather than on private financial intermediaries themselves – for which the EIB has been criticised in its main funding programme of the past half-decade, the European Financial Strategic Investment (EFSI) (the Juncker Plan, 2015-20).