Financing Utilities: How the Role of the European Investment Bank Shifted from Regional Development to Making Markets

Abstract

In the face of continuing financial and economic crises in Europe, the European Investment Bank (EIB) has been criticized for being overly-conservative in its loans to Europe. Critics in particular have called on the EIB to vastly increase its investment in utilities as a counter-cyclical measure. To take stock and, in order to evaluate the role of the EIB in financing utilities over time, we compile and analyze an original database of all utilities project loans from 1958 to 2004. We find the EIB started out by functioning as a regional development bank, prioritizing utilities finance in poorer zones; however, the 1970s energy crises marked a shift whereby EIB utilities projects became more politically oriented. Finally, by the 1980s, utilities projects supported by the EIB were intimately related to those required for the Single Market. The origins of the EIB’s current conservative approach to utilities loans was born in the 1970s and fully consolidated by the 1990s.

Keywords: Utilities, finance, European Investment Bank, development, globalization