European finance ministers agreed Saturday to use the EU's lending bank to help small- and medium-sized companies raise funds in a tight economic environment. French Finance Minister Christine Lagarde said the plan called for a 50 percent increase in financing to the European Investment Bank in 2008 and 2009 - to about 15 billion euros ($21 billion). The funds would be part of an overall 30 billion euros ($42 billion) package to last until 2011, she said. “We agreed that our economic area is facing various shocks, in particular a financial shock, inflation shock and an exchange rate shock, and that the common response is a strategy which is deliberately focused on growth,” she said at a news conference after chairing a meeting of EU finance ministers in Nice, southern France. The ability of smaller companies to raise funds has been curbed by the global financial crisis, which originated in the US. Still the amount pales in comparison to the US government's $93 billion (67 billion euros) package of additional spending or tax breaks launched earlier this year. Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of euro-zone finance ministers, said Friday the EU ruled out an EU-wide stimulus package, which German Finance Minister Peer Steinbrueck said “would only burn up money.” EU ministers did agree, however, to consider a proposal of Italian Finance Minister Giulio Tremonti to use the EIB to help finance large energy and infrastructure projects, Lagarde said. Tremonti said the European economy could do with a dose of “old-fashioned interventionism” to bring it out of its current slump, but denied that the idea was a way to get around EU budget rules at a time when deficits are increasing, or that his cash-strapped government was aiming to tap EU funds. “It's not about Italy wanting German money in order to finance Italian infrastructure,” he said. “We want to use European private capital in a better way under a public direction.” The aim of EIB lending is to support long-term development projects, particularly in poor EU regions with low-interest loans. The Luxembourg-based bank never funds more than 50 percent of the total project cost, but its lending is a catalyst meant to trigger private lending.
