What Europe Can Teach the U.S. about Infrastructure Banks

The European Investment Bank raised $80 billion for projects last year alone. Should the Obama’s proposed program adopt a similar model?
October 11, 2010, 10am PDT | Lynn Vande Stouwe
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Created in 1958, the EIB offers loans, technical assistance and venture capital funding for infrastructure projects ranging from high speed rail to wind farms and solar plants. Its focus is on investments that transcend national borders and advance the continent as a whole.

Roger Rudick notes that some critics don't think the EIB system would work in the US, citing differences in institutional risk tolerance. European investors are hesitant to sell bonds for infrastructure projects, a practice commonplace in America. Some even argue that an infrastructure bank would duplicate functions of existing programs. Additionally, leveraging Obama's proposed $60 billion of funding into the estimated $2.2 trillion required to repair the country's infrastructure may prove difficult even with investment from private banks.

Political merits may outweigh initial difficulties, Roger Rudick says:

'Supporters like the idea of a funding institution that can, at least in theory, transcend local budgets, political turf wars, and election cycles For giant electric, water and rail projects that take decades to construct and cross many state boundaries, this may be just the way to leverage the private capital necessary to keep the country's infrastructure from falling apart.'

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Published on Friday, October 8, 2010 in Streetsblog
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