By Danish Minister for Transport Henrik Dam Kristensen
As we all know, the current economic situation is putting great strain on state budgets in the European countries. The austerity measures applied in many EU member states have left European governments with very little room for manoeuvre and represents a potential challenge to the future funding of transport infrastructure projects.
In light of these challenges, the Danish EU Presidency and the European Commission will host a conference on 24-25 May that will focus on financing of major infrastructure projects. The conference is a good opportunity to discuss the issue and share our individual experiences in order to meet the need for future investments in transport infrastructure.
Major steps are also taken at the EU level to address the issue. In March 2012 the Council agreed on a new set of guidelines for the Trans-European Networks (TEN-T) that creates a common framework for EU funding of infrastructure projects. In addition, the European Commission has put forward a proposal on the establishment of the Connecting Europe Facility (CEF) that aims to facilitate and co-finance cross-border infrastructure projects in Europe.
Furthermore, on 22 May 2012 the Council and the European Parliament agreed to initiate a pilot phase on European project bonds in 2012-13 that aims to facilitate cooperation between private stakeholders and the European Investment Bank, EU and the member states on infrastructure projects within transport, energy, and information- and communication technology. The project bonds may thereby help ensuring access to financing for profitable projects that are hampered by the short term economic situation.
Together these initiatives will help create a framework that supports the continued development of the European transport system.
Facing a Tough Economic Climate
There are numerous reasons why it is important to continue investing in infrastructure across Europe. Traffic volumes are expected to increase and the need for investments in infrastructure will become even more evident in the near future. A well-functioning infrastructure and a modern and efficient transport system facilitate the Single Market and enable businesses to transport their goods and services efficiently and allow easy travel for European citizens. In short, infrastructure is instrumental to creating jobs and fostering growth.
Nevertheless, I am aware of the economic challenges that we all are facing and the fact that infrastructure funding can be difficult. Due to these circumstances, we must look at innovative and alternative ways of financing future infrastructure projects and Denmark offers some unique insights in this respect.
The Danish Infrastructure Investment Programme
In Denmark, the development of a modern and efficient transport system has been assigned high priority in recent years. In the current decade we will carry out infrastructure investments amounting to € 21 billion. The investment programme includes the implementation of a new signalling system (ERTMS) on the entire national railway network and the construction of a fixed link across the Fehmarn Belt.
The projects will create better and more efficient connections between Scandinavia and the European Continent and have both received financial support from the TEN-T programme.
A Unique Danish Approach
The Danish investment programme has been made possible by a firm and focussed prioritisation at the political level to develop Danish transport infrastructure in a manner that also contributes to an efficient European transport system. A central piece in the puzzle has been the unique approach employed in Denmark for the financing of major projects, the so-called state guarantee model. This approach innovatively combines the benefits of the high creditworthiness of the Danish state with user financing. As a result, the establishment of major infrastructure projects such as the Fehmarn Belt fixed link is made possible even at a time of economic hardship.
In the state guarantee model, a state-owned company is responsible for the planning, construction, operation, and financing of the projects. The company raises the loans to finance the given project in the international financial markets. The Danish state provides a state guarantee for the loans that ensures low costs of capital due to the high credit-worthiness of the Danish state. The loans are subsequently re-paid through the use of tolls and railway charges paid by the users of the infrastructure. In this model, the State remains highly involved in the project, while at the same time avoiding a burdening of the state budget.
The state guarantee model is only one example of how to user finance future infrastructure projects in Europe and several other approaches are being applied in the EU. There is great potential in sharing our individual experiences and that is exactly why we are hosting the conference in Copenhagen in the coming days.
The importance of knowledge sharing
One of the topics at the conference is how to avoid adding pressure on state budgets when funding large infrastructure projects. The conference will take a closer look at experiences from several countries like Sweden, The Netherlands, and Germany and examine the prospects for utilising Public Private Partnerships as well as the role of the TEN-T and the Connecting Europe Facility.
It is essential that we learn from each other and share new insights that may prove useful in future projects. The issue is important and I believe that the discussions at the conference will prove instrumental in our efforts to achieve a modern and efficient transport infrastructure in Europe.