European Commission President Jose Barroso said a European Investment Bank loan to spur the Portuguese economy will go ahead, ending a growing spat between the two institutions.
A credit line of as much as 6 billion euros ($8 billion) for Portuguese banks to lend to small and medium-sized enterprises has been on hold as the EIB and the commission squabbled over the guarantees needed.
“The European Commission, European Investment Bank and the Portuguese authorities have come to an agreement to have lending made available to Portuguese SMEs,” Barroso said in Brussels today after meeting Portuguese President Anibal Cavaco Silva. The head of the commission told reporters he hopes the money can be unlocked “swiftly.”
Portugal, struggling to return to growth and facing a 2.3 percent contraction in its gross domestic product this year, is looking to exit its bailout program next year after benefiting from EU and IMF financial aid totaling 78 billion euros since 2011.
In December last year, the Portuguese government said it would provide a 2.8 billion-euro guarantee that would enable the EIB to cover its 5 billion-euro exposure to Portugal and lay the ground for an additional 1 billion euros for new operations. The government stepped in to spare commercial banks from running out of liquidity when providing collateral, the EIB said in a statement.
Since early 2013, when the commission was notified, it has been working “with Portugal and the EIB to find a solution that would be compatible with EU state-aid rules for the state guarantee provided, therefore respecting EU law,” Antoine Colombani, Competition Commissioner Joaquin Almunia’s spokesman, said this week.
“The delay wasn’t because of the commission,” Barroso said. “The delay was due to the fact that guarantees asked for” by the EIB “strictly speaking weren’t necessary.”
The EIB did not have an immediate comment.