The European Investment Bank: Establishment and Early Project Cooperation

On March 25, 1957, Belgium, West Germany, France, Italy, Luxembourg and the Netherlands signed the Treaty of Rome establishing the European Economic Community, with an attached protocol defining the Statute of the European Investment Bank (EIB). The treaty entered into force on January 1, 1958, establishing the bank. Treaty signature, institutional organization and the first loan were successive stages.

The founding proposal was not free of disagreement. Italy emphasized development of less-developed regions and sought favorable funding, while Germany was particularly concerned about recurring additional burdens on national budgets and preferred a bank with lending discipline. The final arrangement assigned regional development, business modernization and projects of shared cross-border interest, relying on the bank's own capital and capital-market borrowing to finance structural differences within the common market.

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On January 25, 1958, the Board of Governors met in Brussels and formed a twelve-member Board of Directors: Germany, France and Italy each nominated three, Benelux jointly nominated two, and the Community Commission one. On February 13, Pietro Campilli was appointed president, forming the Management Committee with two vice-presidents. The ministerial Board of Governors set overall credit policy, directors decided lending and borrowing, and the Management Committee handled daily business.

The National Bank of Belgium initially hosted the EIB, which then moved temporarily to 11 Mont des Arts in Brussels. Departments for the secretariat, lending, finance and treasury, research and legal affairs developed gradually. By the end of 1958, there were 66 employees, including 43 in translation, clerical and general services. Joint decisions required multilingual contracts and financial documents; periodic meetings of national representatives alone could not run the institution.

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The original Statute set capital at one billion units of account. Germany and France each subscribed 30%, Italy 24%, and Belgium, the Netherlands and Luxembourg the remainder. The unit of account was defined by gold content and cannot be treated directly as the later euro. One quarter of subscriptions was payable in five installments; the remaining three quarters could be called only as needed to meet the bank's liabilities.

The first two installments received in 1958 totaled 100 million units of account. Paid-in capital reached 200 million by the end of 1959, with the final 50 million due in 1960. The billion subscribed was therefore not cash wholly available for lending at opening. Temporarily unused funds were deposited with banks or invested in short-term Treasury bills to balance returns and liquidity. The long-term design called for capital-market borrowing so the six states' contributions could support sustained lending.

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In May 1958, bank departments began contacting member-state administrations and major banks to study informally proposed electricity, transport, telecommunications and manufacturing projects, especially in southern Italy and parts of France. Campilli also explained to financial institutions in all six states that the EIB intended to supply complementary funds and relied on local institutions for project knowledge.

The Statute allowed direct applications from businesses or referral through member states or the Community Commission. The country concerned and the Commission had to give opinions, after which the Management Committee examined the proposal for a directors' decision. Loans were generally combined with other funding and required a state guarantee or other adequate security. Bringing European development objectives, local knowledge and repayment capacity into one process was the practical link in cooperation.

References: [1] [2] [5]

The bank began lending in April 1959. A World Bank announcement dated April 22 stated that the Cassa per il Mezzogiorno simultaneously obtained $20 million each from the EIB and the International Bank for Reconstruction and Development and issued $30 million in bonds in New York, with the Italian Republic guaranteeing principal and interest. Bond proceeds supported the fund's general development program, while the two banks' $40 million helped finance three specified projects.

The fund on-lent the money: the Mercure lignite-fired power project received $18 million jointly from the two banks, and the SINCAT and CELENE chemical projects in Sicily together received $22 million. The EIB's respective shares were $9 million, $7 million and $4 million. CELENE planned to buy ethylene from neighboring SINCAT to make polyethylene and other products. On-lending and supply relationships among the national fund, regional financial institutions and companies connected the joint loans to specific equipment and production arrangements.

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In 1959, directors approved seven loans totaling 52.1 million units of account: 32 million for Italy, 16.1 million for France and 4 million for Luxembourg. Four supported electricity and three chemicals. Luxembourg's hydroelectric project connected to the European grid, embodying shared cross-border interests rather than merely construction within one country.

The annual report also made clear that approval was not immediate full payment. By the end of 1959, effective loan contracts totaled about 34.13 million units of account, while actual payments to borrowers were 3.69 million, with disbursement following construction progress. Early cooperation first established common capital, project selection, guarantees and staged payments. These financing arrangements alone did not prove that every development goal had already been achieved.

References: [3]