There is a large number of features which can facilitate or hamper the development of capital markets. It is not possible to establish an ideal combination, which will in any event, depend on the particular circumstances prevailing in each national market.
However, the financial crisis has, in many ways, already changed the balance of incentives in the right direc-tion:
■ The banking market capacity for PPPs is significantly affected. Recent EPEC research indicates that the banks' market for PPPs may have shrunk by over 50% in 2009 compared to previous years. Absent a revived capital market, it is likely that the availability of new funding will become a real bottleneck to the execution of the ambitious deal flows still envisaged in most European countries. This will create strong incentives for all players to find alternative financing solutions;
■ Banks are increasingly aware that they will not be able to supply all the funding needs for PPPs and are opening-up to co-lending alongside bonds investors;
■ Investors, which are currently caught between very low return government lending and volatile equity markets, should increasingly see infrastructure lending as an attractive complement to their portfolios;
■ Procurers, governments and sponsors are concerned that the deal flow would slow down due to lack of funding;
■ Private sector players are keen on reviving the market. Many are already working on creative ideas, such as mezzanine funds or debt funds.