The recent crisis has had a major negative impact on PPP projects since (i) there has been a marked reduction in the availability of bank lending and other forms of credit for PPPs, and a significant deterioration of the financial conditions offered for PPP lending, a development associated with a change in the assessment of risk of PPP projects on the part of banks, and (ii) some national governments and regional authorities have reduced or put on hold their PPP programmes.
The development of PPPs is, therefore, currently being restricted by:
● significant increases in the cost of debt for PPP projects as a consequence of the credit crunch;
● the substantially reduced maturities being offered by banks29 on their debt;
● the fact that committed finance is only available at the end of the procurement process.
Faced with this situation, responses in Member States vary. Some authorities have decided to reduce, or temporarily suspend, their PPP programmes. However, others are taking supporting measures, ranging from state guarantee schemes, which have been introduced in France, Belgium and Portugal, to new public sector debt facilities introduced in the United Kingdom, Germany and France. A number of public authorities are also modifying the management of procurement of PPP projects or simplifying national public procurement rules and practices, which often go beyond the minimum procedural requirements of Community rules in this field. These developments reflect governments' commitments to ensure that PPPs play a more important role in investment - a role that will become still more important as public finances remain under pressure for the foreseeable future30.
Reduced access to finance may also have an impact on the effectiveness and extent of competition in the public procurement process. The fact that there is not enough banking capacity in the market to support two or more fully funded bids, and that banks are unwilling to commit significantly in advance of contract signature, has significant implications for procurement. The issue is therefore how to ensure that deals are still closed, and that the public sector gets the best value for funding while not infringing the public procurement rules. The Commission will explore ways to deal with these difficulties (Section 5).
At the EU level, the European Council of 11 and 12 December 200831 supported the use of accelerated procedures during 2009 and 2010, recognising the exceptional nature of the current economic situation and the need to accelerate public spending during the crisis32.
The Commission has also put in place a 'Temporary Community framework for State aid measures to support access to finance'33, which contains a number of relevant provisions for PPPs. It provides a flexible complementary instrument allowing Member States to intervene where general measures, interventions in line with market conditions and interventions under the normal state aid rules are insufficient to respond to the exceptional conditions created by the crisis.
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28 Material in this section draws on analysis by the European PPP Expertise Centre (EPEC) as part of its work on the impact of the credit crisis on PPPs. EPEC was established as a joint initiative by the Commission, Member States and EIB. Further details are available at www.eib.org/epec.
29 Maturities of 7 to 10 years are now the market standard. Previously, maturities of 25 to 30 years were not uncommon for major infrastructure projects.
30 Support measures for PPPs might constitute state aid, which needs to be notified to the Commission.
31 Point 11, 8th indent.
32 IP/08/2040 of 19.12.2008.
33 OJ C 83, 7.4.2009, p. 1.