Three steps in the works to revive Europe's economy

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BRUSSELS - EU leaders meet for an informal summit in Brussels on Wednesday where France aims to push a proposal for metalizing European debt, but the heart of discussions will focus on ways to reignite economic growth across the continent.

Below are three of the main ideas being considered that could form the basis of a "growth pact" to compliment a fiscal treaty that aims to enforce stricter debt and deficit rules in the euro zone from January next year:

EU project bonds

Under a proposal by the European Commission, the European Union would back debt issued by the managers of infrastructure projects as a way of attracting investors to finance cross-border transport, energy and communication projects.

The Commission aims to launch a pilot phase to run over this year and next, using 230 million euros ($294 million) from the EU's budget as collateral and combining that with guarantees from the European Investment Bank (EIB).

The Commission says that by combining the project bonds with guarantees from the EIB, the 230 million euros could be multiplied by three. If other lenders chipped into projects, the amount of money raised could reach 4.6 billion euros.

Project bonds are different to so-called stability or euro area bonds because they are limited to privately run projects and the responsibility for repaying the loan rests with the company in charge. They do not allow countries to rely on guarantees from others.

Project bonds would not issued by the European Union or by member state governments.

The Commission believes the project bonds would be a catalyst for longer-term private investment, rather than marking a major new debt-backed public stimulus program for Europe.

Boosting the EIB

Leaders will discuss a plan to increase the EIB's paid-in capital by 10 billion euros ($13 billion), a move that could increase potential lending by 60 billion euros and ultimately deliver extra investment of up to 180 billion euros - according to a proposal made by the European Commission.

Olli Rehn, the European commissioner for economic affairs, set out a proposal along those lines to EU member states in April and officials say support is now growing for such a move.

However, a call by the EIB for extra cash would fall hardest on its top shareholders. France, Italy, Britain and Germany have pledged about two-thirds of its roughly 230 billion euros of callable capital.

The key question with boosting EIB funds is not so much whether it's a good idea, but whether the bank has the institutional capacity to deploy all the extra resources. Projects and investment partners would need to be identified, a process that can take time and requires intensive due diligence.

Redirecting structural funds

Leaders are looking to make use of the 82 billion euros in EU development aid that has not yet been allocated to specific projects for the 2007-2013 period. While that may seem like a vast amount of money, only a fraction of that is likely to be re-directed or re-committed to other projects.

While it is up to member states to come forward with proposals and not something decided in Brussels, Commission "action teams" have already been to the indebted Mediterranean countries of Spain, Italy, Portugal and Greece to look at ways to invest in schemes combating youth unemployment.

Funds could support programs to re-train workers in growth industries, as well as backing small companies that need financing, rather than focusing on infrastructure projects.

Another initiative already tried in Greece that may be expanded is to use development funds to guarantee loans from the EIB and commercial banks to allow entrepreneurs to obtain financing to set up companies.

One problem will be convincing EU member states that the commitments they have already made to the EU budget should be shifted. It is likely to require lengthy bureaucratic discussions to determine what projects are no longer worth committing funds to and which ones would be more efficient.

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