Sace and the European Investment Bank (EIB) have combined to issue a €400mn loan to Fiat.

The finance will bankroll the Italian car manufacturer’s research and development up until 2016 with the aim of assisting Fiat become “Europe’s most environmentally-friendly carmaker”.

The loan will be fully covered by a Sace guarantee and comes in the same week as reports that the ECA is to lose 60% of its budget, in line with the Italian government’s ongoing austerity programme.

However, a representative of the ECA tells GTR that this is untrue, since Sace was already privatised in 2012.

“Sace is a limited company wholly-owned by Cassa Depositi e Prestiti since November 9, 2012, and therefore its capital is independent from the Italian state,” the spokesperson says.

The EIB loan is expected to benefit a range of smaller companies in Fiat’s extensive supply chain, as well as lending support to future exports. Earlier this year, Sace agreed to provide €1bn worth of guarantees to Fiat’s ongoing borrowing, with the intention of bolstering Italian automotive exports.

Vehicles account for 7% of all Italian exports and are worth some €35bn to the national economy every year.

Fiat is the world’s 12th largest vehicle manufacturer, but has been feeling the competitive heat of low-cost vehicles produced in Asia. The likes of Tata and Hyundai (owner of Kia) have seen their share of the market rise in line with growing customer demand for smaller and cheaper vehicles on both sides of the Greenwich Meridian. It’s hoped that support from Sace and the EIB will help the Italian company claw back some ground.

“We are proud to contribute to strengthening Fiat’s innovation capacity, which we are certain will have positive impacts in terms of both the company’s international competitiveness and the production processes and employment procedures of the countless small business in the supply chain,” Sace’s CEO Alessandro Castellano said in a written statement.