The government of Italy and the European Bank for Reconstruction and Development (EBRD) are launching a € 4mn initiative to develop the private sector in the western Balkans.

This is the first concrete result from the Balkans Initiative launched by the government of Italy in Venice in late 2003 and is part of a broader effort targeted at the development of energy, transport and the private sector in southeastern Europe. Participants include the World Bank and the European Investment Bank, which are expected to set up similar arrangements with Italian grants totalling €14mn, along with the support of the European Commission, for an overall amount of €35mn. Italy and the EBRD will coordinate closely with the other IFIs on the implementation of the Balkans Initiative.

The grant funds provided by Italy will be used by the EBRD to catalyse significant private sector investment in the region. The target countries are Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Serbia and Montenegro, Bulgaria and Romania.

Priority projects include SME support through local financial institutions. Among other things, Italian grants will provide technical assistance to the banks to develop lending capabilities for small business clients, while EBRD will extend credit lines. Development of leasing facilities to assist small business borrowers will also be explored.