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

The Italian Cooperation Fund for Private Sector Development in the western Balkans is the first concrete result from the Balkans Initiative launched by the government of Italy in Venice in October 2003 and is part of a broader €14 million effort pledged by Italy for the development of the private sector as well as energy and transport infrastructure in south-eastern Europe, also involving the European Investment Bank and the World Bank.

Speaking at the signing ceremony in Rome, Lorenzo Bini Smaghi, director general, international financial relations, at the Italian Ministry of Economy and Finance, said the grants provided by Italy would 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 and Serbia and Montenegro.

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

EBRD vice-president Fabrizio Saccomanni said small businesses are the engine of growth, and the improved access to long-term finance will add to exports and jobs.

In addition, Italian funds will also be used to help the EBRD develop commercial projects by local municipalities for water, waste water, transport, solid waste and heating.