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Banking

CEE: Work in progress

After decades of neglect, infrastructure in central and eastern Europe is in urgent need of upgrading. Now projects across the region are on hold in the wake of the global downturn. Lucy Fitzgeorge-Parker talks to the public- and private-sector bankers trying to get the market back on its feet.

WHEN THE SLOVAK centre-right opposition won a surprise victory in elections last June, one of its first actions was to pull the plug on a pair of multibillion-euro motorway projects planned by the previous regime. Domestically, it was a popular move – local politicians and media had condemned the public-private-partnership financing of the schemes as expensive and unnecessary – but it badly dented the confidence of the international infrastructure community in central and eastern Europe.

In some respects, the cancellations should not come as a surprise. PPP is controversial, jumbo infrastructure deals are notoriously subject to political whim, and most countries in CEE are still developing. It isn’t the first time a big transport project in the region has failed to make it past the planning stages. In the past five years Hungary, Romania and the Czech Republic have all abandoned high-profile motorway projects at the procurement phase, in some cases repeatedly.

The difference with the Slovak deals, according to Jens Gerkel at global infrastructure fund Meridiam, one of the core investors, was partly that the cancellations came at such a late stage – indeed, the D1 phase 1 project had already closed and the new government reportedly had to pay more than €50 million in penalties to the deal consortium.

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