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The European Investment Bank (EIB) is in negotiations to finance the Tel Aviv light rail project as part of its efforts to enter the local private sector, EIB vice president Philippe de Fontaine Vive said yesterday.

De Fontaine Vive is responsible for FEMIP, the Facility for Euro-Mediterranean Investment and Partnership.

The EIB would also be interested as well in financing a train between Jordan and Haifa or a port designated for joint Israeli-Palestinian use, the vice president commented, and would consider being a partner in the so-called "peace channel" between Eilat and the Dead Sea, if the project's economic feasibility can be affirmed. The Peres Center for Peace is currently conducting an economic feasibility study of the plan, and Yitzhak Tshuva is reportedly interested in financing the project.

The bank extends loans on the basis of two criteria aside from economic feasibility: the added value the loan could provide in comparison to loans from other sources in the market, and proper management of the project tender. Investment goals need to meet targets set by the EU's Barcelona Program, which include creating jobs and protecting the environment.

The EIB representative made the point that Israel is the sole Mediterranean basin country in which the bank has yet to invest in any projects. The decision to finance projects now stems not from the diplomatic process, but rather from recent Israeli legislation, he said.

Because the EIB invests in order to promote the interests of the EU's plan for Mediterranean basin states, it provides grants for projects tied to the environment. Therefore, he added, it intends to get involved in Israel's desalination projects.

Yesterday, the EIB signed an agreement with the Finance Ministry to extend a 200 million euro loan designated for financing waste water treatment in local authorities with fewer than 200,000 residents.

The state has not told the bank for how long it wants the loan, which is to be integrated into the government's five-year plan, de Fontaine Vive said.