NXP Semiconductors has obtained a €1 billion loan from the European Investment Bank (EIB), officially to finance its R&D. On the face of it, it seems like a good thing that Europe is supporting continental companies, particularly in the high-tech sector. On closer examination, however, this kind of operation raises a number of questions.
Firstly, why go through the EIB and not a traditional bank ? When a company the size of NXP needs to extend its line of credit, it generally turns to its bankers. Based in Luxembourg, the EIB is neither a private bank nor an emanation of the European Central Bank (which alone can issue money), and its funds do not come from the EU budget. It is simply an intermediary that raises money on the global capital markets (which take their margin in the process) and then allocates this money to projects, mainly European but not exclusively, selected by the European countries that are its shareholders and governors. Its advantage is that it benefits from the aura of the EU, which gives it a very good rating on the financial markets and therefore access to low-interest loans.
My second comment is this : is it really the role of the European institutions, and therefore ultimately of European taxpayers, to come to the rescue of flourishing multinationals in search of advantageous loans? Over the last twelve months, NXP has distributed no less than 2.4 billion dollars to its shareholders in the form of dividends and share buy-backs, i.e. 87% of its cash flow. Wouldn't it have been a good idea to use more of this to fund the company's R&D? Or to repay part of its ten billion dollars in long-term debt ? And besides, financially, to what extent can NXP be considered a European company ? When Philips decided in 2005 to outsource its semiconductor activities in order to maximise profits, most of the shares in NXP were acquired by a bunch of American investors. To date, NXP's main shareholders are the american groups Fidelity, JP Morgan, Vanguard, Wellington, BlackRock and others. In short, Europe is using its economic credit to round out the margins of american shareholders.