The European Investment Bank, the European Union's financing arm, on Thursday, signed a 275 million-euro loan agreement with Bank Hapoalim, which will be allocated for the support and expansion of projects of small- and medium-sized businesses in Israel. "After 11 years, the EIB is resuming its lending operations with the state of Israel, and encouraging investment in the private sector without requiring a state warranty and without creating new public debt," said Philippe de Fontaine Vive, EIB Vice-President. "The financing facility we just signed underscores one of the Facility for Euro-Mediterranean Investment and Partnership's top priorities to support capital investment projects of SMEs in the Mediterranean Neighborhood Countries and this is just the start of the partnership. Looking ahead, we are also considering issuing EIB bonds denominated in Israeli shekels." The EIB's 10-year financing facility will support Bank Hapoalim in providing attractive term lending products for Israeli small- and medium-sized businesses in industry, services, tourism, agro-food, health and education for environmental projects, which will also seek to help create new jobs. The companies will be chosen according to a set a criteria determined by the EIB, which is committed to financing pollution abatement projects. "The program is an important milestone for international cooperation between Israel and international financial institutions and for companies to realize their economic potential," said Hapoalim CEO Zvi Ziv. Earlier this week the Finance Ministry said 200m. euro of the EIB funds were allocated to an environmental program for water and sewage projects. The EIB loan will benefit some 400 projects with a focus on investments in areas populated by low income groups. Fontaine Vive added that the FEMIP will further develop its activities in Israel with a focus on key infrastructure projects, in particular those involving regional cooperation with Israel's neighboring countries. "The bank's entrance into activity in Israel and the allocation of credit represents an expression of trust by the European Union in Israel's economy and an upgrading of economic relations," said Finance Minister Avraham Hirchson this week. "The financing will help the country move forward on infrastructure projects". The EIB ceased lending to Israel in 1995, saying Israel's per capita income exceeded EIB criteria and that the government would not guarantee the investments. However, a government source indicated at the time that the bank withdrew its activity due to European hostility towards Israeli government policy and the lack of economic stability in the country, while it continued to invest in the Palestinian Authority.