Fiat Will Still Get EU Loan for its Plant in Serbia image

The European Investment Bank will continue to offer Fiat a 500 million euro ($625 million) loan to build a new facility in Serbia, to manufacture the 500L minicar.

In May 2011 European Union’s finance arm offered the subsidized loan, part of the joint project made with Kragujevac, the central city in Serbia. The project is worth 1 billion and includes contributions from Fiat and the government. Although the EU and Fiat promised to pay 500 million euro and 410 million euro respectively, Serbia’s government announced on Thursday, August 30th, that it will offer only 55% of the 90 million it was supposed to pay Fiat this year.

Even if Sebia is not able to pay the entire sum, the European Investment Bank will continue to distribute the 500 million euro loan to Fiat, for the plant in Kragujevac. The facility was opened on April 14th and it is expected to produce 200,000 Fiat 500L units annually. Analysts wonder if this facility was really necessary in the European market which already struggles with the economic crisis and the overcapacity issue. Fiat’s decision to stop any investments in Europe made the country’s unions and politicians to ask the government help the country’s ailing auto industry.