The welfare state, bureaucratic centralization and distribution of power by political parties have precluded development of private initiatives in this field.

However, Italy has now reached a turning-point of great importance. As an example, Law 142 of 1990, which has reformed the organisation of local authorities, provides for the establishment of companies with equity capital which is both public and private and thus offering the possibility of involving partners from the private sector. This instrument has also been improved upon by new "rules" dictated by the market place. Without these rules, the common practice on the part of State bodies of putting out development infrastructure and services to tender may persist.

The opening up of the market through project financing is therefore possible only if foreign investors with wide expertise are able to introduce new rules in this field. In this case, therefore, the legal framework plays an important role although it should be utilized after the market develops towards certain types of companies and projects.

In regard to companies established with both public and private capital, Law 489/92 dispenses with the obligation for the public capital to be in the majority. The same Law establishes that service tariffs should ensure a balance between investment, management, economics and financing.

On the other hand, the wider participation of the private sector in the process of financing infrastructure development has become usual in the European scenario. That also applies to infrastructure development at European level, such as the Euro-tunnel, TGV, telecommunication projects, etc.

In order to give support to international cooperation, the EU has created an ad hoc instrument, the European Economic Interest Grouping (EEIG), to develop a common structure to be used by public bodies and private corporations in all EU Member States.

To reinforce this trend, the creation of the European Company is presently under discussion. The European Company will provide for an organisation and management of complex initiatives, in which several partners from different Member States will participate.

It is within this framework that we should place all the questions linked to project financing.

The situation that Italy has now to face is becoming clearer every day. In the New Europe, the role that the State plays in the economy is to be modified and relationships between the public and private companies are continually in evolution. An increased part of the activity which was formerly carried out by public bodies now is undergoing the privatisation process. Also different types of public works are more and more often being carried out or managed by private corporations or by mixed public and private companies.

Project financing is one of the main instruments to overcome the crisis in the infrastructure development market because it promotes investment of private money as a su-pport to public economic sources.

Furthermore, for the Public Administration the use of project financing means that it saves the public purse the burden that derives from the management of public works being given by contract to private companies. The most interesting opportunities for applying the principles of project financing are in the construction of harbours, highways, solid urban waste recycling plants and waste water treatment plants, infrastructure development for urban public transport (mainly underground and tramways), dams and hydraulic plants, potable water distribution for irrigation.

The opportunities for all these public works can be shown to be of interest also at international level. In point of fact, Mediocredito Centrale has opened a project financing department which is able to provide financial support and expert consultancy in several fields: oil and gas, electrical, infrastructure development and communications.

In less than a year this project financing department has carried out operations worth more than one thousand billion Italian Lira.

With regard to the legal instruments which apply to project financing, there is in Italy the so-called "Build operate transfer" (BOT). Decree Law No. 406/1991 establishes the legal basis for the contract. This provision will be soon modified and improved upon pursuant to implementation of the principles contained in EU Directive 93/38.