(NICE) - EU finance ministers backed plans on Saturday to hike public lending to credit-starved small and mid-sized firms, hoping to give the faltering European economy a boost.

The ministers agreed at a two-day meeting in the French Riviera city of Nice that the European Investment Bank would lend 30 billion euros (42 billion dollars) to such firms by 2011.

For 2008 and 2009, they authorised the EIB to increase its lending by 50 percent to 15 billion euros for the two-year period.

"It's by supporting our small and medium sized companies that we will get more growth, more jobs and more research and development," French Finance Minister Christine Lagarde told journalists after chairing the meeting.

Acknowledging that they underestimated the current economic downturn, the ministers ruled out on Friday launching a sweeping stimulus plan, choosing not to follow the United States or Japan.

Instead they have pinned their recovery hopes on much more modest plans for increased lending through the EIB to small and mid-sized companies which are struggling to get loans in the face of the current financial market crisis.

The EIB, whose board of governors is made up of EU finance ministers, is a public development bank that finances investments based on the European Union's priorities.

The EIB allocated 5.2 billion euros to small and mid-sized firms in 2007 out of a total of nearly 48 billion euros in loans.

The ministers also agreed to study an Italian proposal to ramp up EIB lending for big infrastructure projects and stimulate growth.

Earlier this month, Italian Economy Minister Giulio Tremonti said that the EIB should be transformed into a European sovereign investment fund along the lines of the Cassa Depositi in Italy, the Caisse des depots in France or KfW in Germany.

Informal meeting of EU economy and finance ministers in Nice

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