MILAN, September 8, 2008 (AFP) - Italy said on Monday that the European Investment Bank should be turned into a sovereign fund to finance infrastructure projects and stimulate the EU economy out of crisis.

Economy Minister Giulio Tremonti was quoted by Italian press reports as saying: 'We are asking the European Union to study the possibility of creating an instrument at European level along the lines of what exists already in other countries.'

He gave as examples the Cassa Depositi in Italy, and the Caisse des depots in France or KFW in Germany. These are quasi-state bodies with various functions, from holding obligatory deposits for certain transactions to investing in the national economy.

Tremonti, who intends to put his proposal to European Union economy and finance ministers at their next meeting in Nice, southern France, on Friday and Saturday, said that the European Investment Bank should take on this function.

'The economy is in crisis and we see it all over Europe: only a big plan for public investment can pull Europe out of the global crisis,' he was quoted as saying.

'A sovereign fund would have not only big economic value, because we have the strongest currency in the world and we are not making use of it, but also political. That would be an extraordinary symbol of a reaction to the global crisis.'

The EIB, created in 1958, already plays such a role to some extent by supporting some of the EU's objectives by financing investment. It operates mainly within the European Union but also elsewhere, in Turkey and North Africa for example.

French Economy Minister Christine Lagarde said in an interview with the French newspaper La Tribune last week that the EIB could help Europe to pull out of the crisis by increasing financing for small and medium-sized companies.

She argued that such a solution would be more effective than a plan to stimulate the economy by means of big public works programmes because they were unlikely to have much effect quickly.

Some governments within the EU, notably Italy and France, face long-standing problems in correcting their public finances and reducing budget deficits and national debt, and consequently have little room to manoeuvre in raising public spending to stimulate their economies.

France currently holds the presidency of EU ministerial meetings.