HOSPITALS in the region are to benefit from a £115m European Union loan.

The European Investment Bank (EIB) is backing the modernisation of some of the region's largest hospitals, in Newcastle.

The loan is part of measures to improve the infrastructure of less-developed parts of the EU.

It will mean that almost a third of the £353m needed to modernise hospital services on Tyneside will come from the European bank.

The remaining £238m will be financed through bond issues in the City of London.

As part of the ambitious modernisation programme, facilities at the Freeman Hospital and Royal Victoria Infirmary will be revamped and expanded, allowing the eventual closure of Newcastle General Hospital.

EIB vice-president Peter Sedgwick said: "We are particularly pleased to co-finance this project as it represents an important part of the reorganisation of the acute health services in Newcastle.

"The project will contribute to increased efficiency and quality of the Newcastle medical services and therefore it will help to implement the UK Government's regional and national health priorities."

Tim Care, a partner with Dickinson Dees, the law firm which has represented the Newcastle Hospitals Trust during negotiations, said the involvement of the EIB was very welcome.

"It is unusual for the EIB to get involved. They are really choosy," he said.

"The project would have been more expensive without the EIB loan and the extra capital means the trust has been able to go for a high quality scheme."

The Newcastle Trust will have to pay back the costs over 38 years.

In the past five years, EIB lending in the UK has reached a total of 15.5bn euros, including £1.3bn in UK health and education sectors.

The EIB has helped to finance recent NHS hospital projects in the West Midlands, Blackburn, London and Manchester.