EBRD options
Published: March 18 2008 19:15 Last updated: March 18 2008 19:15
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The European Bank for Reconstruction and Development has recovered from its scandal-hit origins to focus successfully on its mission of helping the ex-Communist states on the road from Marx to the market.
It has overcome serious difficulties investing in countries as far afield as Poland and Tajikistan – and is now delivering serious profits for its 60-odd shareholder governments.
But the success of the post-Communist transition raises questions about the EBRD’s future. Its founders envisaged that, unlike most other multilateral institutions, it would close when its job was done. Formally, that issue will be considered at the bank’s next capital review in 2010. Informally, it is already under discussion – and it already divides the shareholders.
The US, the single biggest shareholder, wants the bank to start paying dividends and accelerate winding-down operations in advanced countries in central Europe.
But the ex-Communist states argue the EBRD still has much to do in the region’s less developed countries and are outraged that a development bank should pay dividends that would transfer resources from poor nations to rich.
The European Union, with 60 per cent of the vote, is divided. Some members are ready to compromise with the US on the payout, while others dig in their heels.
The EU has gone as far as mulling plans for a possible merger of the EBRD with the EU-owned, Luxembourg-based European Investment Bank, which finances projects inside and outside the EU.
Such a deal might cut overheads, save money and allow the US and other non-EU shareholders an elegant way out of the EBRD.
But the union should not rush to judgment. The EBRD has unique skills – notably in private sector finance and support for small enterprises. Its London location allows for close co-operation with commercial banks and companies. All this could be lost in a botched merger.
It is a pity that, at this crucial time, the union is mishandling the appointment of a successor to Jean Lemierre, the much-admired EBRD president who leaves this summer. Leading EU states have backed Thomas Mirow, the German deputy finance minister, even though he has little experience of post-Communist countries or international finance. Greek, Czech, Hungarian and Polish candidates with formidable qualifications have been virtually ignored.
This does not bode well for the EBRD. In the coming years, when its future is decided, the bank will need an experienced head with a real commitment to eastern Europe.
Copyright The Financial Times Limited 2008
