EU executive vows 'comprehensive coordination' of European development

BRUSSELS — The European Commission has released its vision for the European development finance system, promising a “new comprehensive coordination mechanism” to improve coherence with European Union member states and the international finance institutions they hold shares in. However, it remains unclear what this kind of mechanism might entail. “The commission seems to favor a decentralized European development finance architecture.” --— Benedikt Erforth, researcher, German Development Institute The 14-page document from the EU’s executive arm stops short of saying whether the European Bank for Reconstruction and Development or the European Investment Bank is best placed to become the bloc’s sustainable development bank — a key point of contention in ongoing debates over the future of European development finance. Insiders say that question has been put on hold until after the annual meeting of EBRD’s board of governors in May, which will see the bank’s shareholders appoint a new president and approve a new strategic plan. “Everybody is waiting on what happens at the EBRD,” an EU member state representative, speaking on condition of anonymity, told Devex. In the meantime, the commission’s latest text, dated Jan. 31, proposes short-term and less drastic measures to improve coherence and visibility. These include an annual meeting of European development players, the creation of a “centre of excellence” on development, possibly through the European Think Tanks Group, and an “EU4” brand — for example, “EU4Energy” — which could be used by national European and EU-wide development agencies and banks. The aim of the proposed “comprehensive coordination mechanism” is to ensure “that the EU, its member states and the IFIs they hold shares in, collectively use their sizeable financial assistance capacity in a coherent way which promotes the EU’s values and strategic objectives,” the commission writes. Asked at an event this week what was meant by a “new comprehensive coordination mechanism,” Sandra Kramer, a senior official in the commission’s development department, DEVCO, said: “I am sure that what is meant there is … that we need to focus a lot more on what we can build together. For the moment, the IFIs are not working sometimes in a concerted manner, or not yet in a manner completely aligned with the member states.” The EU member state representative pointed out that there already are coordination mechanisms, citing collaboration between EIB and the budget department of the commission on global investments by EIB, which is owned by EU member states. “DEVCO’s nose is out of joint because they feel that when [the budget department] BUDG discusses with the EIB, they [DEVCO] don’t get involved,” the source said. “That’s also part of the power play. I think the commission somehow wants to run that [coordination mechanism] with member states coming in afterwards, but member states also want to be involved in this much more hands on.” A senior DEVCO official, also speaking on condition of anonymity, said the paper came from different commission services, signaling the willingness of the EU executive as a whole to provide a policy steer to European DFIs. It was too soon to say what the new coordination “mechanism” might look like, the DEVCO official added, saying the intention was not to lock national DFIs and others into projects against their will. The paper also stated the commission is “exploring the options that exist” to dedicate some of its funding for proposals submitted by consortia of DFIs — a move designed to encourage the involvement of smaller players, rather than just established actors such as Germany’s KfW. Benedikt Erforth, researcher at the German Development Institute, told Devex the document reinforced the commission’s attempt to create a level playing field for European DFIs. “The commission seems to favor a decentralized European development finance architecture,” Erforth said. “This might be motivated by the hope that such a decentralized yet inclusive system could not only strengthen the European external financial architecture, but also have some positive effects on European integration.” Erforth also noted the scant reference of any role for the European Parliament in the commission’s strategy for more collaborative development action. “When it’s about creating transparency and accountability, and as such strengthening the effectiveness of the system, the Parliament itself claims a more important role also in the policy process — in formulating policies, in checking policies — and none of this has been acknowledged by the commission,” Erforth said.