EU ministers assign homework to rival banks

BRUSSELS — European Union finance ministers have given the European Investment Bank and European Bank for Reconstruction and Development until the end of January to weigh in on sweeping changes being considered to the bloc’s climate and development investments. Ministers met Thursday in Brussels, where they issued their response to an October report by an expert panel designed to improve the coordination and visibility of European development efforts, particularly in Africa. The High-Level Group of Wise Persons had recommended three long-term options for the creation of a new European climate and sustainable development bank: Build on EBRD, create a new mixed-ownership institution, or use a subsidiary of EIB. “Slapping a ‘development’ stamp on a subsidiary won’t change the nature of the EIB and its business model, which are far from development-oriented.” --— Xavier Sol, director, Counter Balance As expected after a debate between EU development ministers last week, the official response issued Thursday discarded the second option. Thomas Wieser, who chaired the expert group, told Devex that a new institution would have produced the best development impact in the long run, but it was the most difficult choice politically, would have taken a long time, and would not have resolved the sometimes overlapping roles of EIB and EBRD. Ministers asked the two banks to send them “information on financial, legal, and operational implications for their institutions of both options 1 and 3” by the end of January 2020, as well as proposals on how the pair can cooperate better under the existing system. The banks’ input will inform an independent feasibility study, due by fall 2020. Ministers endorsed a number of short-term steps, mostly designed to improve the branding and planning of the EU’s ongoing development efforts, which are currently divided among the European Commission, EIB, EBRD, and national development finance institutions. States called on both of the banks to ensure that any steps they take now “contribute to and do not undermine” the process while ministers continue to reflect on development finance reform. EIB has proposed short-term measures to its board that are aimed at increasing its development impact — a point of criticism in Wieser’s report — while EBRD is conducting its own analysis of a possible move into sub-Saharan Africa, due to be sent to shareholders later this month. On the larger question of structural reform of EIB and EBRD — already considered in the 2010 Camdessus report — Wieser told Devex that there was a “realistic risk” that the issue would again be postponed indefinitely. He said some further analysis of EIB and EBRD was warranted, but “in reality, many of the member states were happy about the possibility to do some more studying and number crunching because it allowed them to kick the can down the road.” Wieser, former head of the Eurogroup Working Group, added that “some people, I’m sure, are full of hope that the end of this road down which the can will be kicked is not in sight and will remain not in sight.” Søren Peter Andreasen, general manager of the European Development Finance Institutions association in Brussels, was more upbeat about Thursday’s outcome. “I hadn’t really dared hope for such a serious outcome and such a serious treatment of the Wise Persons report,” Andreasen told Devex. “To me it reads, in [the ministers’] decision, like it’s just a matter of fact that we need to work with all of the hands and resources that we have, and we cannot just make a political decision to try and go with the efforts of one institution or another institution.” Xavier Sol, director of Counter Balance, an NGO that monitors the EIB and EBRD, said in a statement sent to Devex on Thursday that the pending feasibility study should consider more than simply “financial engineering and the promotion of European interests.” Merely “slapping a ‘development’ stamp on a subsidiary won’t change the nature of the EIB and its business model, which are far from development-oriented,’” he said. As for EBRD, Sol argued that the European Commission is not doing enough to push EU development priorities within the bank, “even though it is perfectly capable of doing so.”