BRUSSELS — Outgoing German development minister Gerd Müller fanned the smoldering rivalry between the European Investment Bank and European Bank for Reconstruction and Development on Monday, nominating EIB as his preferred option to lead a possible European Development Bank.
The idea of a single entity to better coordinate EIB, EBRD, and European development banks’ work outside the bloc dates back to at least 2010, but reached its apex at the end of last year as the two multilateral lenders sparred in public hearings with European Union member states. The impetus was a high-level wise persons’ report from nine development finance experts who were charged by France and Germany with finding ways to give Europeans more impact and brand recognition in their development efforts, particularly in Africa.
The group compared the pros and cons of EIB, which is wholly EU-owned but without, they said, a convincing development model, and EBRD, which has mixed ownership but deeper presence in partner countries, though not sub-Saharan Africa, leading a hypothetical new European Climate and Sustainable Development Bank. In response, EU member states recently engaged consultants to conduct a feasibility study on the wise persons’ findings.
“We have to see if the position that [Müller] took is also Germany’s position.”— Charles Goerens, liberal member, European Parliament
That move, combined with the COVID-19 pandemic and its domestic economic fallout, had taken some of the sting out of the debate — though the two banks continued to discuss “the European financial architecture” bilaterally. Müller’s intervention could reignite the issue, just as a Frenchwoman, Odile Renaud-Basso, vies for the presidency at EBRD on Oct. 7-8.
“My suggestion would be to speed up with the establishment of a European development bank,” Müller told members of the European Parliament’s development committee Monday. He said that national European development banks, “could all be brought together, under the umbrella of the European Investment Bank, in order to have a common approach in the developing countries, to become more visible, to act in a more concentrated manner as the EU.”
He put the price tag at €10 billion: “This would be made available by the 27 member states, and then we could use that €10 billion and leverage it to make €50 billion as part of an offensive involving education, industry and agriculture.”
“There has been an ongoing process to establish a European development bank, and it needs to be stepped up,” Müller said. “It needs to be done under the auspices of the EIB.”
The banks’ written responses to EU member states seek to highlight their existing strengths and future potential for leading the bloc's development finance efforts.
The frank comments on such a sensitive topic caught many EU development players by surprise, some of whom wondered whether Müller — who has said he will not be a candidate at next year’s German federal election — was conveying the German government’s official position. Asked the same question by Devex, Müller’s office did not immediately respond.
A French official told Devex Monday that “there is a feasibility study underway which only just started and which was ordered by [member states] to examine the different options on the table. We will give our view once the result of that study is known.”
Müller’s appearance before the committee was designed to set out the priorities of the German presidency of the Council of the EU, which rotates every six months. The country occupying the presidency is meant to play a “neutral, mediating role” the Germans explain on their website. “This means that the national position takes a back seat in favour of a mediating role between the positions of the 27 EU member states.”
Charles Goerens, a liberal member of the European Parliament from Luxembourg and one of the most experienced members of the development committee, told Devex that for him there was nothing untoward about Müller’s comments.
“We have to see if the position that he took is also Germany’s position, and I personally find that what he said goes in the sense of a better coordination of European development policy, notably by including the national development banks,” Goerens told Devex by phone Monday. “I think he was speaking on Germany ... He never broke with the German policy. He has strong convictions in many areas and what he said doesn’t bother me at all.”
EIB President Werner Hoyer told Devex that a dedicated EU development bank is “essential” to respond to COVID-19 as well as to put Europe “on a level playing field with China, the U.S., and other regional powers.”
“If we want to avoid that the Paris climate agreement and global Sustainable Development Goals are pushed into the background of global affairs, Europe needs to think development big,” Hoyer, who penned an op-ed on the subject last week, wrote by email Monday.
“A genuine EU development bank, within the EIB Group, will allow the EU to considerably increase its impact and visibility in partnering countries at a critical moment in time — and start to fill an important gap in the external set-up of the Union.”
EBRD declined to comment.
Responding to Müller’s comments Monday, Thomas Wieser, who chaired the wise persons group, told Devex by email that: “What we need is not a larger Investment Bank, but a true Development Bank. In order to become such a bank such an entity would need to have a governance and policy set up independent from and very different from that of the EIB — even if the EIB were to be a large shareholder, which is politically and financially a pragmatic choice.”