Q&A: Thomas Wieser on really changing European development finance

BRUSSELS — In true European Union fashion, finance ministers last week endorsed a feasibility study to evaluate proposals from an expert report in October on how to improve European development finance. At stake is which organization gets to lead a possible new European Climate and Sustainable Development Bank — the candidates being the European Investment Bank or the European Bank for Reconstruction and Development. “At the end, it will be a very, very political decision, and not one taken by analysts, accountants or book-keepers.” --— Thomas Wieser, chair, High-Level Group of Wise Persons Devex spoke with Thomas Wieser, who chaired the expert High-Level Group of Wise Persons that was commissioned to produce the report, to ask what he thinks about the reaction to it and what happens now. This conversation has been edited for length and clarity. What did you make of EU member states’ response to your report? It’s not astonishing that the [ministers in the Council of the EU] didn’t want to take any steering decision one way or the other [on which agency should take the lead on European development finance going forward], because of the diversity of views amongst member states. That also reflects the view of our group that there are pros and cons with every solution and it is not so easy to come out in complete favor of one or the other. In a sense, there is a legitimate need for some further number crunching, 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. And 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. There is a realistic risk that with all this studying and ... procrastinating there will not be any really good decision on where one should land. If these issues are taken on board by [heads of state in] the European Council and some steer is given, then I’m confident that a good result, one way or the other, can be reached. But if it remains at the level of ministers for some time — torn between their role as governors of EIB and governors of EBRD, most of them not with such a background in development — then I think we will have the worst-case scenario; namely that hardly anything will change. Why do you think heads of state have not yet given clear instructions about what they want for the future of EIB and EBRD? Usually, politicians act when things are on the verge of going wrong. As long as things appear to be by and large OK, they prefer not to take a decision. I think there are a couple of heads of state and other politicians who think much further ahead and try to flag issues where if you don’t do anything in two years, things will go wrong in five years, for example. That’s why the new president of the European Council has such a decisive role. It is about managing information and creating an awareness among those who may not see totally clearly why one needs to ramp up our activities, act in a more coordinated manner and why the quality and quantity of our spending needs to go up. This is not something that the normal head of state normally deals with. In the case of the U.K., France, and one or two others, because of their historic past, there is more cognizance of these issues. But the average, landlocked, European country, which has no colonial past … goodness. What impact could the move for a European Green Deal, with a key role foreseen for EIB, have on this debate? And where does that leave EBRD? The Green Deal is about 100 times more than just “how do we finance the ecological transition in sub-Saharan Africa.” I confine myself to saying it would be very peculiar if one had one bank financing ecological transition in Africa and another one doing all other development projects, wouldn’t it? Because there are hardly any projects with a positive impact on ecological transition, biodiversity etcetera, which are not first and foremost development projects and sometimes vice-versa. So how do you disentangle the two? If you had two banks with two different labels doing more or less the same thing in sub-Saharan Africa, give me a break. The situation would be even worse than now. Is this debate an existential fight for EBRD? It depends how you look at it. The way we portrayed it in the report was to show people what the corner solutions are: Having EBRD being the one who is doing everything on the African continent and EIB doing only Europe and accession countries, versus an EIB subsidiary doing everything in sub-Saharan Africa and EBRD more or less out, for now, doing what they do. Maybe the reality will not be a corner solution but somewhere in between. I think there will always be valuable projects and policies for EBRD to implement in its present area of operations, even if they keep to that. One complication you and others have raised in choosing EBRD to lead a European Climate and Sustainable Development Bank is its mixed ownership, including the likes of Japan and the U.S. However, Erik Berglöf, a former EBRD chief economist who sat on the expert panel you chaired, told me recently that the lack of EU control over EBRD is a “red herring” because “there is no meaningful example where the EBRD didn’t implement an agreed EU policy.” Is he right? Let’s say it’s a pink herring. No project has ever been voted down that the Europeans really wanted. But there is a certain sense of strategic intelligence in bank management that knows which projects to actually put into the pipeline so that they are not voted down. On the other hand, you have got to admit that within EBRD the Europeans are not unanimous on what they want. There is no sense of truly transporting a European development policy. And that is one of the things that we highlighted as one of the problems we are facing: no clearly articulated development policy that is so well articulated down into national policies that there is a greater sense of doing this together among the European representatives, inter alia in the EBRD. Suma Chakrabarti, president of EBRD, believes that what is needed now are political decisions, not more feasibility studies on top of the work EBRD is already doing. Is he right? I wouldn’t know precisely what EBRD are doing and I’m sure I don’t know what EIB has been doing over the past three or four years on this issue. Let me just say: At the end, it will be a very, very political decision, and not one taken by analysts, accountants or book-keepers. Despite the criticisms in your report, EIB and EBRD seemed to view it as a vindication of their existing plans — a development subsidiary for EIB and a move into sub-Saharan Africa for EBRD. Meanwhile, EU development ministers appear to be warning both banks not to just keep moving ahead with their plans, which would later make it harder for member states to choose either EIB or EBRD to lead EU development efforts. I had the same impressions as you just described, both on the reception of the report within the banks, and on the reactions within the development council. So, yes. I think people are quite concerned that things will just sort of steam-roller on. And how do you stop that happening? Politics. If politicians get engaged enough in these issues then you get political steer. And if they just let things happen and slide along then it doesn’t happen.