EBRD should extend its Scope to MED Countries
May 14, 2008
The European Bank for Reconstruction and Development was created in 1991, after the collapse of the Soviet Union, to bolster the economic development in the Central and Eastern Europe. During the first 16 years of its existence it has extended loans to business and the public sector for an amount of $ 27 billion. It has thus become the main public lender in Central and Eastern Europe. But compared to the EIB with more than a 10fold lending volume it remains a dwarf.
Since its start it has radically shifted the geographical emphasis of its operations. The initial focus on Central Europe is about to disappear. New loans in EU member states will be phased out by 2010, so that all future lending will go EAST: Ukraine, Moldova, the three small Caucasian countries and Central Asia up to Mongolia.
Upon proposal from the EU, Turkey is about to join the borrowing countries. The EBRD has decided so in early May. That is a wise decision, considering Turkey’s huge capital demand, inter alia for the development of its renewable energy resources.
The EBRD should not stop there. Egypt, Israel and Morocco are – symbolic – contributing members, but without the right to borrow. There is no reason to bar them from also borrowing in the future. The EBRD would constitute a useful complement to EIB lending in the MED because of its experience with financing business ventures, something sorely needed around the MED. Countries like Morocco, Algeria, Tunisia, Egypt, Jordan and Albania should be natural clients.
Opening the EBRD to financing in the MED will put and end to repeated calls for a separate “Mediterranean Financial Institution”, for which the market is too small.
