the eib and europe's global influence
tHE FUTURE OF EXTERNAL LENDING BY THE "EU BANK"
Autumn 2013
Media partner
THE EIB AND EUROPE's global influence:
the future of external lending by the "eu-bank"
Dinner debate
co-organised by Friends of Europe,
and European Investment Bank
with media partner Europe's World
Autumn 2013
Brussels
This report reflects the conference rapporteur’s understanding of
the views expressed by participants. Moreover, these views are not
necessarily those of the organisations that participants represent, nor
of Friends of Europe, its Board of Trustees, members or partners.
Reproduction in whole or in part is permitted, provided that full credit
is given to Friends of Europe and that any such reproduction, whether
in whole or in part, is not sold unless incorporated in other works.
Rapporteur: David Koczij
Publisher: Geert Cami
Project Director: Nathalie Furrer
Programme Manager: Lindsay Digneffe
Photographer: Jan Van De Vel
Design and layout: Cristina Frauca
Friends of Europe – Les Amis de l’Europe
4, Rue de la Science, B-1000 Brussels, Belgium
Bibliothèque Solvay, 137 rue Belliard, B-1040 Brussels, Belgium
Tel.: +32 (0) 2 893 98 21 – Fax: +32 (0) 2 893 98 29
Email: [email protected]
Website: www.friendsofeurope.org
© Friends of Europe - November 2013
Table of contents
introduction
6
The EIB: An effective instrument of
external EU policy8
EIB operations outside the EU
11
negotiating the External Lending
Mandate (ELM)
13
ANNEX I - Programme17
6
Friends of Europe | Dinner debate
INTRODUCTION
The European Investment Bank (EIB), in addition to being among the largest
multilateral lenders in the world, is a powerful multiplier of the EU’s foreign policy
and development efforts.
As consultations between the European Parliament and the European Council
continue on the scope of the EU’s External Lending Mandate (ELM) for the 20142020 period, Friends of Europe’s dinner debate, entitled “The EIB and Europe’s
Global Influence: The Future of External Lending by the ‘EU Bank,’” brought
together a group of experts to discuss issues related to the EIB, the ELM, and
Europe’s role in a changing world.
“The ELM is a tool that helps the EIB operate in some 160 countries worldwide,”
noted moderator Shada Islam, Director of Policy at Friends of Europe. “The EU
and its foreign policy are changing and we have to come to terms with an ELM
that reflects this.”
“The fact is that the EU is becoming a smaller place in an
increasingly bigger world. We need to think about how to join our
strengths to defend and enhance our interests and values on the
global level.”
Ben Knapen, Permanent Representative of the EIB in Brussels
“In this debate, we are using technical terms to discuss a political issue – the
position of Europe in the world,” noted Ben Knapen, Permanent Representative
of the EIB in Brussels. “The fact is that the EU is becoming a smaller place in an
increasingly bigger world. We need to think about how to join our strengths to
defend and enhance our interests and values on the global level.”
For the first time in history, the European budget for 2014-2020 will be decreased,
stressed Ivailo Kalfin, Member of the European Parliament Committee on
Budgets. “We need to start thinking about more efficient tools and instruments,”
The EIB and Europe's global influence: The future of external lending by the "EU Bank"
7
he added. “Supported by the EU’s budget guarantee, the EIB is able to leverage
25-30 times the amount allotted. There is no other institution in the world that
can deliver comparable results.”
Fundamentally, the EIB was created as an institution to leverage funds within the
EU, indicated David O’Sullivan, Chief Operating Officer at the European External
Action Service (EEAS). “As an internal instrument, the EIB has always been a
productive and valuable tool,” he added. “Now, we see that the external scope
of its mandate is growing. Though small in relation to its overall structure, the
Bank’s presence outside of Europe adds economic and political value to the EU.”
The mid-term review of the EIB’s external mandate for the period 2007-2013,
conducted by a steering committee of ‘wise persons’ led by former International
Monetary Fund Managing Director Michel Camdessus, concluded that the EIB
was a powerful instrument of the EU’s external policy1, stressed Tamsyn Barton,
Director General for Operations Outside the EU at the European Investment Bank
(EIB). Since then, the Bank has made key changes to increase the quality of
Speakers included from left to right: Tamsyn Barton, Director General for Operations Outside the EU at the
European Investment Bank (EIB), Ivailo Kalfin, MEP, Shada Islam, Director of Policy at Friends of Europe,
David O'Sullivan, Chief Operating Officer at the EEAS, and Ben Knapen, Permanent Representative of the
EIB in Brussels
1
The full report can be consulted online at http://www.eib.org/attachments/documents/eib_external_mandate_2007-2013_mid-term_review.
pdf
8
Friends of Europe | Dinner debate
lending, a new Results Measurement Framework, new synergies with the EEAS
and EC, and new modalities of co-operation with other IFIs, such as the Mutual
Reliance Initiative.
“Though of course quality is important in the Bank’s lending outside the EU, scale
matters,” she said. “The headroom for lending under the ELM has been reduced
in the current Council proposal and this is cause for concern.”
The EIB: An effective instrument of
external EU policy
In this time of austerity, budget constraints in the EU member states are tending
towards reductions in the external operations of the EIB. “This year we are
spending almost one billion euro in our Eastern neighbours and Central Asia
(ENCA region). The reduction for next year could be as dramatic as 50%. We
are witnessing similar reductions in other important parts of the world: Asia, Latin
America, and BRIC countries such as South Africa,” said Barton.
“Given the span and interests of the EU in the world, what is important is to
keep the levels we have presently,” stressed Kalfin. Lending levels in the EU
neighbourhood, specifically the Western Balkans, have decreased in recent
years, he added.
While its role is fundamentally about leveraging funds in the EU, the external
dimension of the EIB’s work has been very useful for the EU’s image and standing
in the world. “The Bank’s external work, though beneficial, is not endlessly
expandable,” indicated O’Sullivan. “At the end of the day, the EIB is still a bank
and, though we would like it to fulfil EU policies, it must also remain commercially
viable.”
“The EIB is a special bank,” stressed Kalfin. “In the European Parliament, we
tend to be pushy with regards to the ELM, as we recognise that this is the EU
Bank.” At the same time, it is important to remember that the EIB is an AAAcertified International Financial Institution (IFI).
As a bank, the EIB is held to a strict set of requirements related to EU standards
The EIB and Europe's global influence: The future of external lending by the "EU Bank"
9
found in no other IFI. It is responsible for reporting on results, for which it
developed the Results Measurement Framework (REM), launched in 2012.
The REM monitors the results and development outcomes of EIB-supported
projects, noted Barton.
Furthermore, she continued, the EIB is committed to working with the EU
institutions, specifically the European Commission and the European External
Action Service develop the agreed regional technical guidelines for all of its
lending programmes, which set EIB’s lending firmly within EU external strategy.
“This year we are spending almost one billion euro in our Eastern
neighbours and Central Asia (ENCA region).The reduction for
next year could be as dramatic as 50%.”
Tamsyn Barton, EIB Director General for Operations Outside the EU
There are three priorities for lending under the ELM: first a focus on the
development of social and economic infrastructure in regions outside of the
EU neighbourhood; second, projects that aim to mitigate and adapt to climate
change; third, lending to SMEs.
10
Friends of Europe | Dinner debate
“The focus on social and economic protection, climate change mitigation, and
results-oriented lending are unique to the EIB,” concluded Kalfin. “I cannot think
of any other IFI that is held to such high standards.”
In the past, using the EU’s budget guarantee, the EIB has financed EU
investments in emerging economies, with beneficial results. When deciding on
such investments, the question then, as now, is whether to focus on quantity or
quality, noted participant Gerassimos Thomas, Director of Finance, Coordination
with EIB Group, European Bank for Reconstruction and Development, and IFIs
at the European Commission Directorate General for Economic and Financial
Affairs.
“The focus on social and economic protection,
climate change mitigation, and results-oriented
lending are unique to the EIB. I cannot think of
any other IFI that is held to such high standards.”
Ivailo Kalfin, Member of the European Parliament Committee on
Budgets
“The composition of foreign investments undertaken by the EIB matters more
than the amount loaned,” he added. “We need to leverage our efforts to better
promote our policies in our partner countries and in other IFIs.”
The risk inherent in the declining level of available funds is a diminished influence
of EU policies, interests, and values outside the EU.
In order to increase this influence, the EEAS whenever feasible hosts EIB offices
within EU representations worldwide.
The symbolic value of European presence through the EIB is not to be undervalued.
A reduction in the number of projects in which the Bank is implicated can be
detrimental to the EU’s image abroad. “Even a small drop in the ocean can make
a big splash in terms of how the EU is perceived externally,” Barton said.
The EIB and Europe's global influence: The future of external lending by the "EU Bank"
11
EIB operations outside the EU
Iulian Groza, Deputy Minister of Foreign Affairs and European Integration
of Moldova, indicated that his country’s cooperation with the Bank is very
concrete, encompassing eleven projects valued at 200m euro.
These projects are mostly centred on infrastructure development, though
support for the modernisation of Moldova’s agricultural sector, in particular
viniculture, has been very fruitful.
“Moldova is one of the EIB’s success stories. With continued and
increased support, I hope we can ensure that this partnership
continues.”
Iulian Groza, Deputy Minister of Foreign Affairs and
European Integration of Moldova
Manana Kochladze, Regional coordinator for
the Caucasus , CEE Bankwatch Network.
“Cooperation with the EIB is very target-oriented,” he said. Since 2008, there
has been a fourfold increase in exports to EU markets from Moldova, owing in
large part to Moldova’s bid to join the EU and closer economic ties between
the two. “Moldova is one of the EIB’s success stories,” he concluded. “With
continued and increased support, I hope we can ensure that this partnership
continues.”
Turkey has benefited from a substantial volume of EIB loans, stressed Orhan
Beskok, Senior Executive Vice President at the Industrial Development Bank
12
Friends of Europe | Dinner debate
of Turkey (TSKB). Since 2000, the country has received 20bn euro and 2.5bn
alone in 2012.
The sectors to which these loans have been directed include - but are not
limited to – the environment, SMEs, transport, combating deforestation, and
most recently, to the municipality of Istanbul for a project to update the city’s
earthquake preparedness.
“The challenge for China and the EU is how to integrate
this populous country into the multi-lateral system that our
predecessors created after the Second World War.”
Ben Knapen, Permanent Representative of the European
Investment Bank (EIB) in Brussels.
Thomas Gerassimos, European Commission
Director for Finance and Coordination with EIB
Group, EBRD and IFIs.
The relationship of the EIB with partner countries is not always based solely
on financing development through the ELM, noted Barton. China, which has
in recent years become a dominant economic player on the world stage, has
developed a relationship with the EU and the EIB based on an agenda of mutual
interest and knowledge transfer, particularly on climate change mitigation.
“The challenge for China and the EU is how to integrate this populous country
into the multi-lateral system that our predecessors created after the Second
World War,” stressed Knapen. “The EU and EIB would like to see China
become a stakeholder in this system. This means that we have to interact with
each other while defending our own interests.”
The EIB and Europe's global influence: The future of external lending by the "EU Bank"
“When the EIB engages with China, we need a strategic understanding between
us on how this engagement can tie into other areas of EU-China cooperation,”
noted O’Sullivan. “We need to be part of a useful network and to build financial
links between these two economic giants.”
Boosting the external perception of the role of the EIB and the EU must begin
at home, with consensus on the value of the EIB to Europe’s external policies.
“We still need to work on illuminating that what the Bank is doing fits into the
overall strategies of the EU with regards to its external policies,” he noted. “We
need to demonstrate to the member states and the European Parliament that
these are not disconnected efforts.”
Negotiating the ELM
The discussion on the ELM for the 2014-2020 period should be conducted
against the backdrop of the EU’s interests and values. “The principles of rule
of law, democracy, transparency, sustainability, inclusiveness, and so on, are
what hold the member states of the EU together,” stressed Knapen. “The EIB is
demonstrating that it is possible to do more with less and, with the ELM, the EIB
can be an important player in leveraging budget constraints.”
As the EU’s budget is set to decrease over the next period, it behoves decision
makers to consider more efficient tools and financial instruments. With a
multiplying effect of 25-30 times, the EIB offers such an instrument.
To maintain lending at current levels, indicated Kalfin, relatively minor sums need
to be considered. The EIB’s AAA rating as an investment institution is supported
by the EU’s budget guarantee fund for external actions, set up in 1994 to cover
defaults on loans outside of the EU.2
The guarantee fund is taken from the EU’s budget and exists to cover the risk of
defaulted loans to the EIB and other European financial institutions. This means
that “in order to increase lending by 2bn euro – which would bring in roughly
50-60bn in additional lending – we need not more than an additional 55m in the
guarantee fund from the EU budget,” he stressed.
2
http://www.ec.europa.eu/economy_finance/financial_operations/market/guarantee_fund/index_en.htm
13
14
Friends of Europe | Dinner debate
The alternative to this relatively small increase in EU funding of the Bank’s
activities is a huge gap in EU activities in the world, he noted, adding that “every
euro allocated for the ELM will result in large returns on investment.”
In other words, Knapen indicated, the current discussion between the European
Parliament and Council on raising the guarantee by 200m euro means that an
additional 5bn euro can be counted on for investments both inside and outside
of the EU.
“The budget guarantee is a very efficient instrument,” Thomas said. While the
changing world economy has caused some accepted ideas to be challenged,
there are worse ways to spend taxpayers’ money. The discussion is therefore
about the size, rather than the existence of the ELM.
“I support that the core business of the EIB is in Europe,” he added. “When we
are discussing the size of the ELM – which in the worst case will be 900m and in
the best 1.4bn – we are not talking about enormous sums of money.”
“The EIB is demonstrating that it is possible to do more with
less and, with the ELM, the EIB can be an important player in
leveraging budget constraints.”
Ben Knapen, Permanent Representative of the EIB in Brussels
“The position of the European Council with regards to the ELM is that, with
limited resources available, we would prefer that the Bank concentrate them
on pre-accession countries and the European neighbourhood,” stressed Migle
Tuskiene, Financial Counsellor at the Permanent Representation of Lithuania to
the EU. However, it is important to note that EU presence in all regions of the
world is an important goal that remains to be decided upon.
The European Parliament has presented suggestions to the Council – in particular
on financial reflows – on how to make a reduced amount of money that exists
go further without placing additional strain on member state budgets, noted
O’Sullivan.
The EIB and Europe's global influence: The future of external lending by the "EU Bank"
15
“We do hope that some sensible solutions can be found so that the ELM can
allow the EIB to continue its good work abroad, as a supplement to the Bank’s
core business of investing in the EU and its immediate neighbourhood,” he
concluded.
The European Parliament, as part of its presentation to the Council, suggests a
mechanism that would not require additional spending by the member states,
noted Kalfin. This mechanism would funnel a portion of the accumulated funds in
the Mediterranean Fund in order to restore current levels of ELM funding.
This can be accomplished in two steps, he continued, first by adopting a certain
figure and then using the ELM’s midterm review to free up additional funds. During
the previous budget period, a similar process was used, resulting in increased
funding for the EIB – specifically 2bn euro for climate change actions and 1.7bn
for lending to all regions.
“We do hope that some sensible solutions can be found so that
the ELM can allow the EIB to continue its good work abroad, as
a supplement to the Bank’s core business of investing in the EU
and its immediate neighbourhood.”
David O' Sullivan, Chief Operating Officer at the EIB in Brussels
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Friends of Europe | Dinner debate
The benefit of these suggestions by the European Parliament, he stressed, is
that the costs to member states already under economic stress is minimal and
potentially non-existent. “I am trying to win this argument with the Council,” he
concluded. “I hope we can achieve an acceptable result by the end of this year
and finish this conversation during the Lithuanian Presidency.”
The EIB and Europe's global influence: The future of external lending by the "EU Bank"
Annex I – Programme
Operating in 160 countries, the EIB is not only the largest multilateral lender in the
world but also the only EU Bank which delivers support for the EU’s external priorities.
The Bank provides finance and technical assistance to projects worldwide, applies
EU standards policies to all its operations and as such is uniquely placed to support
Europe’ external activities and development efforts by transferring knowledge and
experience. As discussions continue on a new external lending mandate to establish
the EIB’s priorities for 2014-2020, it is important to reflect on several questions
related to the Bank’s levels of lending and ability to respond quickly and efficiently to
a changing global political and economic environment. What should the EIB role be
in sustainable development, job-generation and bolstering the global drive towards
poverty alleviation now that grants are declining? The EIB invests in areas such as
infrastructure, private sector development and climate action. What are the benefits for
project promoters, partner countries and their people? Procedures for development,
social and environmental impact assessment and project monitoring: What has been
done and is it effective? How can demands for greater Bank transparency, reporting
and public consultation be met without increasing bureaucracy and red tape, and
without causing business confidentiality breaches? What is the importance of the
EU guarantee under the external lending mandate and how does it help the Bank to
boost Europe’s role and influence worldwide?
Featuring:
David O' Sullivan
Chief Operating Officer at the European External Action
Service (EEAS)
Ivailo Kalfin Member of the European Parliament Committee on
Budgets
Representing the EIB:
Tamsyn Barton
Director General for Operations Outside the EU at the
European Investment Ban (EIB)
Ben Knapen
Permanent Representative of the European Investment
Bank (EIB) in Brussels
Moderated by Shada Islam, Director of Policy at Friends of Europe
17
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