A law unto itself

By David Cronin in The Guardian –

The EIB dwarfs even the World Bank with its lending. About time, then, that its EU masters exercised some ethical control.

Located in small and sleepy Luxembourg, the European Investment Bank is not in the habit of grabbing headlines. So perhaps it’s a measure of how desperate politicians are that they are portraying the EIB’s lolly as vital for economic resuscitation.

After raising its loans to small firms in September, the bank now looks certain to release up to €40bn to help Europe’s carmakers. Of course, this package will be sold as a lifeline to an ailing sector. But I can think of few causes less deserving than an industry that bears the dubious distinction of being one of the single largest contributors to climate change and has gone to every conceivable length to resist being subject to more stringent pollution limits.

The EIB’s low profile belies the enormous power it wields as the largest lender on the planet, commanding a portfolio twice that of the World Bank. Throughout its history, it has interpreted its autonomy from the main EU institutions as akin to immunity from having to follow such irksome policies as respect for human rights or protecting the environment.

While every other decision-maker is officially expected to promote the reduction and recycling of waste, the EIB thinks it can burn its way out of our ecological problems. Of 33 waste projects (pdf) it financed between 2000 and 2006, more than 20 involved incineration. Worse, it has thought nothing of showering money on vast road and airport schemes (pdf), including the expansion of Heathrow, heedless to the resulting rise in greenhouse gas emissions. And it has seen no problem in aiding western firms intent on making a quick buck in ecologically-destructive projects in developing countries. These include Gilgel Gibe, a dam under construction in Ethiopia, which is likely to deprive nomadic pastoralists of access to their grazing lands.

The EIB’s arrogance landed it in hot water earlier this month, when the European court of justice ordered that the bank’s lending facility for countries bordering the EU and for Asia and Latin America be redesigned. This ruling followed complaints by MEPs that these loans, worth nearly €28bn between 2007 and 2013, were not respecting agreed objectives on the reduction of poverty.

Pre-empting the verdict, the EIB announced in early October that it was about to review its external lending activities and had hired a team of “wise persons” to assist with this process. You only have to look at who will be chairing this team to distrust its “wisdom”. Michel Camdessus was head of the IMF from 1987 to 2000, during which time he presided over policies that triggered an economic crisis in Asia and left Africa poorer than it was when he assumed office. Asking him for advice about fighting poverty is like asking Jonathan Ross for advice on telephone etiquette.

The bank lacks any credible claim to independence. With the EU’s 27 governments, its chief shareholders and their finance minister sitting on its board of governors, it should be held to account just as much as any public authority. As it turned 50 this year, it’s about time the bank ceased behaving like a petulant teenager and finally accepts that it cannot be a law unto itself.

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