Corporate welfare and development deceptions: Why the European Investment Bank isn’t fit for EU development work

cover report

cover report

The Counter Balance campaign today called for a winding-up of so-called development lending activities at the European Investment Bank (EIB), as the European NGO coalition issued a report detailing exactly why people living in poverty are failing to receive the benefit of billions of euros loaned each year by the EIB outside the European Union.[1]

As an NGO complement to the analysis of EIB development lending published yesterday by a Wise Persons’ Panel headed by former IMF head Michel Camdessus, “Corporate welfare and development deceptions: Why the European Investment Bank is failing to deliver outside the EU” concludes that EIB lending outside the EU is:

Incoherent, both with EU development policies and EIB legal obligations established by the new Lisbon Treaty and a European Court of Justice decision of November 2008.[2]

Incomplete, since opportunities for development provided by the unique capacity of the EIB to lend long-term and cross-sectorally are spurned in favour of socially and environmentally damaging projects with high rates of return for big corporations but few or no development benefits for the poor

Incompetent, as the EIB has neither the staff nor the organisational culture – in terms of both staff incentives and project appraisal processes – to carry out proper development work.

Desislava Stoyanova, coordinator of the Counter Balance campaign, said: “Civil society has given the EIB some time to respond to the new pressures for development lending put on it, but it’s now apparent that the EIB simply isn’t capable of doing the job and it should no longer be involved in EU development work.”

Alex Wilks, the author of the report, said: “The new Lisbon Treaty and the European Court of Justice decision make it very clear that EIB lending must lead to sustainable development and poverty eradication, and the EIB simply doesn’t do that. It is mired in an out of date ethos of corporate welfare and big contracts for multinationals, under the guise of development work.

“The EIB’s huge subsidies for fossil fuel and raw materials extraction, its insistence on loans not grants and habit of pumping billions into unaccountable and non-transparent intermediary banks, not to mention its near total lack of development expertise, make the EIB wholly unsuited for the task it’s been given in the developing world.”[3]

The ongoing plan to expand the EIB’s loan volume by 30 percent in 2010 and 15 percent in 2011, following a 30 percent increase in 2009, will aggravate the the EIB’s existing deficiencies, Counter Balance believes. However, the new report differs from the Wise Persons’ Panel conclusions in rejecting the need for a European Development Bank.

Desislava Stoyanova said: “The EU does not need to establish its own development bank. Adding yet another multi-lateral development bank to the existing global and regional ones would increase rather than diminish complexity and confusion. Our report argues instead for the channelling of EU development funds to existing multilaterals other than the EIB, especially the regional banks like the Bank of the South and the African Development Bank which are currently growing in capacity.”

For more information

Desislava Stoyanova, Counter Balance coordinator

Tel: + 32(0)2 893 08 61

Email: desislava@bankwatch.org

Alex Wilks, Independent consultant

Tel: +44 789 608 46 88

Notes for editors

1. Read the full report here and a power point presentations here

2. Under the amended Lisbon Treaty, (Art.21(2)(d) to (g)), the EIB’s mandate outside the EU, congruent with EU cooperation policy: “shall have as its primary objective the reduction and, in the long term, the eradication of poverty”. The ECJ decision of November 6, 2008 noted that: “the EIB’s involvement in the context of financial co-operation with third countries forms an integral part of development co-operation.” More background on this decision here.

3. Report author Alex Wilks, now a consultant, has monitored and advocated on aid and international financial institutions for 16 years, first at The Ecologist magazine, then at Bretton Woods Project and the European Network on Debt and Development. He founded Bretton Woods Project, and directed Eurodad, both specialised NGO policy networks which focus on the World Bank, IMF and other North-South financial flows.

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