Saturday May 16, 06:37 PM
EBRD seeks to guide ex-Soviet bloc to economic recovery
By Roland Jackson
LONDON (AFP) - The European Bank for Reconstruction and Development met Saturday to help guide crisis-hit eastern Europe towards recovery and prevent a reversal of two decades of major economic reforms.
The EBRD, formed in 1991 to help former communist nations adopt market economies after the collapse of the Soviet Union, has switched attention to fighting the brutal financial crisis which has crippled its investment zone.
"Today we have the task to sustain the promise of 20 years ago, the enormous achievements in the intervening 20 years sometimes might be underestimated," EBRD President Thomas Mirow said in closing comments to the board of governors.
"With common efforts, I trust we can make sure that the future of our region will look as prosperous and successful as people had been longing for," added Mirow, who was Germany's deputy finance minister until his appointment in 2008.
The London meeting comes one month after the Group of 20 summit, where world leaders agreed that around 1.1 trillion dollars would go to the International Monetary Fund and other institutions to help fight global economic turmoil.
The crisis which erupted in late 2007 has ravaged economies in central and eastern Europe, largely because many of the countries had relied heavily on foreign capital or high commodity prices.
The bank had kicked off its two-day meeting Friday by revealing it would invest a record 7.0 billion euros (9.4 billion dollars) into the embattled region by the end of this year.
So far this year, it has ploughed a total of 2.3 billion euros, which is double the amount invested in the same period a year earlier.
"This bank was created to realise the hopes and aspirations of the peoples of our region of operations following the opening up of eastern Europe from 1989," said Ireland's finance minister Brian Lenihan, who is also EBRD chair of the board of governors.
"It has now a key role in ensuring that these hard-won gains are not damaged by the prevailing crisis."
Last year's gathering in Kiev was preceded by talk that the EBRD's work was nearing completion in central and eastern Europe -- and Australia had signalled that it would leave the institution in 2010.
Australia has now decided to remain as one of the EBRD's 61 shareholder governments as a result of the burgeoning financial crisis that has crippled economies worldwide.
However, Australia's delegation head Peter Reith argued Saturday that the country still "remains concerned about the lack of a clear long-term mandate for the EBRD."
But Mirow warned against abandoning international financial bodies that are needed in times of crisis.
"You should not give up too early a tool like the EBRD because more difficult times might appear in which you are very happy to have it," Mirov told a press conference at the end of the gathering.
Quizzed about the capital requirements of the EBRD, Mirow replied that the bank could invest between 7.0-8.0 billion euros (9.4-10.8 billion dollars) both this year and next year.
The EBRD, which has a capital base of 20 billion euros, will decide whether to alter its capital levels at the bank's next annual meeting in Zagreb, Croatia, on May 14-15, 2010.
Some shareholders think the bank needs to invest around 10 billion euros in 2010, and 15 billion euros in 2011.
The bank's investment zone -- 30 economies which stretch from central Europe to central Asia -- is forecast to shrink by a collective 5.2 percent this year before returning to growth of 1.4 percent in 2010.
The EBRD is owned by 61 governments as well as the European Commission and the European Investment Bank. It posted a record annual loss of 602 million euros in 2008 amid the worst global slump since the 1930s.
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