The European Investment Bank (EIB) may see its action in the Mediterranean competing with efforts by the European Bank for Reconstruction and Development (EBRD) if the latter’s mandate were to be extended to this region. At the same time, debate on the creation of a Euro-Mediterranean investment bank as a subsidiary of the EIB is resurfacing.

As the ‘Arab spring’ unfolds with its massive and determined demands by populations for strong economic and social development in free and democratic societies, the creation of a Mediterranean development bank has come back into the spotlight as a particularly timely debate.

The idea fizzled out on several occasions but finally, in 2002, resulted in the creation within the European Investment Bank (EIB) of the Facility for Euro-Mediterranean Investment and Partnership (FEMIP) and its reinforcement four years later. The sea changes taking place in the last few weeks in the Southern Mediterranean countries and the changing relations between the two banks of the Mediterranean that will result nevertheless place in an entirely new light the question of the usefulness of a specific financial instrument.

The response is not simple or obvious. International finance tools already exist, from the FEMIP to the World Bank along with many other bodies. What is perhaps urgent in this connection is their coordination. However, the creation of a Mediterranean bank is a more ambitious and more political initiative.

The EIB has already expressed its interest and availability to take the plunge, contributing a significant part of the capital along with its expertise. The FEMIP’s experience, its operational presence and its accomplishments on the ground over the years make it in principle a vital player in such a project. The important meeting of economy and finance ministers of the EU and their Mediterranean partners, in July 2012, could be a perfect opportunity to create this Mediterranean bank.

The scenario is not written yet, however. Other players are also expressing an interest in this leading role. The latest to date is the EBRD.

At the recent extraordinary European Council on Libya and the Mediterranean region, on 11 March, the heads of state and government preferred, after some hesitation, to stay silent on these two proposals. It is virtually certain that the proposals will be discussed at the summit, on 24-25 March.

FEMIP

Since the FEMIP was created in 2002, the EIB, the financial institution for EU member states alone, has played an ever more important role in the Mediterranean countries ⁽¹⁾. The FEMIP, which groups all EIB intervention instruments, aims to grant loans to enhance the region’s social and economic development. In 2010, lending totalled €2.6 billion or 40% more than in 2009 (see box). Recently (in February this year), the EIB proposed to increase its lending to around €6 billion in the region by 2013.

The trip to Tunisia, on 2-3 March, by EIB Vice-President Philippe de Fontaine Vive, responsible for Mediterranean financing, was meant to be a tangible illustration of the EIB’s greater role in the region. The idea was to translate into reality the declarations by the Union’s High Representative for Foreign Affairs, Catherine Ashton (12 February), on an increase in loans to €900 million for 2011.

“We reviewed all existing loans with the Tunisian authorities. Then we agreed to accelerate things,” the EIB vice-president told Europoliticsfrom Tunis. In concrete terms, the EIB decided to release around €1.2 billion for existing projects and to add another €600 million in credits. The projects mainly concern infrastructure and the development of small and medium-sized enterprises.

POLITICALLY SENSITIVE DEBATE

However, the crises in the EU’s Southern neighbourhood triggered a debate on a larger scale, a politically sensitive debate on the operations the EBRD could also develop in the region.

Created after the collapse of the Soviet bloc to help its former members to shift to the private economy and to catch up economically, the EBRD has recently started extending its activities to additional geographical areas. Curiously, the prospect of permanent intervention by the EBRD in the Mediterranean, which includes non-European states, among which the United States, in its capital and consequently in its governance, does not prompt unanimous misgivings by the 27 in spite of the competition with the action of the FEMIP and the economic and political influence that would result.

The EBRD belongs to 61 states, the EU and the EIB. In other words, it is an international financial institution whose shareholders include the United States, Canada, Japan and Australia, in addition to the EU member states, but also Egypt, Morocco and Israel among the Southern Mediterranean countries.

In their joint communication on the new strategy in the Mediterranean, the European Commission and the Union’s high representative encourage and support the possibility of “the extension of EBRD operations” to the Mediterranean countries and “call on EU member states and other shareholder governments to support it urgently,” reads the document.

The heads of state and government did not respond to this appeal at the latest European Council in the absence of consensus and time for discussion. The evolution of the draft conclusions on this point was very revealing. Originally, the 27 proposed an evaluation of the “possible extension of the EBRD mandate to the Southern neighbourhood” in parallel with a review of possibilities to increase overall EIB financial support. In the end, this was left out of the final text. The Council preferred to state that “coordination with other international financial institutions is important”.

BANK FOR THE MEDITERRANEAN?

At the same time, the idea of creating a Euro-Mediterranean investment bank, supported by EIB President Philippe Maystadt, has been put back on the table.

The project is not new: the Commission supported it as early as 2002. However, it went no further given the limited interest of a majority of member states.

The main idea is to transform the FEMIP into a genuine Euro-Mediterranean bank in order to associate the Southern Mediterranean states fully in decision making. This new bank would therefore be a subsidiary of the EIB but could include the EBRD among its shareholders, according to an informed source. The project was relaunched at the meeting of the Parliamentary Assembly of the Union for the Mediterranean, on 4 March in Rome, in the presence of the EIB president.

Here, too, the question was brought up at the recent European Council but the 27 preferred not to take action. France wished to mention the project in the conclusions but other member states ruled this premature. Accordingly, the passage on the necessity of examining “the possibility of transforming the FEMIP into a Bank for the Mediterranean, as suggested by the EIB president” was deleted from the final draft conclusions, which already no longer referred to the EBRD either.

At the same time, the idea of creating a Euro-Mediterranean investment bank has been put back on the table
⁽¹⁾ Algeria, Egypt, Gaza/West Bank, Israel, Jordan, Lebanon, Morocco, Syria and Tunisia