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EBRD seeks new leader to fight fresh fires
May 17, 2012 / 3:39 PM / 6 years ago

EBRD seeks new leader to fight fresh fires

LONDON (Reuters) - The impact of the euro zone crisis on emerging Europe and the political challenges of North Africa will occupy minds at eastern Europe’s development bank meeting in London this week, where a new president to deal with it will also be chosen.

The European Bank for Reconstruction and Development, set up in 1991 to enable the former communist economies of the Soviet Union to make the transition to the free market, hosts its annual meeting for its 65 country and multilateral shareholders on Friday and Saturday.

As well as choosing the president from a five-candidate field, shareholders will be voting on a 1 billion-euro fund for North Africa as one of the first projects in the bank’s new push into a region experiencing vast political upheaval.

Shareholders will also discuss the spillover from banking and growth problems in the euro zone and elsewhere into the EBRD’s original region of central and eastern Europe.

“The question of what can be done in order to mitigate risks of further contagion from the euro zone crisis to the region will be at the centre of discussions,” current President Thomas Mirow told a briefing this week.

Mirow and other EBRD officials are worried about the threat posed to emerging Europe from deleveraging by Western European banks and have started work on the a new programme, known as Vienna 2.0, to help banking stability.

Some analysts say the bank may be in danger of overstretching itself.

“When you think of the EBRD’s original mandate, it was quite a different region and set of problems from the issues it is facing with North Africa,” said Vanessa Rossi, global economics adviser for Oxford Analytica.

Emerging Europe, with its close proximity to the troubled euro zone, is still struggling to recover from the 2008/09 crisis.

“The EBRD has not finished with that problem when it has to get started with another quite different set of circumstances,” Rossi said.

The EBRD extended its mandate last year to North Africa due to requests from its shareholders and the international community, and has the expertise to carry out the job, an EBRD spokesman said.

The bank, which will issue revised 2012 growth forecasts at its meeting, has been predicting growth of more than 3 percent for emerging Europe this year, though below 2 percent for the richer central European economies, such as Poland and Hungary and euro zone countries Slovakia and Slovenia.

Where EBRD member countries in central Europe were once looking to “graduate” from being a recipient of EBRD funds and in many cases join the euro zone, those bets are off with the whole euro zone project looking creaky.

The EBRD will also publish growth forecasts for the first time for the North African countries in which it is starting to invest -- Egypt, Jordan, Morocco and Tunisia.

Egypt and Tunisia overthrew their presidents last year but are struggling to get back on a firm financial footing, and political instability remains a concern for the region.

The meeting marks the end of German Mirow’s four-year term as president. Mirow is standing for a second term, but his campaign lacks Germany’s backing, and the contest has turned into a five-horse race, widely seen as part of a tussle for other top European jobs.

He is up against four other candidates for his job -- from Britain, France, Poland and Serbia -- after European Union finance ministers, who hold a decisive vote in the process, failed to agree a candidate. Russia and Bulgaria have proposed his candidacy.

When Mirow joined the EBRD in 2008, Lehman Brothers was still a going concern, the Bank was predicting growth above 5 percent in emerging Europe and the full impact of the sub-prime crisis had not yet been felt.

The EBRD was facing calls to be closed down, merger with the European Investment Bank or to pay its shareholders a dividend from the profits made from its largely private sector investments.

The global financial crisis gave the EBRD a new lease of life. Shareholders agreed to increase the bank’s capital to 30 billion euros (24.65 billion pounds) from 20 billion and the EBRD spearheaded the Vienna Initiative which provided 33 billion euros to support banking sector stability in the region.

The EBRD added Turkey to the portfolio of countries in which it invests, and following the Arab Spring uprisings last year, extended its mandate to include North Africa.

Editing by Jeremy Gaunt.

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