Interview Ernest Urtasun (MEP, Greens): “The EIB should do more and better”

Ernest Urtasun started his first term at the European Parliament in September 2014 where he represents the Spanish greens. As rapporteur of the EIB annual report he discovered the potential of the Bank but at the same time he warns that this potential can only be realised if the EIB significantly improves the quality of its projects.

In an interesting encounter Urtasun tells about his first months in Brussels and why the left needs to reunite forces here. He shares his concerns about the architecture of the Juncker Plan and gives his view on the role of public finance to get Europe out of the crisis.

How have you experienced your first months in Brussels?

Many things have been happening since I arrived. First there was the scandal of #luxleaks which was a shock for everyone. This has undermined a lot the credibility of the Commission and had a strong impact. Then of course we have had the proposal of the Juncker plan which is a good idea on paper but is pretty poorly implemented.

Brussels’ political context is very different from national politics in Spain. Why did you choose to run for the European elections?

My campaign focused on austerity policies and on how the dysfunctionalities of the Eurozone affect welfare systems and social rights in the periphery. For these problems the battle is taking place in Brussels. The left needs to understand that there is no way out of this strong neoliberal offensive with only isolated national battles. That does not work, and the case of Greece makes it clear. I think the left increasingly understands it needs to bundle its forces here, including at the level of the European parliament.

In your first months in the European Parliament you focused in particular on the European Investment Bank. It is not the sexiest or most visible institution, how did it attract your attention?

I got the chance to be rapporteur of the resolution on the EIB’s annual report. The EIB is a very interesting instrument but it is underused. It could do much more to tackle the lack of investment at European level by boosting aggregated demand. It is managing more than three times the capital of the World Bank and should be able to have much more impact. At the same time, the quality of the projects it finances needs to increase.

The work of civil society organisations like Counter Balance in raising awareness and monitoring the operations of the EIB is also a valuable source of information for parliamentarians to understand how the bank works and how it could be controlled.

What are the most striking issues you came across as the rapporteur of the EIB annual report?

I would mention two. Firstly, the European recovery plan was designed in complete isolation from the policy of the European Central Bank. It did not make sense at all to have these two institutions on two separated tracks. We need to combine the policies of both institutions. Therefore we ask in the report on the EIB for the expansion of the ECB to buy the bonds from the EIB.

The other issue that struck me was the evaluation of the Project Bonds Initiative. I come from Catalonia where the Castor Project is located, the flagship project of the pilot phase of the Project Bond Initiative. The project went totally wrong. Project Bonds are another example of an initiative which initially was a good idea but which has been extremely badly implemented and ended up with disastrous consequences.

What went exactly wrong with the Castor Project? What was role of the EIB and the European Commission which created the initiative?

The Castor project was poorly assessed. The EIB says it relies on member states to assess the risks but it should have done a much better job. The Spanish government relied on a report saying there was no risk but other reports which warned for the seismic risks in the area were already in circulation.

When we went to Luxemburg to talk to the bank we told them that we believe the bank’s projects should be subject to more stringent control. This goes also for the Commission which is involved in the identification of the projects.

In the case of the Castor project, a clause in the contract with the project developer determined that the Spanish government was obliged to take over the debt of EUR 1.4 billion. That loss will be passed on to the Spanish citizens through their gas bills. In the report we say that this should be avoided and the adoption of the report sends a strong signal to the EIB.

The logic behind this clause is that the public budget will cover failed private investments and this is not acceptable. Actually there are legal concerns about whether this clause is even constitutional in Spain. The Catalonian government and several NGOs have submitted complaints to the constitutional court against this clause.

Additionally, the EU Ombudsman is investigating whether this clause can be considered as illegal state aid. Transferring a huge amount of money to a private company can be considered as such.

In the future these clauses should absolutely be avoided.

Is there any willingness at the EIB and the Commission to assess these risks better?

The general reaction is that the EIB has no capacity to do this kind of control and that member states should be responsible. In the report we urge the EIB and the Commission to take responsibility as well. You cannot just lend money without control and strong due diligence.

The Juncker plan intends to fund more projects through project bonds-like mechanisms? Does it mean these projects run the same risk?

What happened with Castor is an important lesson for the future, It demonstrates that if there is no correct impact assessment of projects, it can happen again. Under the Juncker plan we could face similar problems, absolutely.

Does this approach undermine the effectiveness of the Juncker plan?

I don’t like the way the Juncker Plan has been designed. The risk sharng mechanisms on which it is based follow the logic of socializing risks and privatizing profits. It is very clear that this is the kind of financial mechanisms that we should avoid because the crisis showed us to what it can lead.

Additionally, nobody believes in the figures that have been presented. The leverage ratio of 15 will not happen and the contributions of the member states until now have been extremely low.

I’m also worried about the projects that will be selected. The list of potential projects provided by the member states has not been subject to a public debate. A discussion on what kind of projects we need is crucial. This cannot be solely decided at the level of experts and the so-called Task Force.

Overall, the Juncker Plan should be much clearer about supporting the kind of projects we want for the future. In addition, we have to allocate more public money to it otherwise the plan will not fly.

You already mentioned the EIB has quite some potential to do more and better. Why can the EIB not realise that potential currently?

The EIB has been too much obsessed by the protection of its AAA rating. It is nowhere written that if the EIB expands, it will lose that triple A and secondly it would not be a disaster because its position to access finance would remain very strong.

I’m in favour of the expansion of the activities of the EIB but of course we have to be very clear that we also need in parallel to increase the democratic accountability of the bank and reach full transparency of its work because some of the project it has been supporting have been a disaster.

If you look at the qualitative angle what are the main elements to improve?

First of all, the EIB energy policy needs to be improved. The EIB has done efforts but it is still too much focusing on the energy sources of the past. Its portfolio still consists of too many carbon-intensive projects and that needs to change. In the report we pushed for a phasing out plan for carbon-intensive project and we want renewable energy to stand at the core of the EIB energy policy.

Secondly, despite its current program on youth employment which is of course welcomed, the EIB is too much focused on large infrastructure projects. The banks policies should be better linked to social cohesion which I think is much needed today.

I could mention as well the external lending mandate of the EIB, its transparency policy, the EIB’s operations through tax havens and so on. There are many things to be changed at the EIB that are mentioned in the report and we will continue the battle to change that.