This week, EU leaders are meeting to agree on a common response to events in the Mediterranean. A coalition of Western and Eastern European NGOs* issues a serious warning that the European Investment Bank and the European Bank for Reconstruction and Development are not the right institutions to financially support the transition in the Middle East and North Africa.

Since EU High Representative Catherine Ashton proposed in February that EIB lending to the Mediterranean be increased and the EBRD be given a role in “supporting the current democratic wave” in the region, figures are already being bandied around: the EBRD could make available as much as one billion Euros for Egypt and Morocco, while the EIB plans to increase lending to the Mediterranean countries by one billion Euros under EU guarantee for the next three years (adding up to a total of almost 6 billion). The 8 March EC Communication entitled “A Partnership for Democracy and Shared Prosperity with the Southern Mediterranean” (1), likely to be adopted during the Council meeting this week, envisages considerable roles for both the EIB and the EBRD in the economic but also political future of the region.

The problem with EIB lending in the region is certainly not insufficient funding. The EIB spent over €10 billion in the region since 2002. But EIB global loans are badly monitored, end up in the wrong hands and most importantly fail to meet the aspirations of the people in receiving countries (2). Lack of transparency over spending of EIB loans is an especially sensitive issue as corruption was one of the main reasons for the uprisings in the Mediterranean region. Even more, the fact that the EIB has not been able to guarantee its loans actually benefit local populations and not corrupted leaders and businessmen even in more stable political circumstances casts a serious doubt over the bank’s capacity to suddenly perform better in the current climate of political uncertainty.

Caterina Amicucci, from the Campaign for the Reform of the World Bank, says: “The European Parliament, which recently voted on the renewal of the EIB external lending mandate, reiterated last month that the EIB should increase transparency and improve development criteria and social and environmental standards. Until the EIB can live up to these demands, we call upon the European Council not to increase the EIB lending volume, especially not for the Mediterranean region where in some places military authoritarianism is trumping democratic movements. What could help in the region is a credible EU political initiative, not more European banking — the banks’ primary interest is not civic empowerment but rather taking advantage of the instability in the region to multiply business opportunities.”

Before the EIB’s lending mandate in the region is expanded, the bank should undertake a review of its previous lending in the region and take measures to ensure such funds do not end up in the wrong hands again.

The EBRD’ s mission – to assist the countries in central and eastern Europe and the former Soviet Union in their transition to market economies and multiparty democracy and pluralism – has been by the EBRD’s own measures achieved with mixed results. After twenty years of operation, so far only one of thirty countries, the Czech Republic, has graduated from recipient to donor country status. With no actual expertise in the Mediterranean, and no publicly available information on how its operations impact on poverty, there is no reason to trust the EBRD will perform better in this region than in post-socialist countries.

“After 20 years a sustainable and socially just society is nowhere to be seen in the EBRD region. Many of the countries that the EBRD works in remain poverty-stricken and authoritarian, and the economic liberalisation model promoted by the bank has taken a severe battering in the crisis,” says Bankwatch’s EBRD coordinator Fidanka Bacheva-McGrath. “This is hardly a good moment to declare victory and jump into a new, very troubled region, particularly with Egypt currently not even having a real government.”