Parliament’s vote on EIB’s external lending gives contradicting signals

On February 17th, the European Parliament voted on the conditions for the European Investment Bank (EIB) to lend outside the European Union until the end of the current framework (2007-2013)*. With a vast majority the Parliament called for transforming the EIB into a more democratic, transparent and accountable institution but at the same time it increased the amount the bank is allowed to lend.

By calling for stronger standards and transparency and by referring to the development objectives of the EU that the EIB is supposed to follow**, the Members of the Parliament indicated the direction which they see for the bank. However, increasing its lending before the EIB has provided any evidence that it can deliver limits the ability of EU decision-makers to put pressure on the EIB to undergo much needed changes. This is critical as Counter Balance researches have repeatedly proven that the EIB does not deliver on its development goals.

The Parliament's proposal for increased lending given to the EIB is for climate action projects (€2 billion) and the Mediterranean region (€1 billion). In both cases it is questionable whether the EIB is the right instrument to be used. Given the fact that the bank put more than €10 billion in the region and the ancient regimes since 2002, the Bank has not proven that it is a credible partner to respond to the Mediterranean people’s aspirations. Green investments are not always as green as they seem, for example the bank considers large hydros as green energy projects. Moreover, “green energy” is often meant for bringing energy to EU markets instead of addressing local people’s energy needs.

The vote came as a result of a several-year process that defined development cooperation as legal basis for EIB operations outside EU. In November 2008 the European Court of Justice ruled that the EIB must put development upfront in its lending outside the EU, something that the European Parliament and European civil society had been calling for. As a consequence, the European Parliament obtained co-decision power (together with the European Council) and the running mandate 2007-2013 had to be reviewed.

However the current document is not final. Following the plenary vote, the Parliament and the Council now have the challenging task to agree on a compromise about the future of EIB’s external lending until 2013. A final decision should be taken by October 2011 when the deadline given by the ECJ decision ends.

*The EU assures the EIB with a guarantee for possible losses when it lends outside the EU. The mandate serves as a set of conditions under which the EIB must operate in order to make an appeal to that guarantee. This is very important for its creditworthiness and turns it into an attractive partner for business.

** Literally: “More generally, EIB financing operations shall contribute to the general principles guiding the Union's external action, as referred to in Article 21 of the Treaty on European Union, of consolidating and supporting democracy and the rule of law, human rights and fundamental freedoms, and shall contribute to the implementation of international environmental agreements to which the Union is a party.” [Art. 3. Par. 1a]