EMBARGO UNTIL DELIVERY
Statement by Jean LEMIERRE
President of the European Bank for Reconstruction and Development (EBRD)
on the occasion of
the third part of the 2008 Ordinary Session
of the Council of Europe Parliamentary Assembly
(Strasbourg, 23-27 June 2008)
(Extract of the verbatim records)
Mr LEMIERRE (President of the European Bank for Reconstruction and Development) said that it was with the greatest pleasure that he was appearing before the Assembly this one last time. If members detected nostalgia in his speech and his answers, that would be entirely accurate. The rapporteur of the committee had spoken impressive words and produced both a thorough and comprehensive report on the work of the EBRD. The regional activity of the EBRD was in rude health, although of course some issues remained to be resolved. Among those important issues were growth, investment and the development of small and medium-sized enterprises. The economies of the region benefited from their proximity to the European Union, this being one of the reasons why the region was so much better off than a few years ago. The problems that remained to be resolved could be grouped together under a small number of headings.
The first was serious political instability in the west Balkans, which could hopefully be resolved over the next weeks and months. It was crucial that the European Union played a role in the stabilisation of the region. A second issue was the resurgence of inflation – it was high in the Ukraine and also pretty high in Russia and other countries in the region. The rise of food prices was particularly problematic in the region because it affected the poorest segments of society disproportionately. Food could often account for as much as 50% of the income of low income families in the region of activity for the Bank.
A third issue was international funding. At the beginning of the Bank’s work, capital flows and financial stability had been much greater. Now there were tensions in the financial and banking systems in the region, something that was not of their own making. In addition to the credit crunch, the stagnation of economic growth in the West made it harder for eastern European countries to increase their exports to the West. This was a source of tension.
Furthermore, the level of indebtedness was high and this caused problems, particularly because debts in foreign currencies exposed countries to exchange rate fluctuations. A problem which was only compounded by increasing levels of inflation. The solution was to take structural measures to create a climate that would foster growth in local production and thereby create new jobs. It was an important milestone that the Ukraine had now joined the World Trade Organization.
In response to these challenges, eastern Europe had a great deal of potential that could be exploited. The region was unique in the world in having more than 20 million hectares of fallow arable land. This land could be used easily to grow food, in fact it had been used to grow food in the past. There were no environmental issues, no deforestation or irrigation issues in doing so. The EBRD was seeking to contribute to this process of development by bringing together private investors and parties from the region itself.
he rise in energy prices had also affected eastern Europe, and the EBRD was supporting energy efficiency measures. In fact, the response from governments in the region had been impressive because they had achieved, through co-operation with the EBRD, three separate objectives which were rarely addressed as part of one policy measure: the environment, energy security, and business competitiveness. The lessons to be learned were that developing national facilities and mobilising domestic resources were key to good development policy. Doing so also helped to decrease dependency on international finance and vulnerability to exchange rate fluctuations.
The EBRD had now started to move out of central eastern Europe. By 2010, this would be complete and its work would be entirely refocused on the south eastern part of the region.
The EBRD had returned a very healthy €1.2 billion, 80% of which was put into reserve funds to safeguard its future work. Approximately 10% of the profit was going into a special fund for investment in the poorest countries in the region, while about another 10% was going towards special operations to assist with the Chernobyl clean-up. Of course, the objective was not to make money, but it was clearly impressive to be able to produce such profits, and the Bank was committed to putting this money to the best possible use for the region in which it worked. The future of the Bank was, of course, a matter for the board and for his successor as well as the many shareholders inside and outside Europe. He was grateful to all the governments which had contributed so strongly to the work of the EBRD and special thanks were due to the non-European shareholders such as Mexico and Canada, who helped to ensure that it was a truly multilateral organisation. A key characteristic of the work of the Bank was the way in which it brought the private and public sectors together in a focus on transforming democracies and installing the rule of law in eastern Europe. It was important that the Bank did not lose focus but that it drew on its collaboration with other institutions such as the European Bank, which had itself developed an entirely new way of working.
Turkey, which was itself a shareholder in the EBRD, had now also requested to be a recipient of assistance from the Bank. A clear and swift response to Turkey’s request would be finalised by October. Many other countries were also keen to have EBRD assistance.
Successive Presidents, many rapporteurs and staff had all acted as great partners in the dialogue with the EBRD. He wished to thank them all, especially all those who went to London at the beginning of each year to ask questions and challenge the EBRD about its work. This had been a constructive process. The founding fathers of both organisations had the same aims and, on behalf of all of the staff, he would like to express gratitude for the valuable advice and constructive criticism that the EBRD had always received from the Council’s Assembly. They would do their level best to respond to any questions which members might have this afternoon.