EBRD Vice President Philippe Le Houérou today hailed a new spirit of cooperation among leading International Financial Institutions (IFIs) that has grown out of their joint support for the economies of Central and South Eastern Europe.
He was speaking at a presentation in Brussels of the results of the Joint IFI Action Plan for Growth in Central and South Eastern Europe which had brought together the EBRD, the World Bank Group and the European Investment Bank.
Under the Initiative, the three institutions pledged to provide funding of €30 billion in the two years to the end of 2014 as the region continued to struggle with anaemic growth in the wake of the eurozone crisis.
The final report from the JIAP showed that the three groups had far exceeded their financial targets, providing a total of €42.7 billion. They had supported more than 770 individual projects and had a substantial impact on the economies of the region.
The JIAP had been launched just as a recovery from the earlier global economic crunch had begun to falter. Le Houérou told the Brussels conference, hosted by the Bruegel think tank, that the banks had successfully responded to the renewed economic weakness. “Our job is to go against the wind – to be counter cyclical,” he said.
The programme was, however, not just about providing finance. There had been a very significant contribution via policy advice which, in turn, had improved the ability of countries in the region to absorb large-scale EU funding.
Just as importantly, this teamwork had taught the institutions how to work effectively together. “It is now in our DNA to cooperate,” Le Houérou said.
Looking forward, the lessons learnt in the Central and South Eastern Europe region could be applied elsewhere – in Ukraine, Moldova and Belarus – but also in new recipient countries of the EBRD, such as Greece or in North Africa.
The formal JIAP programme has now been concluded but Le Houérou and other officials from the institutions made clear that their work had to continue.
Even though growth had picked up, rates of expansion were still well below what is necessary to make sure the economies of the region could catch up with their more advanced neighbours.“The new normal is a much lower growth rate”, Le Houérou said.
World Bank Vice President Laura Tuck told the conference that this drive towards economic convergence had to carry on and she pointed specifically to the problem of continued high unemployment in the JIAP countries. The World Bank was placing a high priority on job creation – looking at both the demand and supply sides, she said.
The EIB’s Vice President Wilhelm Molterer said it was clear the regions problems were not yet over. Some sectors continued to be extremely vulnerable. Western banks were continuing to deleverage and to restructure in the region.
“We are facing a situation which – to put it mildly – is not easy.” The three banks would make the best use of their capacities as they cooperated together in the future, he said.
Gross financial inflows under the JIAP accounted for about 6 percent of annual investment into Central and South Eastern Europe, and were equivalent to about 1.5 per cent of the region’s total Gross Domestic Product.
Up to a third of the financing went to funding local commercial banks, allowing them to maintain their provision of credit to small- and medium-size enterprises, and supporting a rebalancing of the local banking sector.
Another third of JIAP assistance went to strengthening the region’s infrastructure, particularly for transport, energy, and communications, and helping to integrate the countries into Trans European Networks.
JIAP also financed investments to raise energy efficiency and help develop and promote the use of renewables, reducing the impact of climate change. Other projects strengthened the capital positions of banks; promoted the development of local capital markets; and improved the productivity, innovation, and export orientation of firms in the region.
The seventeen countries benefitting from the initiative consist of certain European Union member states (Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia) and EU candidate and potential candidate countries in the West Balkans (Albania, Bosnia and Herzegovina, Kosovo, FYR Macedonia, Montenegro and Serbia).
By Anthony Williams
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