The EBRD lacks a convincing role

The EBRD lacks a convincing role

Gone are the glory days under flamboyant Jacques Attali when the European Bank for Reconstruction and Development was doing more for the Italian marble industry than for the transition economies of former communist countries. But as delegates grappled with the concrete maze of the Barbican at the £1.5m annual meeting jamboree in London, the precise purpose of the EBRD remained as much of a riddle as ever.

Jacques de Larosiere, the president, presented a solid scorecard of achievement to the board of governors.

The total commitment of approved financing grew by over 70 per cent to reach a total of £4.5bn by the end of 1994. For the first time, the bank met the target of over 60 per cent of its resources going to the private sector. At the same time budget cuts had kept the bank's administrative expenses below the 1993 level.

But while the new emphasis on economy met with approval, few disagreed with the view that the bank's running costs remained too high. Germany's Finance Minister, Theo Waigel, raised again the question of the cost of the London headquarters. And the US Treasury's Larry Summers described the cost of the bloated board of directors - reckoned to be 12 per cent of administrative costs - as "clearly excessive".

But the continuing focus on these questions only served to highlight the question: what is the EBRD really for?With less than a billion pounds of funds actually disbursed to date by the bank, the EBRD's role in the economic improvement of central and eastern Europehas been modest.

The Realpolitik of setting up the bank had much to do with French concern about Germany reasserting its pre-war economic dominance over eastern Europe. The attempted demarche has not worked. As Mr Waigel perhaps tactlessly reminded delegates, the total value of German assistance now comes to £65bn - more than half the total support pledged by the West.

The EBRD contends that it can play a catalyst role, mobilising twice as many funds as it puts in itself.

It can also invest in worthwhile projects - particularly infrastructure - that the private sector would reject as too risky. Critics argue that it "cherrypicks" projects that would get funding anyway.

The bank is now lobbying for more capital funds, pointing out that its initial capital of about £8bn will be fully committed by the end of 1997.

A decision won't be taken at this meeting. But while the French and the Germans indicated they may approve an increase, Mr Summers was sceptical about whether the bank would be needed in its present form. The EBRD may have gained respectability, but nobody can yet find a convincing role for it.