New EU bank could quadruple N. Africa, Middle East aid

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European financing for North Africa and the Middle East could rise four-fold to €10 billion a year if EU states back a plan for a regional development bank, an EU banker said on Tuesday.

The proposal is among measures being considered by the European Union to help a region swept by a wave of unrest that brought down governments in Tunisia and Egypt.

The Euro-Mediterranean co-development financial institution would be similar to the European Bank for Reconstruction and Development (EBRD) that assisted Eastern European countries in the 1990s after the collapse of communism.

Philippe de Fontaine Vive, a vice president of the European Investment Bank, the European Union’s financing arm, said the project would transform an EIB department into a subsidiary, in which states like Tunisia and Egypt would become shareholders.

"This new subsidiary would be able to borrow as much as needed for the region," de Fontaine Vive said.

He said calculations done for French President Nicolas Sarkozy, who has championed greater EU support for the bloc’s Mediterranean neighbors, showed such a facility should eventually be able to generate €10 billion a year.

The EIB’s existing Facility for Euro-Mediterranean Investment and Partnership provided about €2.6 billion to nine countries and territories in the region last year.

The proposal for the new facility would first need to be passed by the European Parliament, where it will be debated on Thursday, and then by member states.

Past proposals for such a Mediterranean bank have met resistance from northern European states. However, de Fontaine Vive said support appeared to be growing.

"I understand that with the democratic revolution that is taking place over the Mediterranean region a lot of member states are reviewing their position, because they believe this deserves a lot more support than at present."

He said a decision would be needed by October at the latest, when the legal basis for the EIB to operate outside the European Union ends. "We have been expecting a decision by the spring and we need it by October," he said.

EIB sees improved efficiency

De Fontaine Vive said the new financing structure would improve efficiency since beneficiary countries would be owners as well as recipients and also because it would be able to provide funds in local currencies.

"We would be able to do equity, for instance," he said. "We would be able to bring capital into companies, which we are not doing that much of for the time being."

The EU has been scrambling to re-evaluate its policies in response to the unrest that brought down authoritarian governments in Tunisia and Egypt that Europe and the United States had consistently supported.

While the European Union has expressed support for democratic change in the region, the unrest has raised concerns about Islamist radicalization and the possibility of new waves of unwanted migrants seeking to reach Europe.

Earlier, EU foreign policy chief Catherine Ashton said she would be seeking at least €2.5 billion ($3.4 billion) of extra funding to help support reforms in Tunisia, Egypt and other countries in North Africa.

Writing in the Financial Times, Ashton said she was in discussions with the EIB to mobilize €1 billion for Tunisia this year.

This would represent a doubling of the EIB’s current average annual lending for projects in the country, whose president was driven out by a popular revolt a month ago.

Ashton said she would also ask EU states and the European Parliament for another €1 billion of EIB money for North Africa and the Middle East, including Egypt, to support reform.

That would be on top of €8.7 billion the EIB has earmarked for nine countries and territories — Algeria, Egypt, the Palestinian territories, Israel, Jordan, Lebanon, Morocco, Syria and Tunisia — for the 2007-13 period.

Ashton also suggested the EBRD could provide at least €1 billion a year to "underpin transition in Egypt, for example."

Such a move by the EBRD, which is not an EU institution, would require the agreement of all its shareholders, not all of whom are members of the 27-country European Union.


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