The European Investment Bank (EIB) is a European institution little known by the greater public, but one which policymakers and technocrats are fully acquainted with, appreciating its vital role in EU-wide investment.
Founded in 1957 by the Treaty of Rome, the EIB’s mission is“to contribute, by having recourse to the capital market and utilising its own resources, to the balanced and steady development of the common market in the interest of the Community.”(Article 130).
This is a broad mission that was originally defined as including aiding the development of EU Member States, modernising European infrastructure and financing projects of EU-wide interest. Today, these goals have grown to include the“implementation of the knowledge economy”or supporting European innovation, research and development;“developing Trans-European Networks (TENs)”or modernising vital EU infrastructure in sectors such as energy, telecoms and transport; supporting SMEs; and protecting the environment. The EIB also operates in neighbouring states and throughout the world in over 150 countries to promote European interests.
The EIB functions in a similar manner to a typical investment bank. Despite many misguided articles on the subject, the Bank does not receive European taxpayer funds and generates its own resources through raising them on capital and bond markets. Until recently (January 2012), it benefited from a top-notch AAA credit rating, but this been seriously put into questions over the last few days by the downgrading of nine EU Member States, who are the EIB’s shareholders and on who’s ratings the Bank depends on for its own rating.
The European Investment Fund (EIF) is also operated by the EIB, which is its venture and risk capital fund for SMEs across Europe. Together, they form the EIB Group. As of April 2010, at the end of the previous tri-annual cycle, the EIB’s total capital exceeded €232bn whilst the EIF has capital worth €3bn.
The EIB is accredited as a multilateral development bank and is the world’s largest bank and lender, exceeding the World Bank and the IMF. Examples of projects range from financing motorways in Romania, to helping waste water treatment in Belgium and financing the first tramway in Besançon, an Eastern French city. Transport for London (TfL), London’s public transport authority just received a £1bn loan from the EIB to finance the Crossrail project.
Like other international investment banks and its peers at the Bretton Woods Institutions (the IMF and the World Bank), the EIB has drawn substantive criticism from many quarters including development NGOs. In a recent article for European Voice, Manana Kochladze, a campaigner for CEE Bankwatch, heavily criticised the EIB for funding fossil-fuels, claiming the EIB was thereby failing its remit and usurping the funds of EU citizens.
Mrs. Kochladze is also a member of a European coalition of NGOs called Counter-Balance the EIB. Its mission, according to its website, is to transform the EIB into“an open and progressive institution delivering on EU development goals”.
This is not unusual language coming from left-leaning and environmental NGOs concerning banks and it is quite overused in these days of financial austerity; however, the EIB is dependent on financial markets for raising its own funds. Despite many misconstrued ideas of financial markets, as human institutions, they tend to resent opacity and punish it consequently. This would severely curtail the role of the bank and its access to finance, yet, tellingly, this has not yet happened.
It is understandable that investment in projects such as the Tenke Fungurume Mining Project in the DRC raises eyebrows and questions abound, but ensuring EU energy security through this project or funding fossil fuels are what the EIB was created for. It has delivered high yields in over 60 years of existence. More transparency and increased communication to the greater public shall only help it continue on this path.