16 March 2006
The European Bank for Reconstruction and Development has expressed its interest and intent to provide more assistance to new underdeveloped markets outside of its usual lending sphere.
Growing economic stability in Eastern European markets such as in Czech Republic, Poland, Hungary and Estonia, has prompted the European Bank for Reconstruction and Development to extend its lending capabilities to new countries, especially those farther east. The EBRD has been gradually reducing the amount of annual investments in the "advanced transition economies" of the EU as lending declined from €1 billion in 2004 to €699 million in 2005. The US government is anxious for the lending to end as it is "ideologically opposed to a government-funded institution competing where private lenders operate effectively."
As the institution moves away from its traditional geographic concentration in Eastern Europe, it will operate increasingly without the discipline imposed by the European Commission. The Commission has acted as an enforcer for EBRD policies, as a number of aspiring EU members went through their transitions and moved toward EU membership. Without the discipline imposed by the Commission, the reorientation of EBRD lending will entail an increased level of political risk. The eastward movement is also likely to involve the institution in a growing number of contentious, resource-based projects.
Deficiencies in the infrastructure of potential borrowing countries and the lack of an entrepreneurial middle class are concerning and it is argued that they could make projects difficult to sustain. Furthermore, if the current situation with Shell's proposed Sakhalin II pipeline project is any indication of EBRD involvement, the road ahead is likely to be bumpy and poorly maintained.