Struggle over succession at the EBRD

24 March 2008

A struggle over selecting the successor to the President of the European Bank for Reconstruction and Development (EBRD) has divided donor and recipient countries in a manner that is reminiscent of the recent debates over succession at the World Bank and the International Monetary Fund.

When the European Bank for Reconstruction and Development's (EBRD) current President, Jean Lemierre, announced that he would not seek a third term, a majority of European Union states quickly agreed to nominate Thomas Mirow, Germany’s deputy finance minister. Since European Union countries control 60 percent of the shares of the Bank, it is expected that they will easily succeed in continuing the unwritten rule that the Bank will be headed by either a Frenchman or a German. Under the nationalist logic that appears to dominate all discussions of succession at the international financial institutions, the nationality of the next president is predetermined: Lemierre, who is finishing his second term, is French, and now it is Germany’s turn to appoint a successor.

For the first time since the Bank was established in 1991 to aid former communist countries in Central Europe and the Former Soviet Union make the transition to market economies and democratic governments, the order of succession is being seriously contested. Several candidates, including finance officials from the former communist countries that the EBRD was set up to help, have emerged as challengers. They are motivated not only by their rejection of the undemocratic selection process, but also by concerns about the future role of the EBRD in the region.

Unofficially, members of the EBRD have begun to propose different directions for the Bank in the future.  Some members favor accelerating the move away from operations in the more advanced countries in Central Europe and scaling down overall operations by paying dividends from its profitable investments in the region to the Bank’s shareholders. Others would like to see an expansion of the Bank’s activities in the region’s poorer countries or an extension to other areas, such as Turkey or the Middle East. There is also discussion of closing the Bank and transferring its assets and functions to the EU-owned European Investment Bank. Such discussions are likely to intensify as the EBRD approaches a formal five-year review of its mandate in 2010.

Sources

Succession row casts shadow over EBRD, by Stefan Wagstyl, March 19, 2008. (Financial Times website)