Home
>
Political
>
The European Bank for the Retardation of Development

The European Bank for the Retardation of Development

In typical bureaucratese, the pensive EBRD analyst ventures with the appearance of compunction: "A number of projects have fallen short of acceptable standards (notice the passive, exculpating voice - SV) and have put the reputation of the bank at risk". If so, very little was risked. The outlandish lavishness of its City headquarters, the apotheosis of the inevitable narcissism of its first French Chairman (sliding marble slabs, motion sensitive lighting and designer furniture) - is, at this stage, its only tangible achievement. In the territories of its constituencies and shareholders it is known equally for its logy pomposity, the irrelevance of its projects, its lack of perspicacity and its Kafkaesque procedures. And where the IMF sometimes indulges in oblique malice and corrupt opaqueness, the EBRD wallows merely in avuncular inefficacy. Both are havens of insouciant third rate economists and bankers beyond rating.

Established in 1991, "it exists to foster the transition towards open market oriented economies and to promote private and entrepreneurial initiative in the countries of central and eastern Europe and the Commonwealth of Independent States (CIS) committed to and applying the principles of multiparty democracy, pluralism and market economics. The EBRD seeks to help its 26 countries of operations to implement structural and sectoral economic reforms, promoting competition, privatization and entrepreneurship, taking into account the particular needs of countries at different stages of transition. Through its investments it promotes private sector activity, the strengthening of financial institutions and legal systems, and the development of the infrastructure needed to support the private sector. The Bank applies sound banking and investment principles in all of its operations. In fulfilling its role as a catalyst of change, the Bank encourages co-financing and foreign direct investment from the private and public sectors, helps to mobilize domestic capital, and provides technical co-operation in relevant areas. It works in close co-operation with international financial institutions and other international and national organizations. In all of its activities, the Bank promotes environmentally sound and sustainable development."

Grandiloquence aside, the EBRD was supposed to foster the formation of the private sector in the revenant wreckage of Central and Eastern Europe, the Balkan, Russia and the New Independent States. This it was mandated to do by providing finance where there was none ("bridging the gaps in the post communist financial system" to quote "The Economist"). Put more intelligibly, it was NOT supposed to transform itself into a long-term investment portfolio with equity holdings in most blue-chips in the region. Yet, this is precisely what it ended up becoming. It avoided project financing like the plague and met the burgeoning capital needs of small and medium size enterprises (SMEs) grudgingly. And it refuses to divest itself of stakes in the best run and most efficiently managed firms from Russia to the Czech Republic. In a way, it competes head on with other investors and commercial banks - often crowding them out with its subsidized financing.

One of its main mistakes, in a depressingly impressive salmagundi, is that it channelled precious resources to this budding sector (SMEs), the dynamo of every economy, through the domestic, decrepit, venal and politically manhandled banking system. The inevitable result was a colossal waste of resources. The money was allocated to sycophantic cronies and sinecured relatives (often one and the same) and to gigantic, state-owned or state-favoured loss makers. Most of it lay idle and yielded to its hosts a hefty income in arbitrage and speculation. As banks went bankrupt, they wiped whole portfolios of EBRD SME funds, theoretically guaranteed by even more bankrupt states.

Thus, the only segments of the private sector to benefit handsomely from the EBRD were lawyers and accountants involved in the umpteen lawsuits the EBRD is mired in. It is a growth industry in "countries" such as Russia. This is the melancholy outcome of indiscriminate, politically-motivated lending and of a lackadaisical performance as both lenders and shareholders. In the spirit of its first chairman, the suave and titivated Attali, the bank is in a constant road show, mortified by the possibility of its dissolution by reason of irrelevance. It aims to impress the West with its grandiose projects, mega investments, fast returns and acquiescence. In thus behaving, it is engaged in a perditionable perfidy of its fiduciary obligations. It lends to criminal managers, winking at their off-shore shenanigans and turning a blind eye to the scapegrace slaughter of minority shareholders. It throws good money after bad, cosies up to oligarchs near and far and engages in creative accounting. Instead of Westernizing the Easterners - it has been Easternized by them. Its sedentary though peregrinating employees are more adept at wining and at dining the high and mighty and at haughtily maundering in the odd, tangential, seminar - than at managing a banking institution or looking after the interests of their nominal shareholders with the tutelary solicitude expected of a bank.

Consider two examples:

MACEDONIA

The nascent private sector is nowhere to be found in the list of projects the EBRD so sagely chose to falter into here. The Electricity and Telecoms monopolies are prime beneficiaries as is the airport. The EBRD is also a passive shareholder in both big universal banks - until recently, conduits of state mismanagement. The SME and Trade Facilitation credit lines were conveniently divvied up among five domestic banks (one went belly up, the managers of two are under criminal investigation and one was sold to a Greek state bank). Despite vigorous protestations to the contrary, none of this money reached its proclaimed entrepreneurial targets. Two loans were made to giant local firms - the natural preserve of commercial lenders and equity investors the world over. The EBRD contributed nothing to the emergence of a management culture, to the development of proper corporate governance, to the safeguarding of property rights and the protection of minority shareholders here. Instead, it colluded in the perpetuation of monopolies, shoddy and shady banking practices, the pertinacious robbery titled "privatization" and the pretence of funding languishing private sector enterprises.

RUSSIA

Its 2 billion US dollars portfolio all but wiped out in the August 1998 financial crisis, the EBRD has now returned with 700 million new Euros to be - conservatively but not more safely - lent in major energy and telecom behemoths.

The historic, pre-1998, portfolio appears impressive. Almost 11 billion US dollars were generated by the EBRD's less than 4. The bottom line reads 94 projects. Yet, when one neutralizes the infrastructural ones (including the gas and energy sector) - one is left with less than 50% of the amount. Add "infrastructure-like" projects (water transportation and the like) - and less than 30% of the portfolio went to what can be called proper "private sector". Moreover, even these investments and credits were geared towards traditional and smokestack industries: mining, food processing, pipelines, rubber and such. Not an entrepreneur in sight. And the EBRD's meagre loan-loss provisions and reserves cast serious doubts regarding the mental state of both its directors and its auditors.

To varying degrees, these two countries are typical. Development banks, like industrial policy, import substitution and poverty reduction, have gone in and out of multilateral fashion several times in the last few decades. But there is a consensus regarding some minimum aims of such bureaucracy-laden establishments - and the EBRD achieves none. It does not encourage entrepreneurship. It does not improve corporate governance. It does not enhance property rights. It does not allocate economic resources efficiently. It competes directly with other - more desirable - financing alternatives. It is not equipped to monitor its vast and inert portfolio. By implication it collaborates in graft, tax evasion and worse. It is a waste of scarce resources badly needed elsewhere. It should be administered a coup de grace. And its marbled abode - so out of touch with the realities of its clients and its balance sheet - should be sold to someone more up to the task. A bank, for instance.

About The Author

Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.

His web site: http://samvak.tripod.com

family-safe home cleaners Lincolnshire ...

In The News:

The commercial Unitree H1 humanoid robot weighs 104 pounds with 365 pound-feet torque per joint and demonstrates dangerous potential when software glitches occur.

Americans average 10-plus hours online daily, according to recent survey, splitting time between streaming shows on TV and browsing websites on multiple devices.

Boost your smartphone privacy instantly with these security tweaks for iPhone and Android that limit ad tracking, hide notifications and prevent unauthorized access.

Platforms like Hoax Tech and JS Click Cloaker help cybercriminals bypass detection systems using machine learning to selectively display scam content to victims.

A new battery recycling technique transforms old lithium-ion batteries into high-performance components that retain 88% capacity after 500 cycles with minimal waste.

Google's Android operating system can warn users about earthquakes before the shaking even begins – and there are ways to do it on your iPhone, too.

Meta's new gesture control wristband might just be the most seamless way to control a computer yet. And no, it doesn't require surgery, a camera, or even a touchscreen. All it needs is your wrist.

Long-haul trucks are now being upgraded with a surprising twist, thanks to California-based startup Revoy. Their electric boost doesn't replace diesel but works alongside it to cut emissions and fuel costs without major disruption.

PayPal and Venmo just rolled out something big: AI-powered scam alerts for Friends and Family payments.

As data centers multiply across the United States, energy demand is increasing at a rapid pace. This has not escaped the notice of large investment firms from Wall Street.

The Unicode Consortium, the nonprofit organization that maintains the Unicode Standard to ensure emojis work across devices, has announced Unicode 17.0, which includes nine new emojis slated for release this fall, in September 2025.

OpenAI is one of the world's leading AI research labs. Founded in 2015, it's behind some of today's most talked-about tools, including GPT, DALL·E, and ChatGPT.

Ever catch your dog staring at the screen during movie night and wonder if they're actually watching? Turns out, they might be. A new scientific study from Auburn University found that many dogs really do engage with television, and not all pups react the same way.

Stop the scammers from making contact in the first place. They're getting your parents' contact information and much more personal data besides, from somewhere.

The Walker S2 robot from UBTech autonomously exchanges its batteries in just three minutes, allowing continuous operation in car factories operated by BYD, Nio and Zeekr.

The FX Super One electric MPV from Faraday Future offers flexible seating, zero-gravity recliners and an AI system that creates a personal connection between driver and vehicle.

Practical solutions for reducing unwanted charity mail, political texts and email spam by opting out of shared lists, replying "STOP" and using data removal services.

Delta's new AI pricing system eliminates static airfares for personalized rates based on individual data, raising questions about fairness while promising optimized revenue.

AI data centers are straining the power grid across 13 states, contributing to a $9 billion increase in electricity costs, and PJM customers face monthly bill increases of $25 or more.

Artificial intelligence is transforming the music industry as AI-generated bands like The Velvet Sundown earn substantial streaming revenue, prompting lawsuits from major record labels.

Microsoft phishing scams use fake security alerts and links that redirect to credential-stealing pages with warning signs, including urgent language and unusual senders.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Tesla vehicles manufactured since mid-2021 with AMD Ryzen processors can now access Grok 4, xAI's witty conversational assistant designed to make drives more engaging.

Understand how technology affects mental health through five concepts, including blue light exposure, screen time management and algorithmic bias.

Electric vehicle maker Lucid adds hands-free driving through an over-the-air update for Air sedan owners with the DreamDrive Pro package and Gravity SUV support coming later.

The European Bank for the Retardation of Development

Political