Despite the European car industry’s current 20 per cent overcapacity problem, the EIB is currently appraising an application from Ford for a €600 million loan to construct a new manufacturing plant in Craiova, Romania. Philippe Maystadt, the bank’s president, is clear that its loans should not substitute for sorely needed structural reforms in loss-making industries but in light of the unemployment pandemic, politicians are understandably anxious to create and safeguard jobs.
‘Job losses in the car industry are inevitable,’ comments Pippa Gallop of the NGO, CEE Bankwatch Network. ‘The EIB should be prioritising investments into alternative industries such as public transport, energy efficiency and waste recycling that will secure jobs in the long term, not misspending enormous sums on a quick and unsustainable fix.’
With a funding ceiling of €70 billion in 2009, the EIB is the world’s largest public international financial institution. It dwarfs even the World Bank, yet remains relatively unknown.
Its loans to the European automotive sector – including €766 million to Jaguar Land Rover and Nissan Europe (both have large plants in the UK) – are expected to exceed €7 billion in the first half of this year alone. EUR4.6 billion of this will be provided under an EIB financing programme called the ‘European Clean Transport Facility’ (ECTF).
This programme’s ostensible purpose is to provide loans to rail, aviation, shipping and automotive industries for development of emissions reducing technologies. Franziska Achterberg of Greenpeace, however, believes it amounts to little more than spin – a ‘clean cars pretext’ with which they’re responding to calls from carmakers and EU member states for a bail out. The EUR4 billion ECTF annual budget is already overspent on the car industry alone, leaving nothing for the research or development of truly green systems of mass transport.
Furthermore, Achterberg believes that loans from a public bank are not justifiable if only for the purpose of helping manufacturers comply with forthcoming EU emissions directives. ‘These loans,’ she says, ‘should lead to additional efforts to reach targets above and beyond those stipulated by a piece of legislation that, thanks to pressure from industry lobbyists, is already weak and ineffectual.’
UK based NGO, The Bretton Woods Project, describes the bank’s position on environmental issues as contradictory. ‘It funded renewables to the tune of roughly €2 billion last year,” says its EIB specialist, Anders Lustgarten, ‘yet has since spent tens of billions financing motorway networks, waste incineration projects, and the aviation, car and fossil fuels industries.’
An EIB spokesperson said in response that ‘the Bank’s activities in the energy sector are balanced in line with key EU policy objectives and contribute to their accomplishment.’ She also points out that the EIB loaned rail projects €2.4 billion in 2008 (19 per cent of a total €12.5bn of ‘trans-european transport network lending’ that year), and that it has made sizeable loans to tram projects in several cities in France, Italy and Poland.
Lustgarten explains that because the EIB is a public institution – the capital it raises from financial markets is guaranteed by EU member states, and effectively underwritten by taxpayers – it has an obligation to serve the public interest. ‘In reality,’ he says, ‘it almost exclusively serves large, private sector interests.’ Indeed, its list of clients includes numerous enormously wealthy multinationals such as Exxon, Shell, and (the mining conglomerates) Glencore and Freeport-McMoran.
The EIB is also a leading backer of British Public-Private-Partnerships; a controversial yet increasingly common way of funding public infrastructure that often leads to enormously inflated costs. Notable examples include the Isle of Skye bridge (the estimated cost of which was £15 million, the eventual cost, £93.6 million), the troubled London Underground privatisation project, and the farcical £5 billion widening of the M25.
Of most concern to campaigners, however, is the EIB’s use of public money to fund certain ‘development’ projects in the global south. Several vast mining and oil-pipeline projects it has supported in Southern Africa have destroyed ecologically sensitive areas, polluted scarce water resources, expropriated land and displaced thousands while bringing little material benefit to local populations. The Bretton Woods Project describes such ventures as ‘neo-colonialist, anachronistic and, in light of new legislation, possibly illegal.’ The EIB is unique among international financial institutions (IFIs) in that its loan recipients are currently only regulated by a set of non-binding environmental and social impact guidelines. But many contend that as the EIB is an EU organisation, its projects should be subject to the full rigour of EU law no matter where they take place.
Despite the wide-ranging consequences of many of the bank’s undertakings, avenues for complaint or appeal remain limited due to a lack of transparency; typically, projects are listed on its website only two-months prior to their approval. ‘While the EIB is taking steps to improve its levels of public accountability, its public disclosure on the majority of projects is appalling. Information is late, insufficient and incredibly opaque,’ says Lustgarten. He believes that raising the public and political profile of this shadowy giant is vital if it is to be pressured to reform.
#232: Rue Britannia ● The legacy of the British Empire ● An interview with Priyamvada Gopal ● The People’s Olympics ● An interview with Neville Southall ● Agribusiness in India ● Deliveroo’s disastrous IPO ● Latest book reviews ● And much more!
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March–May 2021 marks 150 years since the Paris Commune. Mathijs van de Sande and Gaard Kets explore its legacy and enduring relevance for today’s left
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