EBRD seeks additional 10 billion EUR for Eastern Europe

European Bank for Reconstruction and Development (EBRD) has asked the countries members of EU to grant additional 10 billion EUR, which is 50% of the funds that are at the disposal of EBRD at the moment, for reduction of influence of the global economic crisis on the countries in central and east Europe.

- That multinational bank, which is controlled by 61 states, including all members of European Union, USA and Japan – has asked for additional funds that will enable larger crediting and, thus, compensate for significant decline in inflow of private capital into former communist countries - "Financial Times" announced.

The newspaper that is read by British business elite also points out that that EBRD’s move, made immediately before the annual meeting of International Monetary Fund (IMF), emphasizes its concern that the economic troubles of that region could be neglected.

Thomas Mirow, the EBRD president, warns, in a letter to shareholders, that while the region’s economies “have begun to stabilise”, they have “not done so uniformly and it would be premature to say that a general turnround has begun. The crisis will have lasting repercussions”.

Mr Mirow appeals to the bank’s shareholder governments to remember this year’s 20th anniversary of the fall of the Berlin Wall, saying the region deserves “broad support” in continuing “its mutually beneficial integration into the European and world economies”.

The formal letter, seen by the Financial Times, follows weeks of discussion at the EBRD about the possibility of a capital increase that was first discussed this year as the bank grappled with the enormity of the economic crisis. Mr Mirow writes that working with its current €20bn capital, the bank would have to limit its annual lending to about €8bn in 2009-10 and reduce it to €6bn thereafter. “Activity would shrink while the recovery is still precarious.”

Mr Mirow says he therefore “strongly recommends” raising the capital by €10bn to allow the bank to commit €9bn-€10bn annually, or €20bn in total extra funding in 2010-15. By mobilising extra capital from private investors, the total additional funds raised could reach €60bn, writes Mr Mirow.

Mr Mirow’s proposals highlight how the global recession has transformed the EBRD. Before the crisis, the US, the biggest shareholder, was keen to reduce the bank’s activities on the grounds that its role in supporting post-communist transition would end as the market economy took root in region.

Due to the most difficult global crisis over the last eight decades, EBRD ended last year with record loss of 602m EUR.