Convergence between eastern and western Europe fraying as EBRD leaders meet

Mon May 9, 2016 2:00pm EDT
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By Marc Jones

LONDON (Reuters) - Twenty-five years after the European Bank for Reconstruction and Development was set up to integrate ex-Soviet bloc states into the world economy, the EBRD is finding its core region pulled apart by a wave of anti-establishment, anti-migrant sentiment.

The bank, which has invested around 100 billion euros ($113.89 billion) since its creation in 1991, holds its annual meeting this week at a time of increasingly fenced-off European borders, sluggish economies, a possible British exit from the European Union and discord between governments over sheltering over 1.2 million migrants camped out across the continent.

Coupled with Cold War-style tensions between the West and Russia, there are signs of divergence in the bank's traditional heartland for the first time since the fall of the Berlin Wall - an erosion of the cohesion the EBRD had set out to promote.

"I think we are really at a turning point in European history," Commerzbank's chief emerging market strategist Simon Quijano-Evans said. "Are we going to see a reversal of the convergence story between east and west Europe of the last 10, 15, 25 years? And how are leaders, wherever they are from, going to deal with that?"

Representatives of the EBRD's 67 shareholders, including the United States, European Union, Japan and China, will converge on the bank's headquarters in London to thrash out these issues.

The bank, also struggling to map out its future strategy, has evolved far beyond its original mandate of investing in ex-Soviet bloc countries, adding stakes in Turkey, Mongolia, North Africa and Jordan as well as euro zone states Greece and Cyprus.

Its involvement in North Africa, for instance, has raised eyebrows and many are also questioning EBRD investments in increasingly prosperous economies such as Poland.

The EBRD president, British former civil servant Suma Chakrabarti, is expected to be handed another four-year term at the meeting, but even he is recommending the bank's shareholders halt its rapid expansion.   Continued...

European Bank for Reconstruction and Development (EBRD) President Suma Chakrabarti speaks during an interview in Kiev, Ukraine, July 2, 2015.  REUTERS/Valentyn Ogirenko