Strings on $12 Billion for E. Europe NEW DEVELOPMENT BANK

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WILL money buy democracy, disarmament, and human rights as well as economic development in Eastern Europe?

That question will be tested by the new European Bank for Reconstruction and Development. "It will be a bank for peace as well as for economic recovery," says Jacques Attali, who has just been named head of the new multilateral bank. "The emphasis will be on private enterprise, and it will deliberately encourage moves away from armaments toward civil industry."

Set up to channel urgently needed investment funds from the West to the fledgling democracies of Eastern Europe, the bank will open for business at headquarters in London next January. It will have initial capital of $12 billion.

Mr. Attali, President Francois Mitterrand's personal adviser for economic affairs, claims that BERD (its French acronym) will break new ground by being "the first international financial institution that poses the question of human rights and requires borrowers to respect the principles of multiparty democracy."

Under terms laid down by its founding group - the 12-nation European Community (EC), the countries of Scandinavia, Switzerland, Austria, the United States, Canada, Japan, and 20 smaller states - the new development bank will lend only to countries which can prove they are determined to take the democratic road away from totalitarianism.

The decision to launch BERD was taken by the sponsoring governments on May 20. A small temporary office has been set up at the Bank of England in London to prepare the next moves. These will include recruitment of up to 1,000 international banking specialists and sifting the first of what is expected to be a stream of requests from East European countries for investment funding.

BERD will commit some 60 percent of its resources to financing loans to East Europe's emerging private sector.

It will also co-finance equity investments in the region, working with private Western investors. Under its charter it will give preference to qualified borrowers and private investors keen to boost industry along capitalist lines.

The main shareholders in the bank are the US (10 percent) and Britain, West Germany, France, Italy and Japan (each with 8.5 percent). The Soviet Union will have a 6 percent stake, making BERD the first international financial institution to have both superpowers as participants.

Initially the French government insisted that Paris should be BERD's headquarters, but accepted a siting in London when Britain agreed to the appointment of Mr. Attali as its first president. This brought protests from the Netherlands, which had also put in a bid to host the bank and provide its first president. …