Academic journal article Law and Policy in International Business

Financing Integration: The European Investment Bank in Transition

Academic journal article Law and Policy in International Business

Financing Integration: The European Investment Bank in Transition

Article excerpt

I. INTRODUCTION

Since the inception of the European Economic Community (EEC) in 1958, the European Investment Bank (EIB) has been quietly playing its role as commonwealth bank for regional integration. Press coverage has been increasing over the past five years, but most of it has focused narrowly on the Bank's role in financing the Trans-European Networks (TENs) mandated by the Maastricht Treaty (the Treaty on European Union, or TEU).(1) Although some wider appreciation has been generated with respect to the gross dimensions of EIB engagement in investment finance, virtually nothing pertaining to the inner workings of the Bank has been revealed to date. The scholarly literature is similarly sparse. Given the growth in EIB lending, the diversity of its mandates, its potential sectoral and geographical impact, and the constitutional precedents the Bank has already set, this is a mysterious silence indeed.(2)

Several factors probably account for the lack of sustained attention to the EIB. First, as a bank, one of the conditions of its existence is the confidentiality of its loan evaluation process. Reinforcing this operational fact of life is the independence enjoyed by the EIB in the matrix of European Union (KU) institutions. This independence is, in turn, related to the Bank's image (and constitutional history) as an implementing, as opposed to a policy-making, agency. Furthermore, despite the occasional financial difficulties of EIB loan recipients, the Bank has enjoyed a level of prestige commensurate with the success of the operations it has actually undertaken. Indeed, conservative management and loan appraisal techniques have thus far shielded the Bank from criticism.

Recently, criticism of the EIB has come from three sources, all focusing on the Bank's commonwealth functions. Somewhat ironically, in each case the criticism arises out of what would be considered EIB success under traditional criteria. First, some critics have expressed concern about the Bank's accountability. In recent years, the European Council and the Commission have asked the EIB to take on additional tasks in support of EU policy aims. As the public policy profile of the Bank has become more pronounced, the question of accountability has been raised. Second, concerns have been raised about the Bank's subsidiarity. In light of developments in the EU financial markets since passage of the Single European Act in 1987, some have questioned whether the EIB has become functionally superfluous in its core banking functions.(3) Third, there is the issue of policy integration. In particular, those advocating thorough and timely implementation of EU policy and law in the area of environmental protection have pressed the Bank to adapt its routines to reflect the sustainability criteria of the Maastricht Treaty.(4) Environmental concerns raise the broader question of reconciling the different priorities mandated by law. Moreover, these three areas of concern overlap, bringing to light additional trade-offs for institutional development.

It is not surprising that, taken together, accountability, subsidiarity, and policy integration are currently animating discussions about the architecture and future trajectory of regional integration. EIB activity condenses these discussions in a way that rewards analysis with fresh insights relating to the ongoing exercises in constitution-writing at the EU level.

This paper reviews the performance of the EIB in light of its evolving economic and financial conditions and parallel developments in regional integration. First, I will address the Bank's evolving rationale, and then provide descriptions of the policy orientation, geographic focus, and dimensions of the Bank's project portfolio and other activities. Equally important to an assessment of EIB activities are the instruments developed to achieve the Bank's stated goals, as well as the internal organization, routines, and governance patterns used to make decisions and carry out policy. …

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