The European Investment Bank wants to create a “new development subsidiary” — and that’s raising hackles in Brussels.
EIB boss Werner Hoyer shared his plans with the EU finance ministers during their monthly meeting on December 5 in Brussels, and the Luxembourg-based development bank is pushing it as a priority heading into critical EU budget talks next year.
So far, the ministers’ reaction has been muted, but some European Commission officials were concerned. They perceive the EIB’s move as a bid to secure money from the coffers of the EU’s executive arm to soften the funding shortfall the lender will face once the U.K. leaves the bloc in 2019.
“This is a defense maneuver because Brexit is looming,” a senior Commission official said. “Hoyer wants to take money from us to capitalize this subsidiary. He’s presenting something without having a discussion with us. This is ruffling a lot of feathers … because it’s a power grab.”
EIB officials in Luxembourg dismissed the allegation. “The new development subsidiary aims to [streamline] the EIB’s activities and make our work more efficient,” said one official on the condition of anonymity. “It’s not about getting more funds, that’s what [Hoyer] told finance ministers.”
Investments, for example, in African countries would seek to improve economic growth in the region and align the EIB’s work with the EU’s efforts to curb migration and fight climate change. “Details are being ironed out at the moment … this is not going to be a new bank with a lot of staff,” the official added.
The EIB’s annual lending reached some €76 billion last year, 90 percent of which went to investment projects across the bloc. This proposed offshoot, which will be run by the EIB itself as a majority shareholder, would fund projects outside the EU that help tackle climate change and advance technology, for example.
Hoyer is set to approach the EIB’s board of governors in June to formally propose the development subsidiary.
It’s no secret that the EIB stands to take a big hit from Brexit.
The U.K. has roughly a 16 percent stake in the world’s largest multilateral bank but is set to take out its money once it’s outside the EU. If the EIB seeks to compensate for that by angling for more funding from other parts of the bloc, it could have an impact on the Commission’s own budget, which helps finance initiatives like scientific research, natural disaster support, and investment support for small and medium-sized corporations.
The U.K.’s stake in the EIB represents some €40 billion in capital commitment. The bulk of that cash pile is sitting in the U.K. and is only made available if the EIB requests it. The EU lender itself only holds around €3.5 billion of the U.K.’s money.
In principle, Britain’s exit from the EU in 2019 will force the country to pull out of the EIB and withdraw that paid-in capital in stages, over a 12-year period, according to the agreement that the Commission published together with the U.K., outlining the progress made in the first phase of Brexit talks.
The U.K. would be free to join the EIB’s new subsidiary as a non-EU country. An EIB insider said “it’s far too early” to discuss Britain’s participation “at this point.”
The U.K. Treasury echoed that sentiment. A British official in London stressed that the idea of setting up the EIB subsidiary was still “an early stage proposal” and only said that the Treasury would “engage constructively on all EIB issues” as long as the U.K. is a member of the EU.
When asked how it planned to make up for a funding shortfall from Brexit, an EIB spokesperson said: “We either get to a point where we have to shrink our lending, or we’d have to ask the shareholders for a capital increase.”
Here comes MFF
Talks starting in May 2018 will begin to lay the groundwork for the Commission’s own budget for 2021-2027 in a process known as the Multiannual Financial Framework (MFF), and the EIB is keen to get into those discussions, according to Commission officials.
The bank’s future funding plans are partly contained in an “information note” — obtained by POLITICO — that the EIB recently sent to Commission and EU officials. The note broadly outlined the EIB’s thinking on the development bank and showed that it intends to share “its vision” in February ahead of the budget talks.
“Most of [the ministers] broadly welcomed the idea set out by the EIB, but stressed the need for more detailed information as well as a thorough analysis of the matter before any decisions would be taken,” said one of the diplomats in the room at the finance minister’s meeting earlier this month. “Concerns raised included … implications on the EU budget.”