Extending the EBRD’s activities to Turkey would dilute its focus, a leading US Treasury official has said on the eve of vote by the bank’s governors on the issue.
US Treasury undersecretary for international affairs David McCormick has cautioned governors that broadening the bank’s activities risks undermining the bank’s mission.
“While acknowledging the potential benefits of an expanded mandate”, the US is “concerned that it would dilute focus from the EBRD’s core mission,” McCormick writes in Emerging Markets today (page 6).
But in an interview yesterday, Turkish Treasury undersecretary Ibrahim Canacki warned that sustained economic growth is at stake if governors reject its application to become a country of operation.
“Partnership with the EBRD would contribute to Turkey’s economic development,” he told Emerging Markets. “Turkey needs to sustain this impressive growth performance over the next decades in order to make further progress in real income convergence with the EU,” he said.
By becoming an “operational country” Turkey would benefit from access to the EBRD’s funds and expertise, while the bank would “diversify its loan portfolio and to overcome the existing overconcentration problem,” Canacki said.
The debate over Turkey comes at a time when the EBRD’s future is in question. Hard line voices in the US, Australia and elsewhere are calling for it to be shut down, now that some countries of operation have made the transition to market status. Australia intends to sell its shareholding back to the bank by 2010.
The bank has already stopped investing in the Czech Republic, and will by 2010 stop investing in Poland, Estonia, Hungary, Latvia, Lithuania, Slovakia and Slovenia, who all joined the EU.
Despite opposition by the US, its largest shareholder, the bank’s governors are set to agree tomorrow to begin formal evaluation of Turkish bid for access to the EBRD’s funds and expertise, and prepare for a final decision by the end of October.
However, divisions remain among governors over whether the EBRD should ultimately accept the country – a split which reflects deeper concerns about whether the bank should be given a new lease on life by extending operations beyond the former communist bloc.
The bank’s board had intended to accept Turkey’s application during the Kiev meeting, but backed down under pressure from the US, Australia and New Zealand, directors told Emerging Markets.
Moreover, board members canvassed by Emerging Markets acknowledged that the debate over Turkey’s EBRD bid reflects a deeper geopolitical rift between member countries over the majority Muslim country’s EU membership aspirations.
“Turkey is such an important geopolitical issue,” said one European director, on condition of anonymity. “The enemies of Turkey’s EU accession believe that [granting the country EBRD operational status] is one way out.”
Another European director told Emerging Markets that US opposition to Turkey’s Bank bid stemmed from its wish to forestall any European attempt to award an EBRD carrot as runner-up prize in place of EU membership. “This could be seen as the end of the bean pole for [Turkey],” he said.
The furore over Turkey comes in the wake of public comments by EIB senior management that the EU bank is planning a takeover bid for the EBRD. A European director has corroborated to Emerging Markets reports that Germany is “actively working” on plans to merge the EIB and the EBRD. The director suggested that German finance minister Peer Steinbruck has been discussing the move with ministry staff.
Former German deputy finance minister Thomas Mirow is due to be appointed EBRD president on Monday.