Bank With a Mission: Pushing Reform in Eastern Europe

A NEW international bank dedicated to helping the countries of Eastern Europe abandon their state-run economies and switch to capitalism hopes to make its first loans before the end of the year. But the London-based European Bank for Reconstruction and Development may have to struggle to win a place alongside other world lending institutions. Its president, Jacques Attali of France, concedes that he has had trouble recruiting suitable staff. So far only 80 out of a planned 250 have been hired, and the bank has yet to acquire a permanent headquarters building.

When the bank is fully up and running, 23 directors will run the bank's day-to-day affairs. A fourth of the budget will be spent on administration. Forty countries, including the Soviet Union, are providing capital.

Speaking prior to the bank's opening April 15, Mr. Attali said lending would initially be limited to Poland, Hungary, Czechoslovakia, Romania, Bulgaria, and the Soviet Union. The bank's long-term objective was to help Europe's former communist countries "reach the same level of development as members of the 12-nation European Community," he said, adding that the eastern countries will not necessarily become EC members.

But at the opening he warned: "Unless we take great care, unemployment, recession, xenophobia, and intolerance will loom. If the bank succeeds in realizing its vision, Europe will become geographically, politically, and culturally united for the first time."

The bank's starting capital of $12 billion (86 percent of it backed by industrial nations in the Organization for Economic Cooperation and Development) makes it appear fairly small fry compared with the World Bank, with capital of $125 billion. Another regional lending institution - the European Investment Bank - has long been in operation.

Attali, however, does not see the role of BERD, as the bank's acronym reads in French, as only that of a fairy godmother dispensing pots of gold. "The problem facing the economies of Eastern Europe is not just money. They need management expertise, accounting experience, and a whole range of legal and marketing skills that we take for granted in the West. A large part of the bank's work will be to help in these areas."

Attali sees the bank as a catalyst, using its resources to attract private capital into major investment projects. He says this technique could generate 15 percent of East Europe's financial needs over 10 years.

About 200 potential projects in Eastern Europe are currently under examination, and deciding how the bank's capital is used is likely to raise problems.

For example, should Poland - with a population three times that of Hungary, "get three times the capital Hungary receives?" asks Martin McCauley of the London School of Slavonic and Eastern European Studies. "The Hungarians, who are furthest along the road of privatization, are arguing that they should get priority. There is going to be a lot of infighting."

Among projects likely to receive favorable treatment by BERD are the upgrading of road and rail transport, which was allowed to languish under communist regimes. Transit links between East European countries and their EC neighbors urgently need improvement. Despite Attali's slowness in recruiting staff, he has managed to net some impressive recruits. They include Miklos Nemeth, a former prime minister of Hungary, and Boris Federov, a former minister of finance in the Russian Federation.

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