Europe Needs Its Own Development Bank

LONDON – Europe needs a robust and agile development bank that can cooperate with, but also challenge, the Chinese institutions involved in the Belt and Road Initiative and the United States’ newly reinforced development agencies. With this goal in mind, the European Union recently appointed a “wise persons group” (WPG) to review the European Union’s development-finance architecture. The group, of which I was a member, has devised three stylized options. But there might be a fourth alternative that combines the best features of existing institutions.

The EU needs a development bank so that it can strengthen its capacity to respond to big global and regional challenges – above all, to risks and opportunities in Africa. From a geopolitical standpoint, Europe urgently needs to bolster its economic sovereignty, without abandoning its ambition to forge multilateral coalitions. Development finance is a critical building block in that regard, and, although Europe currently provides close to two-thirds of all global development finance, it would have a much greater impact if EU efforts were better coordinated.

The two existing European development-finance institutions – the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) – each have their strengths. The EBRD is a proper development bank with a broad range of activities, close policy dialogue with national governments, and a heavy presence on the ground. The EIB, meanwhile, is mainly EU-focused: it is a policy-taker, and most of its staff are based in Luxembourg. But both banks are weak where development needs are greatest: in fragile states and particularly in Sub-Saharan Africa.