Parliament warns of risky financing, demands more accountability at Europe’s bank

In its annual resolution on the European Investment Bank, Members of the European Parliament have criticised the bank’s Project Bond Initiative, warning that the risk-sharing instrument bears similarities to those proposed under the Juncker Investment Plan.

The MEPs condemned the EIB for financing “infrastructure projects that turned out to be unviable and unsustainable”, specifically mentioning the Castor gas storage project in Spain and the Passante di Mestre highway in Italy. The Castor project had to be stopped for causing earthquakes, saddling Spanish taxpayers with debts of EUR 1.4 billion.

The Passante di Mestre project received EIB support, even after several project promoters had been arrested on allegations of corruption and money laundering. Now the project might be refinanced using the Project Bond Initiative, a risk-sharing instrument that the Parliament believes finances the wrong kind of projects and transfers too much risk on the shoulders of the public sector.

MEPs have asked for a proper evaluation of the mechanism and warned about the regular use of such risk-sharing instruments, because they “bear the risk of the socialisation of losses and the privatisation of returns”.

MEPs called on the bank to develop in 2015 a responsible taxation policy that includes country by country reporting and the identification of the beneficial ownership of its clients, as proposed in the Counter Balance report ‘Towards a responsible taxation policy’ earlier this month.

The Parliament is also seeking to increase the accountability of the bank by:

• Enhancing its oversight of the bank through more regular monitoring of its activities;
• Calling for an improved and fully independent Complaints Mechanism at the bank; and by
• Giving the European Court of Auditors full scrutiny over all of the bank’s facilities that deal with public funds.

Xavier Sol, Counter Balance Director:

“This resolution really takes the EIB to task. MEPs want the bank and the Commission to get serious about the risks that come with these financial tools and the failed infrastructure projects like Castor that they are used to finance. Such mechanisms will be at the core of the Juncker Plan, and MEPs share our concerns that these shift the risks to the public sector and reduce the quality of the projects financed. The Parliament resolution comes at a historic moment for the bank, and we hope that the EIB will reflect on the outcomes of this vote through changes in policy and practice.”

Anna Roggenbuck, CEE Bankwatch Network:

“I am pleased to see the European Parliament urging to reform and reinforce the EIB Complaints Mechanism just before the review of this policy. I hope it will bring necessary improvements to its independence and effectiveness which is highly needed in light of the future role of the bank in the Juncker Investment Plan.”