Bank Boosts Ties With Europe

In April, the institution reaffirmed its presence in Europe by appointing a Vice President for Europe and announcing the official opening of its office in Germany. The Bank already has a strong presence in Europe, with offices in Paris, London and Brussels. The changes come in the wake of the May decision to launch Europe's single currency, the euro, and as accession of new member states to the European Union takes center stage.

"The next two to three years will bring exciting new changes and we want to put the Bank on the map in Europe," says Jean-Francois Rischard, soon to become World Bank Vice President for Europe. "We want to further develop our relationship with Europe, which collectively, as the Bank's largest shareholder, represents an important constituency."

Rischard, a Luxembourg national and Vice President of the Bank's Finance, Private Sector and Infrastructure Network, will take up his new post in Paris in September. Announcing Rischard's appointment recently, World Bank President James Wolfensohn emphasized that the position represented a shift in focus, rather than an expansion of services: "Indeed, we are proceeding to cut costs and improve the cost-effectiveness of the general services and administrative functions in Europe."

Two years ago, the Bank opened the doors of its Brussels office, thereby extending a hand to the European Union institutions.

Spiros Voyadzis, who directs the Brussels office, says that the Bank and EU have overlapping missions. While the Bank has an exclusively socio-economic development mandate, the EU is a constellation of primarily public institutions with a broader political mission. But, says Voyadzis, "the aim of our partnership is to achieve our common goals together, particularly where our mandates overlap and where they benefit developing countries with which both institutions work."

The Brussels office was established in 1996 to deepen the partnership with the European Union institutions and Belgium. The Brussels office acts as a liaison between the Bank Group's Washington office and the European Union institutions on development assistance programs and has facilitated a dialogue in the region on economic and social issues pertinent to developing countries. "Our presence in Brussels—where you have the European Commission, the seat of the EU, European Parliament, European Confederation of Businesses and NGOs, as well as an enormous press corps—is critical to raising awareness of the Bank's activities and agenda," says Voyadzis.

The partnership with the European Commission and the European Investment Bank now amounts to $1.1 billion per year in development assistance—up from $800 million since the office opened. This amount is in addition to $500 million of parallel cofinancing by the European Union Member States.

Strategically located in Frankfurt, the Bank's newest office is housed in Kreditanstalt für Wiederaufbau (KfW). KfW is an agency that implements Germany's financial operations and is the World Bank's second largest co-financing partner.

The move to set up shop in Germany under the management of Oltmann Siemens, of the International Finance Corporation (the Bank's private-sector arm), responds to the growing interest in international partnerships on the part of German businesses. IFC Executive Vice President Jannik Lindbaek and Rischard held an official opening event on May 29 with about 400 guests from government, industry, the financial sector, and civil society. Germany is the World Bank's third largest shareholder and its second largest provider of bilateral co-financing. In the past fiscal year, German firms were awarded $563 million for contracts related to projects financed by the World Bank.

As Vice President for Europe, Rischard, who has been with the Bank since 1975 (except for a three-year stint on Wall Street from 1986 to 89) will be the senior spokesman for the Bank Group and Europe and will advise IFC on its European outreach strategy.

"We want to group these offices into one big team," Rischard says of plans for the European offices. "Rather than operating along geographic lines, we will create several business lines. One will focus on communications and flagship events, another on OECD and UN institutions, one on strategic dialogue with key European stakeholders, and another to provide services to the World Bank Group operations.

"We want to deepen relationships with other institutions as well, including European non-governmental organizations, business associations, think-tanks, and top decision-makers in the private sector."

The Euro

The recent historic decision by eleven countries to launch Europe's single currency will transform Europe's monetary landscape. But clearly, the World Bank and its borrowers will also be affected.

On May 3, Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Spain and Portugal (the founding members of the Economic and Monetary Union, EMU), agreed to replace their national currencies on January 1, 1999 with the euro. During a transition period from January 1, 1999 to December 31, 2001, participating member states will be able to pay for goods and services with either the euro or their (former) national currency (existing public debt will be converted into euro in January 1999 and all new public debt issues will be in euros).

The full implications for the Bank are still emerging. But "the euro is coming and we need to be ready," says Salman Zaheer, a member of the Bank's Euro Taskforce, which is helping the Bank's business units gear up for upcoming opportunities and challenges.

Within the Bank, the finance complex is likely to experience the biggest impact. Likely impacts include a reduction in transaction costs and improved liquidity management (by consolidating banking arrangements and accounts currently held in EMU countries), simplified funding of Bank loans (by treating all EMU currencies as a single euro group), and technical changes to out standing loan products. Later this summer, the taskforce will put together a Bank Group-wide strategy on the euro.

EU Enlargement

The Bank is collaborating with the EU on numerous fronts. One of the EU's most pressing issues is centered around preparing former soviet economies for EU membership. The expansion, or EU enlargement, would eventually increase EU membership from the current 15 nations to include 10¹ Eastern European countries and Cyprus.

The European Commission, the Bank, and the EBRD recently signed a Memorandum of Understanding on Cooperation for Pre-Accession Preparation of Central and East European countries and compiled a list of projects for potential cofinancing of environment, energy, and transportation sectors. The IFC is expected to be invited to also cosign the memorandum in September.

Bank collaboration also includes high level coordination meetings (see World Bank News May 7 issue), co-chaired Consultative Group meetings and donor conferences in the framework of the Group of 24 (finance ministers representing developing countries). The EC and World Bank have been working closely to prepare for the next Caribbean Group for Cooperation in Economic Development (CGCED), to be held in Washington next week, June 8 to 11. Press interested in more information on the Bank's European Offices should call Andrew Rogerson in London, 44-171-930-8511, fax 44-171-930-8515; Rachel Winter Jones in Brussels, 322-522-0052, fax 322-552-0025; Nick van Praag in Paris, 33-1-40-69-30-29, fax 33-1-47-23-74 36; and Claudia von Monbart and Oltmann Siemens for the Frankfurt office, 33-1-40-69-30-14.

¹Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovak Republic and Slovenia.