[Opinion] Why new EIB chief must prioritise people's basic needs

EU finance ministers will meet s on Friday (15 September) to discuss who should become the new president of the European Investment Bank (EIB) — the largest multilateral development bank worldwide.

Whoever takes up the position will have a huge responsibility to execute meaningful reform and make sure the bank delivers for its ultimate owners — the people and households of the EU.

The EIB’s €249bn of subscribed capital comes from the taxes we pay via member state contributions.

However, the bank has not been delivering to meet our most important needs, such as access to housing or energy, because it is following the EU’s current economic strategy attempting to reignite a low-growth economy working less and less for us.

The EIB does this by financing big infrastructure projects, investing in technological innovation and supporting the competitiveness of EU industry and firms — with the transport and energy sector accounting for half of the bank’s loans.

This public money often goes to big companies already making large profits on their own.

In the last few years, the focus has narrowed to green, digital, and more recently dual-use military technologies. The idea is that investments will trickle down and create jobs and well-being.

But this is not what we see on the ground.

Across Europe, energy price spikes and food price inflation have hit low and middle-income households hard. The cost of essentials — housing, utilities, food, and transport — are taking up ever higher portions of our already tight budgets.

Basic services like health, education, care and social infrastructure are also increasingly underfunded through inadequate tax revenues, leading to staff shortages in healthcare and education.

While our electricity bills were skyrocketing, the EIB was financing the few clean tech projects built by otherwise highly polluting energy companies who were increasing their profits through price gouging.

We do not see the EIB take such drastic action to support programmes which help households to access affordable public services.

The new president must understand that if we are to stay within planetary boundaries, Europe needs an economy using fewer resources and supporting biodiversity and ecosystem regeneration.

The European Green Deal Industrial Plan is currently more focused on subsidising highly profitable car companies for keeping electrical car production in Europe than reducing car mileage.

At the EIB, this translates into lower climate criteria for fossil companies to support more ‘green’ projects.

We are already facing the disruption of climate change, both through forest fires and floods, as well as closures of polluting industries without decent compensation or alternatives for workers and communities.

Despite this, Europe keeps on postponing changes in industry and lifestyle needed to tackle the environmental crisis.

Improving households’ living standards is the trade-off for getting popular acceptance for these necessary large changes. And this requires considering affordable access to housing, energy, food, transport, healthcare, and education as basic public services. Their provision must become absolute priorities.

Major overhaul

Wealth inequalities must be reduced through tax justice to provide the resources for this common future.

The EIB can play an important role. The bank is currently quite similar to a mainstream European commercial bank.

It uses the same mechanisms for evaluating projects, is very shy of taking risks and makes €2.5bn in profits a year — even though making profits is not part of its mandate.

Other public banks, such as the European Bank for Reconstruction and Development or the German public investment bank Kreditanstalt für Wiederaufbau take a lot more risk and still have a triple-A credit rating.

The European Commission also recognises that the EIB can take on more risk in its latest Strategic Foresight report, but wants it to do this for technological innovation.

Such a trajectory would not create adequate jobs, sufficiently reduce the environmental impact of the economy or help households in need to access affordable housing or energy.

Instead, the new EIB president should overhaul how the bank operates.

The EIB can have a maximal impact on people by lowering its profit target, applying solid social and environmental conditionalities and prioritising publicly owned and local nonprofit projects and entities in vital sectors that respect environmental limits and have long-term social and economic viability.

To achieve this, the new chief of the EU’s house bank should make fewer deals with private banks, collaborate more with national and regional public investment banks and adapt its services so local governments can have easier access to money.

Yet the EIB president cannot change the EU’s economic paradigm on their own. Delivering the essential public services we all need requires fiscal resources and better wealth taxation.

The bank should refrain from supporting any company that avoids paying its fair share in tax or has ample resources to finance these projects themselves.

The EIB has grown a lot as an economic and political player within Europe over the past 10 years. It is about time it works for its real owners, the households and workers that pay the taxes on which it relies.

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