Europe’s Investment Bank Shouldn’t Prop Up Private Capital

At the start of 2024, the European Investment Bank (EIB) — the world’s largest multilateral bank — appointed Nadia Calviño as its new president. Until last year, she was Spain’s deputy prime minister and economy minister, in which role she saw through a €3 billion windfall tax on excessive profits of energy companies and the banking sector. But such progressive measures belie the reality that she was a committed centrist in Pedro Sánchez’s broad-left government — clashing with Labor Minister Yolanda Díaz over European Union (EU) “recovery funds.”

This €800 billion package, financed through the combined EU member states’ debt, was designed to kick-start the European economy after the COVID-19 shock through loans and grants. But the funding will end in 2026 — cutting the EU budget almost in half, on top of a return to austerity. Calviño managed Spain’s share of the investments, which were implemented by means of techno-capitalist public-private partnerships.

In her new EIB role, Calviño is now under pressure to move toward bankrolling the defense industry in the wake of the war in Ukraine. It’s a far cry from the European and Global Green Deal which the EIB — meant to be the EU’s “Climate Bank” — set out to deliver in 2021, after Ursula von der Leyen became European Commission president. Calviño’s personal influence on the EIB’s direction surely has its limits. Nonetheless, with her appointment — and the start of a new European Commission and Parliament after June’s election — left-wing and progressive forces should use this window of opportunity to repoliticize the EIB’s long-overlooked public mandate.

The bank was, indeed, established as a public institution to operate on a nonprofit basis, offering equity, guarantees, or concessional loans (ones on better terms than those of commercial banks) in order to support EU objectives on integration and the economy.

Tucked away in Luxembourg, it was established in Brussels in 1958 to develop the European economy with funds from its shareholders, i.e., the member states of the European Communities (today, the EU). Most of its initial lending focused on regional development in the poorest regions in the European Economic Community (EEC). It financed public utilities in need of large capital with long maturities. With the Washington Consensus setting in, the EIB adopted the political project of the single market and shifted to a “market-maker” role in Europe, targeting roads, railways, and other sectors impacted by the push for liberalization and privatization, such as telecommunications, electricity, or gas. Its largest corporate beneficiaries over the past decade have been Iberdrola, Deutsche Telekom, and Terna.

Now, the bank increasingly embraces a new stage of financing decarbonized capitalism within its market-oriented portfolio. The greening of European industry and manufacturing through support for electric vehicle production, tech companies, or renewables well serves the big European corporations like Volvo, Iberdrola, Schaeffer, Ericsson, or Repsol. But it also backs some non-EU entities such as the US semiconductor manufacturer GlobalFoundries or Northern Fiber Holding, a German portfolio company of Swiss-based global asset manager UBS. In the first months of Calviño’s leadership, the EIB committed €942.6 million to the Northvolt battery gigafactory in Sweden, in what it says is the largest green loan package in Europe to date, with a total $5 billion of debt financing.

The clean tech race, built on an increasing need for stable access to raw materials, is guiding the EU’s public finance toward Europe’s biggest private firms — without considering long-term environmental and socioeconomic effects. But it’s not that the EIB is mandated to pursue greenwashed or extractivist investment. In fact, large public banks like the EIB — with a balance sheet of €545 billion — are well positioned to absorb finance from capital markets and redirect it in the interests of social and environmental benefit.

Looking at the finance ministers of the biggest EU economies that make up the EIB’s board  — from Germany’s fiscally hawkish Christian Lindner, to France’s Bruno Le Maire slashing public spending, or to the Czech Zbyněk Stanjura eroding his country’s labor code — the bank is unlikely to see a reform to systematically increase much-needed social investments amid the cost-of-living crisis. But even so, there is a lot more the bank can do already — and it ought to be supporting public projects that are financially viable over the long term, not motivated by juicy returns. The bank’s profits amounted to a whopping €2.36 billion in 2022, meaning it can indeed increase support for projects that offer social benefits rather than attractive profits. Other big public banks like Germany’s Kreditanstalt für Wiederaufbau (KfW) or the European Bank for Reconstruction and Development (EBRD) set aside more risk reserves than the EIB does and keep their AAA ratings. Indeed, where there’s a will, there’s a way: at the moment, the EIB is vowing to increase its risk-taking — but for innovation and high-return projects.

There are limits on the scope of public investments under the EU’s neoliberal framework — one that sets rigid fiscal rules and stipulates internal-market legislation that drives the privatization of public services. But even small shifts in the distribution of EIB finance from private to public could help resist the financialization of essential public services. Trade unions and local governments should talk to the bank about its public investment interests, such as building quality jobs, or maintaining the foundational livability of households in the face of public spending cuts (that is, increasing the amount of money left for households to spend after all bills are paid by improving access to essential public goods and services). Equally, they can ask for an advisory role; unions and cities are represented in the KfW’s Board of Supervisory Directors, after all.

This is paramount: as things are, to keep growing both in revenues and relevance, the EIB has been pulled toward becoming the financing arm of the EU’s key investment programs designed by Brussels bureaucrats — and by extension, Europe’s top lobby groups. For examples, we can look to the recovery funds, or RePowerEU, or the Green Deal Industrial Plan — the EU’s response to the US Inflation Reduction Act.

But stronger political opposition is also needed, against relying on a tech fix to Europe’s economic woes. Take public investments in the green transition. Private actors are slow to invest in renewables, in which they see relatively little commercial appeal — and when they do, their costs and prices are much higher than a public alternative would be. In this context, European public investment ends up favoring well-established and capitalized companies such as the fossil fuel giants TotalEnergies, Enel, or RWE. Pending full reclamation of energy into public ownership, cities and municipalities can make use of EIB finance for publicly owned renewable energy projects — taking some of the development of renewable energy away from private developers’ hands.

EIB’s current strategy is, instead, deeply rooted in the neocolonial plundering of cheap resources from the Global South, and in the EU’s own core-semiperiphery relations between Western Europe on the one hand, and Southern and Eastern European countries on the other. The green tech market is favoring patent holders, two-thirds of whom are concentrated in Germany. And while Poland receives major finance from the EIB — Poland’s National Development Bank has been the EIB’s biggest counterpart since 2010 — it is not developing its own industrial capacity, but rather feeding Western capital and multinationals with cheaper labor and lower taxes. This is starkly apparent in EIB-funded projects such as LG’s planned EV battery gigafactory in Poland.

In the Global South, the bank claims to be financing development through expanding market opportunities for European businesses in sectors like Enel’s renewables in Brazil, German investments in dodgy hydrogen plans in Namibia, or Orange’s submarine cable system across the Mediterranean. Here, too, internationalists and progressives should demand that the bank fund more public services, social infrastructure, and local productive sectors. Neoliberal Brussels institutions should not be left to lead the bank’s operations, proposing more of the same programs that misuse public investment to derisk big business’s profit maximization.

To be fair, some promising policies are already in place at the EIB — albeit with flaws, or not fully implemented. A clear economic rationale has to exist for its concessional loans, combined with EU grants and guarantees, addressing market failures. For instance, to fund regions that need it most and ensure convergence of living standards across Europe (which is a part of the EIB’s mandate), the bank has a so-called Public Sector Loan Facility (PSLF): a fund of up to €10 billion EIB loans matched by €1.5 billion in EU grants to support regions impacted by the phasing out of fossil fuel–related activities and the decarbonization of polluting industries. The first PSLF project signed was in Western Macedonia, a Greek region dependent on coal and lignite mining, heavy industry, and fossil fuels. Here, an EU grant of €14.5 million and €58 million of EIB loans are financing economic diversification, public health care, rehabilitation of public buildings, and public energy-efficiency works. The unfortunate thing is that the PSLF sum is dwarfed by the other “green” derisking programs.

The EIB also finances affordable and social housing projects like those of Hanover’s municipal housing company, or those of Barcelona en Comú, a party headed by  the city’s former left-wing mayor Ada Colau. As it stands, the program itself is far from perfect: it also promotes private sector housing and public-private partnerships, so it has a limited ability to counter the assetization of a public good like housing. But there is space for European cities and municipalities with progressive political representation and organized communities to develop and demand much more long-term public financing from the EIB for affordable housing projects than is currently given.

In the face of the global push to compete with China’s state-led subsidies, as well as to secure a good position in supply chains and the clean tech market, pressure on public budgets is immense. But even the United States’ Chips Act includes conditions such as limitations on share buybacks and dividends. And if there’s a lesson for the EIB from Chinese or the US public finance, it’s the need to redeploy the EIB’s financial power to support publicly owned and controlled companies — and a strong program of public investment.

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