Washington: Britain risks losing access to the European Union’s development bank when it leaves the bloc, adding to the economic harm caused by Brexit, according to Werner Hoyer, the bank’s president.
The European Investment Bank lent Britain a record 7.8 billion euros ($8.7 billion) in 2015, part of a UK loan book of almost 50 billion euros. Projects funded or approved for funding over the last two years range from power generation and improvements at the port of Dover to social housing in Northern Ireland, according to the Luxembourg-based bank’s website.
“Not having any access to cooperation with the EIB one day will do great damage to Great Britain,” Hoyer said in an interview in Washington during the fall meetings of the International Monetary Fund and the World Bank.
As Prime Minister Theresa May moves toward pulling the trigger on Britain’s exit, she’s signalling her government will give priority to controlling immigration even at the risk of curbing access to the European single market. Hoyer said the economic damage to Britain will be several times greater than that faced by the remaining 27 EU members. The pound fell for a fourth day, declining 1 per cent to $1.2242 at 4:06pm in London.
Brexit risks cutting off UK access to the EIB, and the prospect of losing Britain as one of the bank’s shareholders creates uncertainty about funding for projects in other EU countries, Hoyer said. Unlike countries such as Germany and France, the UK doesn’t have a state bank that funds development projects at home, he said.
“We need clarity relatively quickly as to how the UK envisages EIB lending activities in the run-up to its final exit from the EU,” Hoyer said.
EU governments — the bank’s shareholders — would be right to ask “why they should approve projects at the bank’s board that commit us for 25 years while we know exactly that the UK will no longer be a member of the EU after three years,” he said.
While the EIB also lends to non-EU countries, beneficiaries such as Norway pay into the EU budget and have accepted the freedom of movement of labour, concessions the UK government hasn’t been willing to make, Hoyer said. To keep the EU’s bank from shrinking, other EU members are likely to make up for the 16 per cent share capital the EIB will lose when Britain pulls out, he said.
Hoyer said European Commission President Jean-Claude Juncker’s proposal to double the European Fund for Strategic Investments to 630 billion euros and extend it from three years to six years “makes sense,” though he suggested the program’s impact should first be evaluated. The fund is an EIB-managed guarantee facility that comes from the EU budget.
The EIB is ready to take on a bigger role outside the EU, especially in Africa and the Middle East, to complement official development aid and counter migration pressures, Hoyer said. Germany has said it plans to make Africa a focus of its Group of 20 presidency next year.
“People are completely underestimating the challenge in Africa,” Hoyer said. “We’ll have to deal with 2 billion people. This is the migration century.”