On the heels of the Oslo Accords between the Palestinians and the Israelis (1993-94), signed at the White House, the European countries – who had been entirely sidelined during the process – decided, in 1995, to launch the Euromed Partnership, also known as the Barcelona Process (BP) based on the principles of “peace, stability and prosperity through a reinforced political and security dialogue and economic, financial, social and cultural cooperation”.
The BP – one of whose outcomes should have been a Euromediterranean free trade area – was, in fact, conceived as an operational companion to the Oslo Accords. Its effectiveness has been, rather unfairly, questioned. However, if peace and prosperity have not been achieved in this unruly area, this is largely due to the vagaries and stalemates of Israeli-Palestinian relations. Indeed, autocratic governments and Islamist movements can easily play on that chord to shun radical reforms and, in fact, they mutually reinforce each other. Nevertheless, the impact of the BP – through its financial arm, the MEDA/European Neighbourhood Policy Instrument (ENPI) – should not be discounted, as it has provided an average of about €1 billion/year in grants to the southern shore. Some of its most successful programmes were budget support/structural adjustment projects (administered in a rather different mode from those of the IMF) and institutional twinnings.
But, to make a really permanent dent in the socioeconomic realities of the target countries, it is necessary to finance “hard” projects, besides the “soft” ones. After all, this is what the EU does domestically, with the structural funds that finance the blood vessels of the European economy, the Trans-European Networks (TEN).
Let us take the example of transport. For the 2014-2020 period an amount of €70 billion is earmarked in the EU budget for co-financing works, in particular in the “core network” of 50.762 km of railway lines, 34.401 km of roads and 15,715 km of inland waterways. Additional amounts apply to energy and telecommunications networks.
Now, in the case of the southern Mediterranean countries the corresponding figures fall far short of needs. Hard financing for projects in the transport, energy and telecommunications sectors are channelled through the European Investment Bank and, in the 2014-2018 period, they benefited of loans for a total of €4.1 billion (respectively 1.2; 2.8 and 0.1 billion). More precisely, it has been estimated that, between 2015 and 2017, only twenty transport projects were active in the region, for a total investment of €4.15 billion provided by all donors, the EU included.
Another element of criticism of the BP is its unilateral characteristic. Indeed, even the weak egalitarian set-up of the EU’s relationship with the African Caribbean and Pacific countries (ACP) is practically absent in the BP case. This applies, in particular, to the EIB, which is an exclusively European institution.
These two factors (need for additional hard financing, unilateralism) contributed to the idea, aired by the Prodi Commission in 2002, of setting up a Mediterranean Bank (MB). The idea was not exactly new as it was patterned after that of the EBRD, the European Bank for Reconstruction and Development focusing on Eastern Europe and conceived by Mitterrand’s special adviser, Jacques Attali who became its first president in 1991. Indeed, at that time, Secretary of State James Baker had aired with Attali a proposal for setting up a similar bank for the Near East.
According to that idea the MB would have had as shareholders the European Commission, interested member states (thus circumventing the objection to its obligatory character for MS), Arab funds and individual Arab countries (most importantly those of the Gulf), and other interested parties. It would have been staffed and managed on an equal basis by personnel from the southern and from the northern shores of the Mediterranean. It is clear that it would have had a level of firing power far above that of the financing institutions at present active in the area.
The Commission informally discussed the idea with Spain, at the time holding EU presidency, and was warmly welcomed by Spanish Prime Minister Josè Maria Aznar. However, the chair of the ECOFIN Council, minister Rodrigo Rato shot it down. This happened at the instigation of the EIB, which had been previously soured by the creation of the EBRD for Eastern Europe and did not want to lose another business area, one in which it had already been – timidly – active for decades.
As a matter of fact, the southern Mediterranean is one of the very few world areas lacking a dedicated regional development bank. As mentioned, the EIB is somewhat active there, as well as some Arab and Islamic funds. Even the EBRD has made some inroads in the region. But this is hardly comparable to the role played in their respective geographic areas by: the African Development Bank, the Inter-American Development Bank, the Asian Development Bank, their equivalents for Latin America, West Africa, Central Africa and, of course, the EBRD for Eastern Europe. Or the EIB itself for the EU. And all these banks are managed or co-managed by national staff of the target countries.
Later on the idea of a closer implication of beneficiary countries started to take shape. Indeed, after a few years of debate, the Union for the Mediterranean was founded in 2008. This inter-governmental organisation was largely sponsored by France, in particular by its then president Nicolas Sarkozy, as a bulwark against Turkey’s aspirations to become a EU member. But the UfM is not much more than a debating forum, since it has no financial capability and it simply recommends projects for donors to finance.
However, the UfM, being managed, organized and staffed on an equal footing between north and south could indeed be transformed into the skeleton of a regional bank. It could make a significant contribution to decreasing tensions in this difficult region on the basis of common interests rather than on grand peace plans.