* European Bank for Reconstruction and Development marks 25
years
* Anti-establishment feeling hurting cohesion sought by EBRD
* Annual meeting to tackle change in EBRD's heartland
* EBRD extension beyond ex-Soviet bloc region under scrutiny
By Marc Jones
LONDON, May 9 (Reuters) - Twenty-five years after the
European Bank for Reconstruction and Development was set up to
integrate ex-Soviet bloc states into the world economy, the EBRD
is finding its core region pulled apart by a wave of
anti-establishment, anti-migrant sentiment.
The bank, which has invested around 100 billion euros
($113.89 billion) since its creation in 1991, holds its annual
meeting this week at a time of increasingly fenced-off European
borders, sluggish economies, a possible British exit from the
European Union and discord between governments over sheltering
over 1.2 million migrants camped out across the continent.
Coupled with Cold War-style tensions between the West and
Russia, there are signs of divergence in the bank's traditional
heartland for the first time since the fall of the Berlin Wall -
an erosion of the cohesion the EBRD had set out to promote.
"I think we are really at a turning point in European
history," Commerzbank's chief emerging market strategist Simon
Quijano-Evans said. "Are we going to see a reversal of the
convergence story between east and west Europe of the last 10,
15, 25 years? And how are leaders, wherever they are from, going
to deal with that?"
Representatives of the EBRD's 67 shareholders, including the
United States, European Union, Japan and China, will converge on
the bank's headquarters in London to thrash out these issues.
The bank, also struggling to map out its future strategy,
has evolved far beyond its original mandate of investing in
ex-Soviet bloc countries, adding stakes in Turkey, Mongolia,
North Africa and Jordan as well as euro zone states Greece and
Cyprus.
Its involvement in North Africa, for instance, has raised
eyebrows and many are also questioning EBRD investments in
increasingly prosperous economies such as Poland.
The EBRD president, British former civil servant Suma
Chakrabarti, is expected to be handed another four-year term at
the meeting, but even he is recommending the bank's shareholders
halt its rapid expansion.
"I myself feel we have a huge task already," Chakrabarti
told Reuters in an interview.
"We have 36 countries of operation (where it invests) and
they are very heterogeneous. I think we need to focus,
therefore, the efforts (of staff) fully on delivering within the
existing set of countries."
Chakrabarti is adamant, however, that the EBRD will remain
headquartered in London even if Britain votes for Brexit, or to
leave the EU, at a referendum on June 23.
For some EBRD member states, though, Brexit may change the
equation in several ways. Already in countries such as Poland
and Hungary, anti-establishment ruling parties are tussling with
the EU.
"The EU that all of us (Balkan countries) are aspiring to,
it has lost its magic power," Serbian Prime Minister Aleksandar
Vucic told Reuters earlier this year.
"WHAT IS IT REALLY FOR?"
The EBRD now spends more than 9 billion euros ($10.25
billion) a year funding roads, banks, gas pipelines and small
businesses, as well as a steel hangar the size of London's St
Paul's Cathedral placed over the site of the 1986 Chernobyl
nuclear disaster in Ukraine.
But its region of operation - stretching from Estonia to
Egypt and Morocco to Mongolia - has failed to fully heal the
scars left by the financial crisis.
The bank's economists, like the IMF last week
will cut their growth forecasts again, especially for the
eastern European and Caucasus states that have been hit the
hardest by commodity and currency market problems.
Greece's woes, for instance, may be bubbling up again, with
Athens risking unrest by passing unpopular tax and pension bills
in order to receive emergency EU cash.
Attendees at this week's meeting include Volodymyr Groysman,
the new prime minister of Ukraine, where the EBRD currently
spends 1 billion euros a year; and Sergei Storchak, deputy
finance minister of Russia, which is under Western sanctions and
is no longer receiving new EBRD investment.
Eurogroup head Jeroen Dijsselbloem, China's deputy central
bank governor Yi Gang and the French and Italian finance
ministers are all due to attend.
Their sessions are likely to debate how to tackle the change
of direction in the EBRD's traditional heartland.
"It has been almost constantly reinventing itself for the
whole 25 years," said David Marsh, managing director of the
policy forum OMFIF. "It hasn't really overcome this issue of
what is it really for. There is the same old question of what
should be the long-term mandate be."
($1 = 0.8779 euros)
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Where the EBRD invests http://link.reuters.com/tuc74w
Interview with Chakrabarti on election hopes
Interview with Belka on election hopes
Factbox on EBRD spending
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