* EBRD holds annual meeting May 18-19
* Bank will seek new president, vote on N.Africa fund
* Emerging Europe a worry, as euro zone crisis rages
By Carolyn Cohn
LONDON, May 11 Facing a possible change at its
helm, emerging Europe's development bank risks stretching itself
thinly as mission creep into North Africa eats up resources
while the bank's core charges feel the heat from raging euro
zone financial fires.
The European Bank for Reconstruction and Development, set up
in 1991 to enable the former communist economies of the Soviet
Union make the transition to market economies, hosts its annual
meeting for its 65 country and multilateral shareholders at its
London headquarters on May 18-19.
As well as choosing a president for the next four years, the
bank will be voting on a 1 billion-euro fund for North Africa as
one of the first projects in its new push into a region
experiencing vast political upheaval.
Shareholders are also likely to discuss the spillover from
banking and growth problems into the EBRD's original region of
central and eastern Europe and some analysts say the Bank may be
in danger of overstretching itself.
"When you think of the EBRD's original mandate, it was quite
a different region and set of problems from the issues it is
facing with North Africa," said Vanessa Rossi, global economics
adviser for Oxford Analytica.
Emerging Europe, with its close proximity to the troubled
euro zone, is still struggling to recover from the 2008/09
"The EBRD has not finished with that problem when it has to
get started with another quite different set of circumstances,"
The EBRD extended its mandate last year to North Africa due
to requests from its shareholders and the international
community, and has the expertise to carry out the job, an EBRD
The bank, which will issue revised growth forecasts at its
meeting, is predicting growth of 3.2 percent for emerging Europe
this year, though only 1.7 percent for the richer central
European economies, such as Poland and Hungary and euro zone
countries Slovakia and Slovenia.
President Thomas Mirow and other EBRD officials are worried
about the threat posed to emerging Europe from deleveraging by
Western European banks.
"We will see continual efforts to deleverage, to shrink
balance sheets," Mirow told Reuters Insider television in a
"What (banks) should avoid is to reduce the support and
lending to the real economy, to SMEs (small and medium
enterprises), and rather sell assets which have been bought on a
more speculative basis."
Where EBRD member countries in central Europe were once
looking to "graduate" from being a recipient of EBRD funds and
in many cases join the euro zone, those bets are off with the
whole euro zone project looking creaky.
The EBRD will also next week publish growth forecasts for
the first time for the North African countries in which it is
starting to invest -- Egypt, Jordan, Morocco and Tunisia.
Egypt and Tunisia overthrew their presidents last year but
are struggling to get back on a firm financial footing, and
political instability remains a concern for the region.
The meeting marks the end of German Mirow's four-year term
as president. Mirow is standing for a second term, but his
campaign lacks Germany's backing, and the contest has turned
into a five-horse race, widely seen as part of a tussle for
other top European jobs.
When Mirow joined the EBRD in 2008, Lehman Brothers was
still a going concern, the Bank was predicting growth above 5
percent in emerging Europe and the full impact of the sub-prime
crisis had not yet been felt.
The EBRD was facing calls to be closed down, merged with the
European Investment Bank or to pay its shareholders a dividend
from the profits made from its largely private sector
The global financial crisis gave the EBRD a new lease of
life. Shareholders agreed to increase the bank's capital to 30
billion euros ($38.98 billion) from 20 billion and the EBRD
spearheaded the Vienna Initiative which provided 33 billion
euros to support banking sector stability in the region.
The EBRD added Turkey to the portfolio of countries in which
it invests, and following the Arab Spring uprisings last year,
extended its mandate to include North Africa.
The Bank is now involved with the so-called Vienna 2.0
agreement, to prevent another banking crisis, as well as its
traditional investments such as a recent 135 million euro loan
to Turkish company Enerjisa to construct a wind farm.
Mirow is up against four other candidates for his job, after
European Union finance ministers, who hold a decisive vote in
the process, failed to agree a candidate. Russia and Bulgaria
have proposed his candidacy.
The president has to be elected by a simple majority of at
least 33 shareholders and by a majority weighted according to
the size of shareholding. The United States has the largest
shareholding by capital weighting at 10 percent, but France,
Germany and Italy each have more than 8 percent.
Britain is fielding a candidate for the first time -- civil
servant Suma Chakrabarti -- despite an unwritten rule that the
job will never go to someone from the UK as it houses the EBRD's
The UK government considers Chakrabarti a "unity" candidate
who would sidestep Franco-German squabbles -- previous
presidents have all been French or German -- and keep the EBRD
position outside a carousel of EU jobs up for grabs to ensure a
balance of power in the European Union.
Euro zone sources say the French candidate, European
Investment Bank vice president Philippe de Fontaine Vive Curtaz,
is by no means a shoo-in but the French would like to see their
candidate installed as they are unlikely to get one of the other
Those jobs are the chairmanship of the Eurogroup, the
policy-setting forum of euro zone finance ministers, a seat on
the European Central Bank's executive board and head of the euro
zone's permanent bail-out fund.
German Finance Minister Wolfgang Schaeuble is in the running
for the Eurogroup chair, while Luxembourg's Yves Mersch is
expected to get the ECB job and Spain could get the bail-out
The other two candidates for the EBRD presidency -- Poland's
Jan Krzysztof Bielecki and Serbia's Bozidar Djelic -- are
considered outsiders because of a conflict of interest, as their
countries are recipients of EBRD funds.
But if Mirow doesn't keep the presidency, there is life
after the EBRD -- his predecessor Jean Lemierre was a key
negotiator in Greece's recent debt restructuring.