ITAR-TASS - Igor Finogenov, Head of Eurasian Development Bank: Events in Europe Do not Mean a Crisis for Idea of Integration and Idea of Eurozone
The present difficult course of events in Europe and EU Eurozone is not a crisis for the idea of integration in general or Eurozone in particular. Igor Finogenov, Chairman of the Eurasian Development Bank (EDB) Managing board, expressed his confidence in that today in an exclusive interview to Roman Poderbyanski, correspondent of ITAR-TASS UK office. The Head of EDB participates in the two-day Business Forum of the European Bank for Reconstruction and Development (EBRD) in London
— Igor Valentinovich, at this Forum much attention is given to the crisis in Europe, in particular, in the Eurozone. Do you think it is a crisis of the model chosen by the European countries? What, in your judgment, is the problem? With respect to the Eurasian integration, what lessons are to be learned, what mistakes are not to be repeated so that we were able to avoid such difficult situation here?
-With respect to the current situation in Europe, personally I am far from thinking, that this is a crisis of the idea of integration in general and idea of Eurozone in particular. The Eurozone has certainly contributed and will contribute greatly to the development of the economies of its member states, and will demonstrate the advantages inherent in the model implementation. No one has disproved so far and I think that it will be difficult to deny the fact that lowering barriers on the way of commodity movement, investments, and labour force contributes to long-term and sustainable development.
There are a lot of problems on this way. They often go beyond clearly economic issues and lead to some social problems, if we talk about labour migration, for instance, or any other aspects. All these exist, and today we can see another problem with political roots. It is connected with the financial crisis in Eurozone, in particular. I mean the Greek problems and the issues which become apparent in other Eurozone countries.
I believe that everything has certain administrative reasons with political aspects behind them. In particular, creation of a single currency (euro), single central bank, and, consequently, single monetary policy without joining fiscal function has generated problems in Greece and other countries which have violated the Treaties of Maastricht providing for limits in budget deficit and debt burden. That was apparent and clear, yet the political will was not enough — or it was not implemented in time — which would allow to have levers for regulation of the countries which being affected by certain political factors violated their commitments.
This is a good example and the lesson showing that any integration association unifying politically and economically sovereign states must be built by certain stages to allow aligning policy with economy, when the political will becomes generally accepted and even apparent so that the treaties could be put into practice. I want to reiterate, that this is certainly a lesson to learn. This is not the first and not the last lesson in terms of development of the Eurasian Economic Space which proves that everything must have its planned development.
I would say that the recent events were not a trigger for us to start learning this experience. The European experience was thoroughly analysed at every stage from the very beginning of the idea of creation of the Eurasian Economic Community (EurAsEC) — which has then turned into the Customs Union, and now into the Common Economic Space (CES). And not only the experience of the EU, but that of other integration associations in implementation of such projects, because, along with Europe, there are many other unions, such as MERCOSUR (common market of the South America countries) and other associations, which, by the way, may offer more prominent examples on the basis of historical and other parameters.
We, as a bank, — more specifically, our analytical divisions, — always responded to requests of our shareholder and participants of the integration process with respect to provision them with information about the processes which take place in Europe and the lessons to be learned from the way it was implemented. Thank to Europe for the lesson. I think that this will allow the Eurasian Economic Space to avoid those mistakes, especially, in such unpleasant and painful form.
— With reference to Eurasian integration and the space where Eurasian Development Bank operates, is it possible that the situation developing in the Belarusian economy — as compared with more stable economies in Russia and Kazakhstan — will result in anything similar to Greece which proves to be a «weak link» in the Eurozone?
— It is difficult to say a «weak link» — the term you mentioned. What are the criteria to apply? I know no criteria which would allow characterizing Belarus as a «weak link» in this triplet (Russia, Belarus, Kazakhstan). In terms of economic potential, «orientation», let’s say, to the integration processes, and simply the goods turnover and integratedness of the Belarusian economy into this entire space, — it is not a «weak link», and, if anything, the strongest one. Our researches show that in economic terms Belarus may benefit more than other countries from its work within the Common Economic Space.
Specifically, according to our estimates the per capita GDP will increase by 6.5% by 2020. Our estimates -verified and recognized by specialist — show that this is going to be the strongest impact on the national economy — as compared with other participating states. What does it mean? This is a simple fact, and I am sure that our Belarusian partners know and see it and will adhere to it.
Things do not just happen. As you may know there are certain gaps in the Belarusian economy which are currently managed, inter alia, using the loans granted by the EurAsEC Anti-Crisis Fund, and also advisory assistance we provide as part of implementation of Anti-Crisis Fund projects (EDB is charged with functions of Fund Funds Manager).They lead to improvement of the economy and despite the apparent, clear, and simple political reasons. The «shocking therapy» has its limits, too. All these will help Belarus to bring the key economic indicators to a normal state, and we are sure that this will have even greater effect and opportunity for development of Belarusian economy. To reiterate, I do not know the meaning containing this «weak link».
— Is Belarus a major recipient of the Bank assistance?
— It is not a major recipient. Today it is a major ACF’s borrower. Belarus is not a recipient of any aid from us. We are investors. We invest our money on specific terms and conditions on the understanding that it will return. We are not talking about charity. Of course, the credits provided by the Anti-Crisis Fund have such preferential nature in the generally accepted state with respect to the terms and conditions on which international organizations like the Anti-Crisis Fund used to operate. This is the responsibility Belarus is well aware of.
— Shouldn’t it be considered as a moment of weakness — if the country is a major recipient of anti-crisis credits?
— No, it just shows the size of the economy.
— In the setting of concern about the situation in Europe the EBRD has published its assessments showing that the Eurozone crisis mainly affects the countries which are most connected with the Eurozone. Whereas exporting countries and Central Asia states in the region of EBRD’s operations are affected to a much lesser extent. In principle, the highest forecasts of growth are in this very part of the region-recipient of EBRD investments. Is it possible that the interaction with the recipients of EDR investments has somehow changed over the last year, or the number of requests has increased, or the structure has changed?
— Let’s consider two parts of the question separately. The work of the Anti-Crisis Fund is primarily focused on resolution of budget process related problems in a particular country, and then on implementation of large investment projects. We have no such examples as yet, but I am sure that they appear soon. To return to the Anti-Crisis Fund which as I have already said focuses on rendering assistance to states in resolution of some budget problems today, I cannot say now which country has applied or plans to apply to our fund due to the situation with global markets including financial ones. Anyhow, the reasons for their applications lie in a somewhat different area and may in some or other way be connected with insufficient economy development, diversification etc. Yet they are not connected directly. It is not our case when anyone comes to us and says that «Greece faces problems, we need money». I am sure that we would consider such applications in a different way.
With reference to the operation of the Bank as a bank for development, we certainly consider the way the situation in the global markets affects the economic resilience of the projects we are already financing and planning to finance. It is obvious that such impact exists. Let’s assume that we finance the largest grain producer in Kazakhstan. The grain market, and the intervention of states into this market in terms of closing or opening exports, influences us. The metal market influences indirectly realization of some problems. It does not influence directly until we see a clear interaction.
Although we consider that, we may assume scenarios in which and due to economic problems the need for oil or any other raw material may decrease, which will have a general impact on the fund member states and implementation of specific local projects financed by us. We consider such scenarios and assess them other than a disaster, because there are many factors of other nature which may prevent from such course of events. In short we do not expect «the end of the world according to the Mayan calendar» in 2012, including that in economic sense.