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Warsaw demands bigger role in European Investment Bank

EU finance ministers meet on Friday in Vienna to negotiate how the UK’s share in the European Investment Bank (EIB) is going to be replaced, with Poland demanding an increased share.

Poland is threatening to block the EIB capital increase unless it secures a bigger share, the Financial Times reported on Thursday.

With €3,5bn in the capital, the UK is the single biggest EIB shareholder of the Luxembourg -based institution.

The EIB is the biggest investment bank in Europe, funding research, infrastructure and environmental projects across Europe and beyond. In 2017 Poland was the fifth biggest beneficiary of EIB investment, receiving €5.1bn in finance.

Warsaw wants to buy a bigger share of the UK’s stock, rather than the EIB to draw from its reserve capital.

Most EU member states want a capital increase proportional to the current shareholders’ composition. Austria, the Netherlands, and Sweden want broader structural reforms on supervision to accompany the capital increase.

Currently, Poland is the tenth biggest shareholder.

As the UK departs, Poland will be the seventh biggest economy and fifth in terms of population. Warsaw wants an “asymmetrical increase” of its shares, offering cash so that its shares are reflective of the country’s relative significance.  Romania shares this line of argumentation.

A “proportional” share increase would mean that Poland goes from a 4,7% share to 5,7%. Conversely, Italy, France and Germany would see their influence on the board rise from 48% today to 58%. Hence, Warsaw is demanding an “asymmetrical” share increase.

Prime Minister Mateusz Morawiecki confirmed to Reuters that Warsaw is willing to be “very tough” in the negotiations for EIB’s future shareholders’ composition.

Some fear that a bigger share for Poland could undermine the EIB’s AAA credit profile. And there is a broader reluctance to allow Warsaw to increase its influence given an overall conflictual stance vis-à-vis Brussels.

First published in New Europe: