The European Bank for Reconstruction and Development (EBRD) said Tuesday it would begin funding critically needed investment in cash-strapped Greece as Athens nears the end of a massive bailout programme. The private-sector champion said the programme would cover the next five years until 2020 but declined to give a figure for its potential investment after reports it could be as much as 1.0 billion euros.
"What we will be trying to do is to use the bank's expertise to develop the private sector to promote growth," EBRD president Suma Chakrabarti told a press conference in Brussels to announce the decision. The move follows a request late last year by the previous centre-right Greek government which agreed to tough austerity and reform commitments in return for a debt rescue worth 240 billion euros.
The new hard-left government of Alexis Tsipras won power in January however on a promise to reverse many of those reforms, especially privatisation, and chart a post-bailout future with its sceptical international creditors. Chakrabarti said the state sector in Greece was "still very dominant," accounting for about 40 percent of the economy, and so the EBRD's role would largely depend on future government policy. "Whenever we invest in any country it is always on the back of a programme of reform to a more open economy," he said. "What we are looking at is - are they moving towards a more market-friendly system?"
The EBRD would do as much or as little as was possible, he said, without giving a figure. "We just do not do that but the good news is that we are very well capitalised and we have headroom, no ceiling, no floor," he said. The European Bank for Reconstruction and Development was set up in 1991 to help fund the free-market transformation of the former communist states of eastern Europe.
Since then it has broadened its remit to all of Europe and neighbouring areas, focussing on the private sector to deliver economic, social and political change. The European Union, the European Central Bank and the International Monetary Fund bailed out Greece twice - in 2010 and 2012 at the height of the debt crisis when it looked on the verge of collapse.
At the end of last month, the 'troika' and Greece's 18 eurozone partners agreed to extend the current bailout by four months to give them and Athens the time to work out the next step, since the country remains fragile and unable to fund itself on the open markets.