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Financing social projects inceb target countries:

achievements and challenges

FINANCING SOCIAL PROJECTS IN CEB TARGET COUNTRIES:

ACHIEVEMENTS AND CHALLENGES

January 2012

F INANCING SOCIAL PROJECTS IN CEB TARGET COUNTR I ES : ACHI EVEMENTS AND CHALL ENGES

ACKNOWLEDGEMENTS This study was prepared by Lucia Athenosy, Senior Economist, with contributions by Carole Vachet, under the responsibility of Michael Roeskau (Special Adviser to the Governor and former Central Director for Studies and International Relations) and Sébastien Relland (Head of Economic, Social and Strategic Studies).


FOREWORD

Combating social exclusion and promoting social justice and fundamental rights have long been major pillars of activity of the Council of Europe Development Bank (CEB), founded fifty-five years ago as a financial instrument of solidarity in Europe. Endowed from its creation with an exclusively social mandate, the CEB has dedicated significant lending volumes to strengthening social cohesion in Europe. Today, the CEB strives to foster social convergence through the financing of social investment projects in its Member States and, more particularly, in the countries of Central, Eastern and South Eastern Europe, its so-called “target countries”. Ever since the fall of the Berlin Wall in 1989, the Bank has increasingly deployed its activities in the Eastern regions of Europe.

The overall objective of this study, entitled “Financing Social Projects in CEB Target Countries: Achievements and Challenges”, is to take quantitative and qualitative stock of the actions conducted by the CEB in this region over the last two decades. Covering all the Bank’s sectors of action, the study shows the Bank’s diversity of action and sound achievements in the target countries, which are a priority geographic area for the Bank’s financings. The study also seeks to discuss the main lessons learned from the Bank’s long-standing experience in financing social projects in the target countries and to outline the challenging operational environment in which the CEB intends to consolidate its activities in the target countries in the years to come.

The global financial and economic crisis has hit most of the Bank’s target countries hard. At the time of writing, the overall pace of recovery remains fragile, with increasing cross-country divergence, against the backdrop of the Eurozone sovereign debt crisis, financial market volatility and pressures to accelerate fiscal consolidation in both East and West. Within this context, multilateral development banks have a core role to play in addressing increasingly pressing social challenges. Since the crisis has had a major economic and social impact in the Bank’s Member States, the CEB is committed to deploying every possible effort to best fulfil its social mandate. I believe that in the face of the crisis, the CEB has capitalised on its strong points, namely its rigorous financial and risk management, inseparable from the banking nature of its activity, the originality of its mandate and its capacity for adaptation and rapid response.

Looking ahead, the CEB, as the social development bank in Europe, will remain committed to its social mandate and will be part of the necessary international support designed to improve the living conditions of populations throughout Europe and, more specifically, in its target countries. I am confident that the enhanced means the CEB will have at its disposal thanks to its recent 6th capital increase should enable it to continue to provide substantial support to its Member States in a difficult and uncertain environment. For the CEB, the challenge will be to achieve tangible and sustainable results over the long term in promoting social cohesion and inclusion, while preserving its financial solidity and high standing in international financial markets.

I hope that this publication will provide a wide audience with useful information about our commitment and contribution to sustainable socio-economic development in the target countries. At the same time, I believe that the observations and conclusions it contains will add to the on-going discourse on challenging issues confronting this region of Europe.

Rolf Wenzel

Governor

Council of Europe Development Bank


CEB Member States including the Target Group countries (year of accession)

Albania 1999 Holy See 1973 Poland 1998 Belgium 1956 Hungary 1998 Portugal 1976 Bosnia and Herzegovina 2003 Iceland 1956 Romania 1996 Bulgaria 1994 Ireland 2004 San Marino 1989 Croatia 1997 Italy 1956 Serbia 2004 Cyprus 1962 Latvia 1998 Slovak Republic 1998 Czech Republic 1999 Liechtenstein 1976 Slovenia 1994 Denmark 1978 Lithuania 1996 Spain 1978 Estonia 1998 Luxembourg 1956 Sweden 1977 Finland 1991 Malta 1973 Switzerland 1974 France 1956 Moldova 1998 “the former Yugoslav Georgia 2007 Montenegro 2007 Republic of Macedonia” 1997 Germany 1956 Netherlands 1978 Turkey 1956 Greece 1956 Norway 1978


CONTENTS

EXECUTIVE SUMMARY 1

1. INTRODUCTION: PURPOSE AND SCOPE OF THE STUDY 3

2. HISTORICAL BACKGROUND 4

2.1. CEB countries of intervention 4

2.2. Europe after 1990: the CEB’s increasing commitment to the “target countries” 5

2.3. The target countries 5

3. CEB LENDING TO TARGET COUNTRIES 10

3.1. Trends in regional distribution 10

3.2. Sectoral perspective 15

3.2.a. Turkey, Cyprus and Malta 16

3.2.b. Central, Eastern and South Eastern Europe (CEE) 17

3.2.c. Strengthening social integration 19

3.2.d. Managing the environment 29

3.2.e. Supporting public infrastructure with a social vocation 34

3.3. Public and private borrowers 39

3.4. Developing new lending and non-lending instruments 40

4. CO-OPERATION MECHANISMS: PARTNERS & DONORS 42

4.1. Co-operation with the EU – a strategic orientation for the CEB 42

4.1.a. Pre-accession assistance: taking part in the EU enlargement process 43

4.1.b. The CEB’s contribution to the European Neighbourhood Policy 45

4.1.c. Co-financing with EU Structural Funds 45

4.1.d. Other co-operation instruments under the aegis of the European Union 46

4.2. The CEB and bilateral donors 46

4.2.a. Finland Trust Account 47

4.2.b. Norway Trust Account for the Western Balkans 47

4.2.c. Human Rights Trust Fund 48

4.2.d. Spanish Social Cohesion Account 48

4.3. Long-standing partnerships with other International Financial Institutions 48

4.4. Enhancing collaboration with UN agencies 49

4.5. Perspectives for co-operation with the European Union and donor States 49

5. SOCIAL IMPACT OF CEB FINANCING 51

5.1. The added value generated by CEB activities 51

5.2. Measuring the social impact: methodology and assessment 52

5.2.a. Strengthening social integration 52

5.2.b. Managing the environment 53

5.2.c. Supporting vulnerable population groups 54

5.3. Main findings from the CEB’s experience in project financing 55


6. LESSONS LEARNED AND CHALLENGES AHEAD 58

6.1. Why does the CEB focus its lending on “target countries”? 58

6.2. Addressing the absorption capacity issue 59

6.3. Borrowers dealing with crisis- and post-crisis challenges 61

6.3.a. Public borrowers: need for fiscal consolidation 61

6.3.b. Bank borrowers: economic and financial linkages with European banks 63

6.4. Challenges for the CEB 65

6.4.a. Pursuing objectives defined for 2010-2014 65

6.4.b. Underlying challenges 66

7. CONCLUDING REMARKS 67

BIBLIOGRAPHY 68

STATISTICAL ANNEX 69


BOXES

GENERAL & THEMATIC INFORMATION

Box 1 CEB financing and monitoring

Box 2 Sustainable housing and urban development: the CEB’s experience

Box 3 Financing projects through “Transit loans”

Box 4 Combating energy poverty in Europe

Box 5 Supporting sector policies in target countries

Box 6 Western Balkans Investment Framework

Box 7 Inter-institutional relations: CEB co-operation instruments

Box 8 Ex Post Evaluation: Lessons learned from the CEB’s operations

TABLES

Table 1 CEB Target Group countries

Table 2 Ranking of CEB member countries by income according to World Bank data

Table 3 CEB activities in target countries: Situation as at 31 December 2011

Table 4 Sectoral distribution of total CEB lending in target countries (1990-2011)

Table 5 Sectoral distribution of CEB approvals in favour of the CEE region per sub-period (1995-2011)

Table 6 Public/private distribution of CEB borrowers in target countries (1990-2011)

GRAPHS

Graph 1 Geographic distribution of CEB lending in target countries (1990-2011)

Graph 2 Projects approved per country (1990-2011)

Graph 3 Volumes approved in favour of target countries per year (1990-2011)

Graph 4 Cumulative amounts approved and disbursed in target countries per sub-period (1990-2011)

Graph 5 Target/Non-target distribution of loans outstanding (2004-2014)

Graph 6 Sectoral distribution of CEB lending in Turkey (1990-2011)

Graph 7 The relative breakdown of project approvals in favour of the CEE region per sector of action and per sub-period (1995-2011)

Graph 8 The relative distribution of project approvals in favour of the CEE region per sectoral line of action and per sub-period (1995-2011)

Graph 9 Public/private distribution of CEB borrowers in target countries (2005-2011)


ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank

CEB Council of Europe Development Bank

CEE Central, Eastern and South Eastern Europe (18 countries): Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Moldova, Montenegro, Poland, Romania, Serbia, Slovak Republic, Slovenia and “the former Yugoslav Republic of Macedonia”

EEFF Energy Efficiency Finance Facility

EIB European Investment Bank

ERDF European Regional Development Fund

EU European Union

EU-15 Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom

EU-12 Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic, Slovenia (2004), Bulgaria, Romania (2007)

EU-27 EU-15 plus EU-12

FTA Finland Trust Account

HRTF Human Rights Trust Fund

IDPs Internally displaced persons

IFI(s) International Financial Institution(s)

IOM International Organisation for Migration

IPA Instrument for Pre-Accession Assistance

IPF Infrastructure Project Facility

JESSICA Joint European Support for Sustainable Investment in City Areas

KfW Kreditanstalt für Wiederaufbau

NIF Neighbourhood Investment Facility

NTA Norway Trust Account

OECD Organisation for Economic Co-operation and Development

RCC Regional Co-operation Council

SEE South Eastern Europe (9 countries): Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Moldova, Montenegro, Romania, Serbia and “the former Yugoslav Republic of Macedonia”

SCA Spanish Social Cohesion Account

SMEs Small and medium-sized enterprises

STA Selective Trust Account

UNDP United Nations Development Programme

UNECE United Nations Economic Commission for Europe

UNHCR United Nations High Commissioner for Refugees

UNICEF United Nations Children’s Fund

WB Western Balkans (6 countries): Albania, Bosnia and Herzegovina, Croatia, Montenegro, Serbia and “the former Yugoslav Republic of Macedonia”

WBIF Western Balkans Investment Framework


EXECUT IVE SUMMARY 1

EXECUTIVE SUMMARY

1. Set up in 1956, the Council of Europe Development Bank (CEB) is a multilateral bank with an exclusively social mandate. Today, the CEB strives to foster social convergence through the financing of social investment projects in its 40 Member States and, more particularly, in the countries of Central, Eastern and South Eastern Europe, its so-called “target countries”.

2. Since the fall of the Berlin Wall in 1989, the CEB has significantly increased its lending to target countries in line with its strategic orientations and within a strong prudential framework. The Bank has financed an overall amount of € 17 billion in social projects located in target countries, structured around three sectoral lines of action: strengthening social cohesion (57% of total), managing the environment (28% of total) and supporting public infrastructure with a social vocation (15% of total).

3. Over the years, traditional lending instruments have constituted the main tool for the CEB’s activities in the target group countries. Indeed, CEB support has primarily been channelled through the provision of flexible long-term loans at favourable interest rates. However, the CEB has been able to diversify its financing instruments. Firstly, “transit loans” have represented an additional means of action for developing CEB activities in target countries, while improving the lending risk profile. Secondly, the CEB has introduced subsidised loans through the Selective Trust Account in very specific cases involving the CEB’s statutory priorities and the most fragile countries. Thirdly, the CEB has progressively developed various grant financing facilities in the target countries. As a complement to the favourable financing conditions provided on its loans, the Bank can also offer its “non-lending instruments”, mainly in the form of technical assistance, funded either from different CEB trust accounts or via various EU grant facilities. Last but not least, the CEB has implemented joint project activities with the European Union and other international financial institutions active in its countries of intervention.

4. Over the two decades under consideration, CEB lending has been marked by the progressive geographic deployment and sectoral diversification of the Bank’s activities in the target group. At the same time, the CEB has developed its activities in close co-operation with other international institutions, the European Union and the United Nations specialised agencies so as to maximise synergies, development impact and social added value. Through this policy of partnerships, the CEB has been able to widen its scope of action, leverage its expertise and affirm its specific nature as the social development bank in Europe.

5. Against the background of the global crisis, the CEB has proved to be an effective tool of European solidarity. In a difficult economic and financial context, the Bank has continued to provide support for projects promoting social cohesion and complying with the values of the Council of Europe: it approved close to € 9 billion in 139 new projects between 2008 and 2011. The majority of these projects (58%) were in favour of target countries.

6. While financing social projects across its member countries, even in those enjoying higher incomes, the CEB has endeavoured, over the years, to strengthen the geographic focus of its lending on target countries. This “political” orientation finds its economic rationale in persistent, although diminishing, gaps between the East and the West of the European continent. It also highlights the importance of social sector reforms and investments for economic growth, social development and the catch-up process with the more advanced countries.

7. Looking ahead, significant challenges for the CEB and its borrowers need to be addressed on the road to strengthening social cohesion in Europe. For the target group countries, restoring a self-sustained path of growth with more and better jobs in the whole region will be a challenging task for any country. In a complex economic and financial environment, the main challenge for the CEB will be to achieve tangible and sustainable results while investing in social infrastructure over the long term and preserving the Bank’s financial solidity and high standing in financial markets.

8. The decision on the CEB’s 6th capital increase, adopted on 4 February 2011 and bringing its capital from € 3.3 billion to € 5.5 billion when fully subscribed will enable the Bank to strengthen its financial soundness and ensure its possibilities for action in favour of target countries. The 6th capital increase became effective on 31 December 2011, reaching a subscription rate of 75%, therefore exceeding the minimum threshold of 67%. The enhanced means the CEB will have at its disposal in the future should enable it to continue to provide substantial support to its Member States in a difficult and uncertain environment.


EXECUT IVE SUMMARY 2


INTRODUCT ION: PURPOSE AND SCOPE OF THE S TUDY 3

1. INTRODUCTION: PURPOSE AND SCOPE OF THE STUDY

Endowed from its creation fifty-five years ago with an exclusively social mandate, the Council of Europe Development Bank (hereafter the CEB or “the Bank”) has dedicated significant lending volumes to strengthening social cohesion in Europe. Today, the CEB strives to foster social convergence through the financing of social investment projects in its Member States and, more particularly, in the countries of Central, Eastern and South Eastern Europe, its so-called “target countries”.

Entitled “Financing Social Projects in CEB Target Countries: Achievements and Challenges”, this new study responds first and foremost to a geographic logic, as opposed to a purely sectoral focus. Covering all the Bank’s sectors of action, the study will show the Bank’s steadily growing commitment and diversity of action in the target group countries, which are a priority geographic area for the Bank’s financings. Over two decades after the fall of the Berlin Wall, the study will take quantitative and qualitative stock of the actions conducted by the CEB in this region.

As a further example of the Bank’s action to consolidate its visibility with respect to a wider public, this study adds to a series of earlier publications1 and hence complements the communication actions deployed by the Bank. The study also comes within the Bank’s policy of accessibility to the “institutional memory”.

First, the study aims to give an extensive overview of the Bank’s experience in financing social projects in target countries, both from a geographic and sectoral perspective, over the last twenty years. The study will focus on the progressive geographic deployment and sectoral diversification of the CEB’s activities in target countries. The analysis will be illustrated by concrete examples of financed projects so as to capture the diversity of the CEB’s experience in the region. It will also detail different types of borrowers and financing instruments over the period under discussion.

In addition to project financing activities, the study will pay particular attention to co-operation that the CEB has developed over the years with international institutions, the European Union, the United Nations specialised agencies and other international financial institutions. The CEB has implemented various co-operation mechanisms in its project and grant financing activities so as to develop and further expand its presence in the target group countries. The Bank has also actively participated in various European initiatives and networks, with the aim of sharing and enhancing its expertise and its specific role as a social development bank in Europe. These partnerships have enabled the CEB to increase the added value and effectiveness of its actions.

Finally, the study will seek to discuss the main lessons and achievements from the Bank’s long-standing experience in financing social projects in the target group countries and to outline the challenging operational environment in which the CEB intends to consolidate its activities in its target countries in the years to come.

1 Publications available on the CEB’s website www.coebank.org: Housing in South Eastern Europe: solving a puzzle of challenges (2004); Social challenges in South Eastern Europe (2005); Trends and progress in housing reforms in South Eastern Europe (2005); Health and economic development in South Eastern Europe (2006); Migration in Europe: the CEB’s experience (2008); Housing policy reforms in post-socialist Europe: Lost in transition (2009); Evaluation of public health services in South Eastern Europe (2009); Sustainable Housing and Urban Development: the CEB’s Contribution (2010).


HISTOR ICAL BACKGROUND 4

2. HISTORICAL BACKGROUND

The Council of Europe Development Bank (the CEB or “the Bank”) is a multilateral bank with a social mandate. The Bank was set up on 16 April 1956 by eight member countries of the Council of Europe – Belgium, France, Greece, Germany, Iceland, Italy, Luxembourg and Turkey – as the Council of Europe Resettlement Fund for National Refugees and Over-Population in Europe. The primary purpose of the Fund/CEB was initially to provide assistance to populations forced to flee from regions affected by political or economic upheavals, and to help those driven from their homes by natural or ecological disasters. Aid to refugees, migrants and displaced persons, and victims of disasters are the CEB’s statutory priorities.

The Bank’s scope of action has progressively widened to include other sectors directly contributing to strengthening social cohesion in Europe. Today, while remaining faithful to its priority missions, the CEB participates in the financing of socially oriented investment projects and strives more generally to foster social convergence among its Member States and, more particularly, in the countries of Central, Eastern and South Eastern Europe, the so-called “target countries”.

This chapter gives an overview of the Bank’s geographic coverage and its specificity among other international financial institutions (IFIs) operating in Europe. It also describes the historical context in which the CEB has developed activities in its “target countries” since the fall of the Berlin Wall in 1989.

2.1. CEB countries of intervention

The CEB has 40 member countries today (see map opposite Contents). Among these 40 members, 36 are the CEB’s countries of intervention with at least one project approved since their accession. CEB operations are spread across its member countries without being geographically limited to the most needed and fragile countries. Unlike the World Bank, acting in Eastern Europe and Central Asia, or the EBRD, investing exclusively in the transition countries, the CEB finances social projects in both richer and poorer parts of Europe, with special attention paid to the social needs of the most vulnerable populations. Borrower profiles can differ greatly from one country to another. The reason for this lies in the differences in the levels of development between and within countries and in individual economic policies.

The CEB’s capacity for action is largely determined by the level of risk it incurs and by trends in that risk. In concrete terms, lending to well-rated borrowers enables the CEB to balance its risk profile with regard to “below-investment-grade” counterparties without jeopardising its rating.

This relative balance between the tendency to minimise its risks and the desire to strengthen the social added value of its loans is backed up by a strong prudential framework and conservative risk management with rigorous control standards. This has enabled the CEB to develop its activities, including those in the most fragile European countries and regions, without undermining either the soundness of its rating or its financial solidity over the years. Moreover, the Bank’s rating further strengthens its position as a privileged borrower, whereas for the majority of its borrowers, particularly those most indebted States, financing conditions have worsened considerably.

From a historic perspective, the geographic distribution of CEB lending has gradually expanded in two directions, namely North-South and West-East, along with the accession of new members to the Bank. Prior to the 1990s, CEB lending developed in favour of North-South solidarity, with a continuously growing number of member countries and volumes of activity. The CEB’s increased commitment to the wider Mediterranean and Iberian Peninsula regions was balanced by its operations in the countries of Northern Europe, including all the Scandinavian countries. CEB activities were mainly aimed at providing financial assistance according to its priority missions and at reducing socio-economic disparities between the North and the South of Europe through social infrastructure investments in favour of the less developed Southern countries. The reunification of the European continent that occurred after 1990 allowed the CEB to develop the West-East axis of solidarity, which will be described in detail in chapter 3.



The geographic diversification of CEB loans thus confirmed the emphasis placed on the balance gradually achieved between the Bank’s activities in its “traditional” areas in Western and Northern Europe and the “new” priority given to Central, Eastern and South Eastern Europe (CEE). Indeed, the increasing focus of the Bank’s activities in favour of CEE countries has strengthened its visibility as the European financial institution devoted to social development. In parallel, the Bank has maintained substantial volumes of lending in its Western European countries of intervention.

2.2. Europe after 1990: the CEB’s increasing commitment to the “target countries”

Following the fall of the Berlin Wall in 1989, the reunification of the European continent prompted the CEB’s transformation into a true development bank. The CEB undertook to renew and adapt its methods of functioning so as to best be able to accompany the CEE countries in their transition, reconstruction and integration into European institutions.

As of the early 1990s, the mobilisation of increased means in favour of the transition countries had to deal with challenging issues. On the one hand, these countries had very significant needs. On the other, the Fund/CEB had to extend loans to already heavily indebted countries, without running the risk of jeopardising its financial equilibrium.

The process of accession of CEE countries to the Council of Europe and to the Fund/CEB was however more gradual than originally anticipated. In fact, their accession took place mainly in the second half of the 1990s (see Table 1: for each country - year of accession / first project approved), when the institution had undergone a profound transformation.

In 1997, following the Second Council of Europe Summit held in Strasbourg, two priority lines of focus were established for the CEB: (i) deployment towards Central and Eastern Europe, (ii) job creation and social cohesion in Europe. Furthermore, in order to clearly indicate its nature and mandate, the institution, up to then known as the “Council of Europe Social Development Fund”, in 1999 took the official new name of “Council of Europe Development Bank”. This change of denomination came along with an extension of the Bank’s means: having started in 1956 with a capital equivalent to € 5.7 million, the Bank operated the 5th increase in its subscribed capital so as to reach € 3.3 billion.

The ambitious objective of geographically balancing CEB lending has been progressively translated into the Bank’s lending operations since the end of the 1990s. The medium-term Action Plan 1997-2001 provided for an increase in commitments in respect of the group of CEE “transition countries” and this increase was confirmed in the revised version of the Plan in 1999. In the Development Plan 1999-2004, major efforts were made to approve 50% of new projects in these countries. And it was in 2005, when the CEB launched the new five-year development plan, that the CEE countries officially became part of the Bank’s “target countries”.

2.3. The target countries

Within its 40 member countries, the CEB established a group of “target countries” in the Development Plan 2005-2009 with the clear objective of further expanding its lending to the CEE region. This target group today includes 21 countries (see Tables 1&2), representing 17% of the Bank’s subscribed capital and a total population of 204 million:

18 CEE countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Latvia, Lithuania, Moldova, Montenegro, Poland, Romania, Serbia, Slovak Republic, Slovenia and “the former Yugoslav Republic of Macedonia”;

3 countries that joined the Bank earlier, i.e. Turkey - a founding member and one of the largest CEB borrowers, Cyprus (1962) and Malta (1973), still facing significant needs in terms of investments in social infrastructure.

The Development Plan 2005-2009 successfully achieved the objective of disbursing 50% of total loans to target countries. Furthermore, the CEB consolidated and strengthened its actions in the target group in the last two years of the Plan in a particularly difficult context of the global financial and economic crisis.



Given the prospects for a fragile and weak economic recovery, accompanied by greater vulnerability and increased needs on the part of the emerging market countries in the target group, the Development Plan for the period 2010-2014 foresees a continued effort in favour of target countries with the objective of bringing loans to these countries up to 60% of the total outstanding by 2014. This effort is all the more significant in that these countries represent a 17% share in the Bank’s subscribed capital.

The continuous increase in CEB lending to target countries over the last twenty years is a good indication of how the Bank strives, in practical terms, to reach the right balance between the quality of its project portfolio and its contribution to social cohesion on the one hand, and the prudential framework underpinning its financing, on the other hand.

Table 1: CEB Target Group countries

Year of accession First project approved

Turkey 1956 1957

Cyprus 1962 1963

Malta 1973 1973

Bulgaria 1994 1995

Slovenia 1994 1997

Lithuania 1996 1996

Romania 1996 1996

Croatia 1997 1998

“the former Yugoslav Republic of Macedonia” 1997 1999

Estonia 1998 2000

Hungary 1998 1998

Latvia 1998 2001

Moldova 1998 2003

Poland 1998 1999

Slovak Republic 1998 1999

Albania 1999 2001

Czech Republic 1999 2000

Bosnia and Herzegovina 2003 1996*

Serbia 2004 2005

Georgia 2007 2008

Montenegro 2007 2010

* Although Bosnia and Herzegovina joined the CEB only in 2003, the Bank was able to finance the first project in 1996, “the Refugee and War Victim Rehabilitation Project”, taking into account its emergency help and assistance purpose.



Table 2: Ranking of CEB member countries by income according to World Bank data

Gross national income (GNI) per capita2 Latest available data, 2010

Atlas method (current US$)

Purchasing Power Parity (PPP)

High-income countries: $12,276 or more (Atlas method)

Liechtenstein 136,540 n/a

Norway 85,380 57,130

Luxembourg 79,510 63,850

Switzerland 70,350 49,180

Denmark 58,980 40,140

San Marino 50,670 n/a

Sweden 49,930 39,600

Netherlands 49,720 42,590

Finland 47,170 37,180

Belgium 45,420 37,840

Germany 43,330 38,170

France 42,390 34,440

Ireland 40,990 32,740

Italy 35,090 31,090

Iceland 33,870 28,630

Spain 31,650 31,550

Cyprus 30,460 30,160

Greece 27,240 27,360

Slovenia 23,860 26,970

Portugal 21,860 24,710

Malta 18,350 23,070

Czech Republic 17,870 23,620

Slovak Republic 16,220 23,140

Estonia 14,360 19,500

Croatia 13,760 18,710

Hungary 12,990 19,280

Poland 12,420 19,020

Upper-middle income: $3,976 - $12,275 (Atlas method)

Latvia 11,620 16,360

Lithuania 11,400 17,880

Turkey 9,500 14,580

Romania 7,840 14,050

Montenegro 6,690 12,710

Bulgaria 6,240 13,210

Serbia 5,820 11,230

Bosnia and Herzegovina 4,790 8,970

“the former Yugoslav Republic of Macedonia” 4,520 10,830

Albania 4,000 8,840

Lower-middle income: $1,006 - $3,975 (Atlas method)

Georgia 2,700 4,980

Moldova 1,810 3,340

Source: http://siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf (World Development Indicators Database 2011, 1 July 2011)

2 GNI per capita is the gross national income, converted to US dollars using the World Bank Atlas method, divided by the midyear population. GNI is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad.



Box 1 - CEB financing and monitoring The CEB takes action in the form of loans, guarantees or through the use of trust accounts. The Bank offers flexible long-term loans at favourable interest rates, in specific cases accompanied by interest rate subsidies, to its Member States, their regional or local authorities, and public or private financial institutions (€ 2.1 billion in approved projects in 2011). At the time of publishing this study, the Bank enjoys the highest rating (AAA/Aaa) awarded by the three rating agencies (Moody’s, Standard and Poor’s, Fitch), which mirrors its strong financial profile, the support of its shareholders and its stringent risk management policy. The AAA rating enables the Bank to offer particularly favourable financing conditions to its borrowers. Along with loans, some very limited grant resources can be made available through the CEB’s trust accounts in order to subsidise interest rates and/or to finance technical assistance. On a much smaller scale, the Bank also provides separate grants. CEB projects are financed through long-term loans, disbursed in several tranches, generally with a grace period. The Bank’s activity thus makes it possible to alleviate the constraints weighing upon access to long-term credit for projects generating positive externalities. All CEB operations are granted in accordance with specific technical and social criteria and in strict compliance with public procurement rules. The eligibility criteria and general procedures for projects financed by the CEB are presented in the Policy for Loan and Project Financing (2010) - a reference document setting out provisions for the appraisal, approval, financing and monitoring of the Bank’s projects. The CEB pays particular attention to the quality of its projects in order to optimise their social impact. Assistance and monitoring throughout the whole project cycle therefore constitute key factors in the effective implementation of the projects. The different stages in the project cycle



Project identification encompasses a number of actions to define the eligibility, feasibility and objectives of a proposed project, including a description of the means required to achieve the set objectives. The process of project identification and appraisal thus involves a thorough evaluation of the financial and technical sustainability of both the project and the borrower. On the basis of the loan request formulated by the borrower, the Bank evaluates the project’s objectives and financing plan by carefully analysing its socio-economic impact, technical aspects and costs, the institutional capacity to manage the project as well as the project’s impact on the environment. As soon as a project is approved by the Bank’s Administrative Council, a framework loan agreement is negotiated and signed by the Bank with the borrower to provide a contractual basis for the project’s implementation. After the first disbursement, the Bank’s services carry out regular monitoring and on-site missions in order to check on the physical progress of the works, compliance with costs and procurement procedures, and the achievement of the project’s approved objectives and anticipated social effects. On completion of the project, a final report drawn up by the borrower details the use of funds and compliance with the objectives and projections approved by the Administrative Council. At the same time, it provides information on the material and social results obtained. The Bank also plays a role in respect of any eventual difficulties that could jeopardise the success of the project as well as an advisory role in solving any such difficulties. The CEB continually strives to enhance the quality of the projects it finances. Within this policy, the aim of ex post evaluation is primarily to improve understanding of the social impact of the Bank’s actions, contribute to increasing the quality of projects and programmes financed by the Bank and help strengthen the transparency of CEB operations. The Bank’s Ex Post Evaluation Department (DEP) works on the basis of evaluation programmes, consisting of a series of evaluations of projects/programmes in one of the Bank’s sectors of activity. Individual evaluations investigate the performance and quality of projects and programmes financed by the CEB and assess their impact and sustainability. Dissemination of the good practices and lessons learned stemming from the results of the ex post evaluations contributes to organisational learning within the CEB with a view to improving the planning, selection and design of future projects and programmes, thus increasing the impact of Bank’s assistance and service to clients.


CEB LENDING TO TARGET COUNTR I ES 10

3. CEB LENDING TO TARGET COUNTRIES

The objective of this chapter is to provide an overview of the CEB’s project portfolio in the target group countries, both from a geographic (section 3.1) and sectoral (section 3.2) perspective. This analysis will be illustrated by concrete examples of financed projects so as to capture the diversity of the CEB’s experience in the region. Furthermore, section 3.3 will seek to identify trends in borrowers and financing instruments over the period under discussion. Lastly, section 3.4 will be dedicated to instruments of intervention developed by the CEB in target countries in addition to its lending instruments.

Over the last twenty years, the CEB has significantly increased its lending to target countries in line with its strategic orientations. The following figures (as at 31 December 2011) illustrate the Bank’s commitment to this region:

Total projects approved (since 1990): € 17 billion to all target countries (of which € 11 billion in CEE), compared to € 38 billion approved over the whole period in all CEB countries of intervention, i.e. about 45% of the total projects approved during this period.

Total loans disbursed (since 1990): nearly € 12 billion in favour of all target countries (of which € 7.3 billion in CEE), compared to € 28 billion disbursed in all CEB countries of intervention, i.e. 43% of total loans disbursed in target group over the period 1990-2011.

Loans outstanding (as at 31 December 2011): € 6.9 billion (of which € 5.4 billion in CEE), equivalent to 57% of total CEB loans outstanding (€ 12.1 billion) as at 31 December 2011.

3.1. Trends in regional distribution

Over the twenty years under consideration, CEB lending in favour of the target group countries has been marked by two major developments:

a gradual geographic deployment in the CEE region;

a progressive increase in volumes financed in these countries.

During the period 1990-1994, data reflect exclusively projects financed in Cyprus, Malta and Turkey. The CEB developed its operations in the CEE region after 1995, when the first CEE countries joined the Bank. As can be seen in Table 1, the CEB approved its first projects in Bulgaria, Romania and Lithuania in 1995-1996, Bosnia and Herzegovina, Croatia, “the former Yugoslav Republic of Macedonia” in 1996-1999, Central Europe (Hungary, Poland, Slovenia, the Czech and Slovak Republic) in 1997-1999, Estonia and Latvia in 2000-2001, Albania in 2001, Moldova in 2003, and other Western Balkan countries after 2005. Finally, the CEB’s first loan operation in Georgia was approved in 2011; but Georgia benefited from three grant projects, approved by the CEB, in 2008.

The geographic deployment of the CEB’s activities in target countries has progressively diversified over the years, with some major poles of concentration in Central Europe, Turkey and Cyprus, and certain countries in South Eastern Europe, mostly in Romania (see Graph 1).

Particular attention should be paid to so-called “transit loans”, which represent 13% of the total approved in target countries since 1990. Indeed, the CEB has also financed projects in target countries “indirectly”, i.e. through loans granted to intermediary banks located in non-target countries, for example in Austria, Germany, Italy and Sweden, for the benefit of the local banking sectors in target countries, in order to finance projects in these target countries. Projects are thus intermediated by banks in Western Europe, the CEB’s direct borrowers, which on-lend the funds to a subsidiary or an associate local bank to fund projects in the target countries. More detailed information on “transit loans” is provided in Box 3.



Graph 1: Geographic distribution of CEB lending in target countries (1990-2011)

Graph 2: Projects approved per country (1990-2011)

At country level, the Bank’s largest borrowers in the target group are Turkey, Poland, Hungary, Cyprus and Romania (see Graph 2). These five countries represent about 70% of the CEB’s loan portfolio of the target group. Totalling over € 2 billion, “transit loans” cover a relatively important share (13%) of the approved projects (see also box 3).

The remaining amounts include projects in Croatia (€ 561 million), Lithuania, Serbia and Slovenia (roughly € 300 million), between € 200 million and € 250 million in Bulgaria, the Czech Republic and Malta. The CEB has approved cumulative amounts of projects of between € 100 million and € 200 million in Albania, Bosnia and Herzegovina, Latvia, “the former Yugoslav Republic of Macedonia” and the Slovak Republic. The first loan operation in Georgia involves € 60 million, approved in 2011. Finally, the CEB has implemented small but significant social projects in Estonia, Moldova and Montenegro with loan portfolios of less than € 50 million.

In parallel with the progressive geographic diversification of the CEB’s activities in target countries, we observe a gradual increase in volumes financed per year. In graph 3, amounts approved over the period 1990-1994, i.e. prior to the accession of CEE countries to the Bank, represent projects approved in Cyprus, Malta and Turkey.

Central Europe32%

Bulgaria, Romania10%Baltic countries

3%Western Balkans

8%Cyprus, Malta

11%

Turkey22%

Moldova, Georgia<1%

"Transit loans"13%

Geographic distribution of CEB lending in target countriesCumulative amounts approved (1990-2011): Total € 17 billion

125 163 222

1 712

236

46 60

561

2 012

297165

38183

25

235

2 686

1 468

284198

295

3 788

2 250

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

AL BiH BG CY CZ EE GE HR HU LT LV MD MK MO MT PL RO SI SK SR TQ "Transitloans"

in €

millions

Projects approved to target countries (1990-2011)


CEB LENDING TO TAR GET COUNTR I ES 12

Graph 3: Volumes approved in favour of target countries per year (1990-2011)

Graph 4: Cumulative amounts approved and disbursed in target countries per sub-period (1990-2011)

The strongest increase in CEB lending to the target group can be observed in the last years, over the period 2005-2009, with around 40% of the total volumes approved and disbursed in the target group countries over the 20-year period under consideration (see Graph 4).

Indeed, the CEB has significantly intensified its action in target countries during 2005-2009, with 135 projects approved for a total of € 7 billion, representing 60% of the total approved over the same period. This sharp increase is the result of the main operational objective to strengthen the Bank’s commitment in favour of target countries, defined in the Development Plan for 2005-2009. Furthermore, the last two years of the Plan were marked by an unprecedented global economic and financial crisis, which engendered greater vulnerability, both at economic and social levels, within the CEB’s countries of intervention, especially in “emerging Europe”. Against the background of the crisis, the CEB saw increased demand for its financings in 2008-2009, particularly in favour of social public infrastructure, “green” investments and job creation. This strong demand for CEB financing continued in 2010-2011 with new projects approved totalling € 2.5 billion.

200

544

276

516

328

457

324

91

218

382 378

744

972

1 085

847

1 398

1 967

1 191 1 201

1 385

1 259 1 290

0

400

800

1 200

1 600

2 000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

in €

mill

ions

Volumes approved to target countries per year (1990-2011)

1 8631 471

4 026

7 141

2 549

1 684

629

2 590

4 723

2 161

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

1990-1994 1995-1999 2000-2004 2005-2009 2010-2011

in €

mill

ions

Cumulative amounts approved & disbursed per sub-period (1990-2011)Total approved: € 17 billionTotal disbursed: € 12 billion

Projects approved Loans disbursed



Similarly, loans disbursed in favour of the target group countries have gradually increased over the years and have been spread over a larger number of countries. Specifically, over the five-year period corresponding to the Development Plan 2005-2009, disbursements totalled € 4.7 billion, representing 58% of all disbursements. As in the case of projects approved, this amount represents around 40% of the total financed in the target group countries since 1990.

According to the latest Development Plan for 2010-2014, the CEB expects to further develop its action in the target group countries in the coming years. During the first two years of the Plan 2010 and 2011, new project approvals amounted to € 2.5 billion, representing 58% of total approvals. Disbursements amounted to € 2.2 billion, equivalent to 59% of total loans disbursed in 2010 and 2011.

When it comes to loans outstanding, the relative distribution has changed over the years in favour of the target group countries (see Graph 5), illustrating the progressive development of the Bank’s operations in these countries. At the end of the year 2004, the distribution was 76/24 in favour of non-target countries. In line with the increase in the CEB’s activities in favour of target countries, the share of these countries in total loans outstanding went from 24% at end 2004 to 57% at end 2011. In absolute amounts, loans outstanding in target countries reached € 6.9 billion at end 2011, while this volume represented only € 2.6 billion at end 2004.

Graph 5: Target/Non-target distribution of loans outstanding (2004-2014)

The objective to continue efforts in favour of target countries, set forth in the Development Plan for 2010-2014, should lead to these countries representing up to 60% of total loans outstanding by 2014. This effort is all the more significant in that these countries represent a 17% share in the Bank’s subscribed capital.

24%27% 29%

35%40%

48%

54%57%

60%

76%73% 71%

65%60%

52%

46%43%

40%

0%

20%

40%

60%

80%

100%

2004 2005 2006 2007 2008 2009 2010 2011 Objective2014

Target countries Other countries



Table 3 below shows cumulative totals approved, disbursed and outstanding per target country over the period 1990-2011, as at 31 December 2011. For those that joined the Bank before 1990, i.e. Cyprus, Malta and Turkey, figures refer to the CEB’s activities since 1990.

Table 3: CEB activities in target countries: Situation as at 31 December 2011

Cumulative amounts (MEUR) since 1990 Project approvals

Loan disbursements

Loans outstanding

Albania 125 102 101

Bosnia and Herzegovina 163 107 69

Bulgaria 223 124 73

Croatia 561 346 247

Czech Republic 236 55 30

Estonia 46 30 23

Georgia 60 0 0

Hungary 2,012 1,653 1,243

Latvia 297 192 160

Lithuania 165 65 51

Moldova 38 10 10

Montenegro 25 10 10

Poland 2,686 1,757 1,355

Romania 1,468 991 889

Serbia 295 85 73

Slovak Republic 198 75 41

Slovenia 284 213 146

“the former Yugoslav Republic of Macedonia”

183 55 39

(1) Sub-total 18 CEE countries 9,065 5,870 4,560

Cyprus 1,712 1,265 652

Malta 235 165 68

Turkey 3,788 3,060 823

(2) Other target countries 5,735 4,490 1,543

(3) “Transit loans” 2,250 1,415 807

TOTAL (1+2+3) 17,050 11,775 6,910



3.2. Sectoral perspective

The CEB’s original mandate was to respond to emergency situations, but its scope of action has gradually widened to include other sectors of activity that directly contribute to strengthening social cohesion in Europe. Today, CEB lending is structured around three sectoral lines of action:

Strengthening social integration

Managing the environment

Supporting public infrastructure with a social vocation.

Sectoral lines of action Sectors of action

Strengthening social integration Aid to refugees, migrants and displaced persons Housing for low-income persons Creation and preservation of viable jobs Improvement of living conditions in urban and rural areas

Managing the environment Natural or ecological disasters Protection of the environment Protection and rehabilitation of historic and cultural heritage

Supporting public infrastructure with a social vocation

Health Education and vocational training Infrastructure of administrative and judicial public services

Table 4 shows the sectoral breakdown of both project approvals and loan disbursements in favour of all target countries over the period 1990-2011. Table 4: Sectoral distribution of total CEB lending in target countries (1990-2011)

Figures as at 31 December 2011

Total CEB lending to target countries (1990-2011) PROJECTS APPROVED LOANS DISBURSED

M€ % M€ %

Strengthening social integration 9,700 57 7,258 62

Aid to refugees, migrants and displaced persons 330 2 530 5

Housing for low-income persons 1,270 7 993 9

Improvement of living conditions in urban and rural areas 3,280 19 2,165 18

Creation and preservation of viable jobs 4,820 29 3,570 30

Managing the environment 4,730 28 2,905 25

Natural or ecological disasters 2,132 13 1,455 13

Protection of the environment 2,368 14 1,320 11

Historic and cultural heritage 230 1 130 1

Supporting public infrastructure with a social vocation 2,620 15 1,612 13

Health 1,140 7 740 6

Education and vocational training 1,265 7 852 7

Infrastructure of administrative and judicial public services 215 1 20 <1

Total 17,050 100 11,775 100

The sector analysis of the project portfolio will be carried out with a view to identifying sectoral trends and patterns per geographic area and per sub-period.

As a first step, three target countries – Turkey, Cyprus and Malta – will be considered separately (section 3.2.a). The 18 Central, Eastern and South Eastern European (CEE) countries will be then examined as a “region” (section 3.2.b).

Lastly, a more detailed assessment will be carried out in sections 3.2.c, 3.2.d and 3.2.e, per sectoral line of action and per sector, with an attempt to determine clusters of countries with similar sectoral features in CEB projects.



3.2.a. Turkey, Cyprus and Malta

The CEB has been an active partner in Turkey’s economic and social development over the past fifty years. Turkey is one of the eight CEB founding members, ranks as the fifth largest shareholder with a 7% share in the CEB’s capital and is the largest borrower in the target group. Some 160 projects approved by the CEB in favour of Turkey represent € 6 billion since 1957, representing 14% of all CEB approvals over the period. Loans disbursed over the fifty years totalled almost € 4.5 billion, accounting for 14% of all CEB disbursements. Since 1990, project approvals have amounted to almost € 4 billion or 22% of total projects approved in target countries (see Graphs 1&2); loan disbursements represented € 3 billion over this period.

The CEB has supported projects in Turkey in almost all its sectors of action (see Graph 6), mainly including projects related to the CEB’s statutory priorities involving disaster reconstruction and prevention, urban and rural modernisation, creation and preservation of jobs in small and medium-sized enterprises (SMEs), protection of the environment, and to a lesser extent, projects in the health, housing and education sectors. More recently, the CEB has increasingly focused on projects dedicated to environmental infrastructure, disaster preparedness and mitigation, and SME financing.

When engaging in projects in Turkey, the CEB has accepted higher risks than elsewhere. Indeed, Turkey was and still is rated “below investment grade” by the major rating agencies. However, the perceived risk has never materialised and all repayments have invariably been made on time.

Graph 6: Sectoral distribution of CEB lending in Turkey (1990-2011)

While Cyprus became a member as early as 1962, only minor projects were financed at the beginning. However, since 1990 relations have intensified and Cyprus has become the fourth largest borrower in the target group, with € 1.7 billion of projects approved since 1990. This amount involves a significant series of environmental projects for the construction or extension of sewerage or irrigation networks in several municipalities (including one project, approved in 2009, benefiting the two communities in the Greater Nicosia area), the extension of the electricity distribution network, and the construction and rehabilitation of health and education infrastructure. Several of these projects have been financed in co-operation with the World Bank and the EIB. Before 1990, the CEB financed several projects to help refugees displaced by the conflict that divided the island in 1974. These programmes supported the construction of housing, the development of water supply infrastructure, the reforestation of certain areas damaged by the conflict and the development of the road network and small-scale industry.

In Malta, the CEB financed successive stages of the construction of the Mater Dei Hospital (70% of total CEB lending to Malta) during the 1990s and also contributed to job creation in SMEs. Prior to this, the CEB had financed the construction and rehabilitation of housing for migrants in the 1970s.

Aid to refugees, migrants and displaced persons3%

Natural disasters25%

Protection of the environment10%

Improvement of living conditions in urban and rural areas23%

Housing for low-income persons4%

Creation and preservation of viable jobs26%

Education1%

Health8%

Sectoral distribution of CEB lending in TurkeyTotal project approvals (1990-2011): € 3.8 billion



3.2.b. Central, Eastern and South Eastern Europe (CEE)

When the CEB started operating in the CEE region in the mid-1990s, its “first” sectors of action mainly reflected two of the Bank’s statutory priorities, namely aid to refugees, migrants and displaced persons and aid to victims of natural or ecological disasters. Although their relative share in the portfolio is today less important, these projects have represented significant volumes financed over the 20-year period. Furthermore, the health and education sectors received a specific attention in 1995-1999 and have been regularly present in the portfolio ever since.

Among all the sectors, job creation and preservation in the form of credit for SMEs represents the most important sector of action over the whole period, with the most significant increase since 2000. Indeed, this sector received 27% of all the approvals in the region during 2000-2004 growing to 37% in 2005-2009. The housing sector also took on particular importance in the CEE region during the period 2000-2004, representing 26% of total approvals during the period.

In the last five years, CEB lending has gradually diversified into other and/or “new” sectors, such as urban renewal, energy efficiency, administrative and judicial public services. In particular, municipal programmes involving investments in social and environmental infrastructure in urban and rural areas represented more than one third of the approvals during 2005-2009.

In the specific case of the Western Balkan countries, there has been a clear shift from urgent reconstruction of damaged infrastructure to other sectors such as SME financing, modernisation and upgrading of municipal infrastructure, health and education, environment and energy efficiency.

Graph 7: The relative breakdown of project approvals in favour of the CEE region per sector of action and per sub-period (1995-2011)

This sectoral diversification of CEB lending in the CEE region can be explained by factors such as changes in national and/or regional priorities: evolving sectoral challenges, needs and policies; the development of CEB/EU co-operation (see chapter 4 for detailed description) in the form of co-financing with the EU Structural and Pre-accession Funds due to increasing geographic and sectoral synergies; increased needs as a result of the financial and economic crisis.

0%

20%

40%

60%

80%

100%

1995-1999 (419M€)

2000-2004 (€2.7bn)

2005-2009 (€6.3bn)

2010-2011 (€1.9bn)

Infrastructure of administrative and judicialpublic services

Education and vocational training

Health

Historic and cultural heritage

Protection of the environment

Natural or ecological disasters

Creation and preservation of viable jobs

Improvement of living conditions in urbanand rural areas

Housing for low-income persons

Aid to refugees, migrants and displacedpersons



Table 5 shows the sectoral breakdown of project approvals in favour of CEE countries per five-year sub-period from 1995 to 2009 and in the last two years 2010 and 2011. It comes as a complement to Graph 7 with more precise figures.

Table 5: Sectoral distribution of CEB project approvals in favour of the CEE region per sub-period (1995-2011)

Total projects approved in CEE (excluding Turkey, Cyprus, Malta)

1995-1999 2000-2004 2005-2009 2010-2011

M€ % M€ % M€ % M€ %

Strengthening social integration 90 21 1,753 64 3,803 61 1,140 60

Aid to refugees, migrants and displaced persons

56 12 108 4 25 <1 0 0

Housing for low-income persons 15 4 713 26 261 4 116 6

Improvement of living conditions in urban and rural areas

4 1 188 7 1,211 19 478 25

Creation and preservation of viable jobs 15 4 744 27 2,306 37 546 29

Managing the environment 225 54 579 21 1,708 27 365 20

Natural or ecological disasters 207 49 341 12 492 8 160 9

Protection of the environment 16 4 191 7 1,050 17 190 10

Historic and cultural heritage 2 <1 47 2 166 2 15 1

Supporting public infrastructure with a social vocation

104 25 415 15 754 12 380 20

Health 30 7 150 5 328 5 62 3

Education and vocational training 74 18 265 10 386 6 143 8

Infrastructure of administrative and judicial public services

- - - - 40 1 175 9

Total 419 100 2,747 100 6,265 100 1,885 100

Aggregate data according to the three sectoral lines of action (see Graph 8) reflect a continuous increase in projects related to strengthening social integration, thus becoming the most significant line of action in the CEE region after 2000, with € 6.8 billion, representing 60% of all the projects approved over the whole period from 1995 to 2011. Totalling € 2.9 billion, management of the environment is the second largest sectoral line of action in the CEE region, representing 25% of the total; it received particular attention at the very beginning, although with relatively modest amounts, and particularly benefited from substantial CEB financings between 2005 and 2009. Last but not least, lending to public infrastructure with a social vocation, for a total amount of € 1.6 billion, represented 15% of all the projects approved over the whole period in this region and accounted for the most significant share of CEB financings in the mid-1990s.

Graph 8: The relative distribution of project approvals in favour of the CEE region per sectoral line of action and per sub-period (1995-2011)

0%

20%

40%

60%

80%

100%

1995-1999 (419M€) 2000-2004 (€2.7bn) 2005-2009 (€6.3bn) 2010-2011 (€1.9bn)

Strengthening social integration Managing the environment Supporting public infrastructure with a social vocation



3.2.c. Strengthening social integration

Social integration has always been at the core of the CEB’s mandate. For the CEB, contributing to strengthening social integration at operational level means acting in favour of refugees, migrants and displaced persons, financing housing for low-income persons, facilitating job creation and preservation through easier credit access for SMEs and improving the living conditions in urban and rural areas.

Over the past twenty years, this sectoral line has represented close to € 10 billion in terms of projects approved for all target countries, i.e. 57% of the total approvals. During the same period, loans disbursed in favour of these countries and this sectoral line of action have totalled € 7.3 billion, representing 62% of all disbursements made since 1990 (see Table 4).

3.2.c.1. Aid to refugees, migrants and displaced persons

Aid to refugees, migrants and displaced persons is one of the CEB’s original priorities. Founded in the post-war context of increased migratory flows to Western Europe (1956), the Bank has seen subsequent enlargements of the membership, particularly after the fall of the Berlin wall, which have turned its attention to migratory flows in South-Eastern Europe.

The Bank’s action in this sector aims to facilitate the reintegration of returning migrants or refugees and to improve the integration of migrants in host countries. The CEB undertakes action both in providing emergency aid and in undertaking actions in favour of the resettlement and sustainable integration of the populations concerned. CEB projects have allowed the (re)integration of thousands of refugees or displaced persons in different contexts across Europe.

In concrete terms, projects in this sector involve the construction and repair of receiving structures such as reception centres, temporary and permanent housing, and other infrastructure destroyed by conflicts (such as health and school facilities), education and vocational training, as well as the technical infrastructure and basic equipment necessary to meet the immediate needs of populations victims of exceptional situations. These investments target several types of beneficiaries, namely refugees, internally displaced persons, as well as migrants and ethnic minorities, such as Roma.

Over the past two decades, the CEB has provided support to these vulnerable populations in the CEE countries according to the needs expressed by its Member States: first supporting ex-deportees and rehabilitated political prisoners returning from the former USSR to Lithuania; then displaced populations and refugees in the Western Balkans (Bosnia and Herzegovina, Croatia, Serbia) and, more recently, in Georgia; as well as Roma minorities, in Central (Hungary) and Southern Europe (Bulgaria, “the former Yugoslav republic of Macedonia”). Prior to 1995, the CEB also intervened in Turkey, Cyprus and Malta, which have also been faced with important movements of displaced persons or refugees, caused by internal or nearby conflicts.

With a total loan portfolio of € 530 million, the Bank has provided financial support for the resettlement and reintegration of thousands of refugees and displaced persons in countries, where conflicts had caused vast movements of populations, and for the integration of migrants or Roma. In the CEE region, the most important share of CEB loans in favour of refugees and displaced populations went to the Western Balkans (almost € 200 million), where the CEB financed projects aimed at reconstruction of basic infrastructure, especially housing.

The CEB has also supported vulnerable populations in exceptional situations through its grant financing. The Bank provides grants via its Selective Trust Account, almost exclusively for the benefit of refugees and displaced populations as well as socially vulnerable groups (Roma, children, etc.). Additionally, a certain number of projects in South Eastern Europe have been supported by the Bank’s grant resources from trust funds opened with the CEB on behalf of a donor. More detailed information on grant financing is provided in sections 3.4 and 4.2.



3.2.c.2. Housing for low-income persons

In the housing sector, the CEB finances projects that address the constraints on access to housing, especially for the less well-off sections of the population. In practical terms, the Bank invests in the construction or refurbishing of housing for low-income households and can also provide mortgage schemes. These actions are aimed at facilitating access to home ownership or rental housing (see Box 2).

In the CEB’s approach, “social housing” is taken to refer to housing provided to persons experiencing difficulty in obtaining a dwelling, as a tenant or as an owner, on the real estate market, due to lack of resources. This mission thus translates into the construction or rehabilitation of housing, either for rent or for ownership, with a view to increasing the supply of affordable housing. The areas of action specific to “social housing” thus become: supply, accessibility and security of tenancy of housing units to low and middle-income groups.

In a demand-driven context, the Bank’s activity, while supporting national housing programmes, is not limited to providing housing for the poorest strata of the population. The social mandate of the CEB provides a rationale for the Bank to finance housing for a broader range of persons. Indeed, facilitating access to home-ownership as well as to rental housing contributes to strengthening social cohesion for people with revenues around the national average and thus keeps them out of vulnerable groups. The scope of CEB action is thus wider than “social housing” per se, even though the latter constitutes a priority. The CEB’s main mission therefore translates into providing decent and affordable dwellings for socio-economically disadvantaged groups of populations.

In the target group countries, the CEB has contributed to national housing programmes mainly in Central Europe (Hungary, Poland, the Slovak Republic), Latvia and Romania, later in Moldova and in the Western Balkan countries (Albania, “the former Yugoslav Republic of Macedonia”, Serbia) and most recently in Montenegro.

In terms of the types of borrowers, the CEB’s portfolio is quite diversified. Depending on the type of tenure (access to home-ownership vs. rental housing), the CEB’s intermediary borrowers include the banking sector, national or local authorities and local or regional government funding agencies. Moreover, borrowers, such as the banking sector, may be considered as “intermediaries” distributing mortgages to final beneficiaries in order to help them purchase their dwelling. On the contrary, public authorities or other public bodies entrusted with responsibilities in the field of housing, when borrowing from the CEB, generally aim to provide housing for rental purposes.

Over the past twenty years, the Bank has invested € 1.3 billion in housing projects in target countries. The CEB financed significant volumes in large-scale housing programmes in the CEE region, mainly in Hungary (€ 163 million), Poland (€ 360 million) and Romania (€ 252 million), especially in the mid-2000s, when the CEB satisfied a significant demand for this kind of infrastructure rehabilitation and construction. The volume and relative share of housing projects in the total portfolio has decreased in the last five years.

The loan amounts of such projects can vary substantially. The CEB has intervened in major programmes contributing with € 100-200 million (per loan) in Hungary, Poland and Romania. On the other hand, it has also financed smaller projects (€ 5-25 million) such as those in Albania, Latvia, Moldova, Montenegro, the Slovak Republic, which are no less significant in terms of their social impact.

Today, large “social housing” programmes are relatively less represented in the loan portfolio. However, this relative decrease should be taken with caution since the CEB has shifted its attention to energy efficiency investments, which may be classified as “environmental projects”, but involve the housing sector at the same time. The Bank has undertaken to include the concept of “green housing” in its operations in recent years, in order to promote housing with a lower environmental impact. “Green housing” projects have received more modest amounts until now,



but the CEB intends to further develop energy efficiency investments both in the housing sector and in general in the coming years (see also Box 4).

In the CEB’s integrated approach to sustainable urban development, “green housing” is considered within a wider “green building” framework. The financing of “green buildings” can cover residential dwellings and non-residential buildings (such as education and health facilities, etc.) as well as different components of urban infrastructure. Moreover, in addition to housing projects, the Bank also finances initiatives in the areas of renewable energy production and collective urban heating. Since 1997, the Bank has devoted over € 700 million to “green buildings” in the framework of projects located in the Czech Republic, Hungary, Poland, the Slovak Republic, Romania, Estonia, Latvia, Lithuania, and within the EU’s “Energy Efficiency Finance Facility” in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Montenegro, Romania, Serbia, “the former Yugoslav Republic of Macedonia” and Turkey.

Box 2 - Sustainable housing and urban development: the CEB’s experience

Housing is a basic need for every human person. As a decisive factor in social cohesion, housing is a condition for access to employment and for the fulfilment of fundamental human and social rights. Housing represents one of the main areas of expenditure of European households. Affordable housing constitutes an essential part of the quality of life. The CEB possesses great expertise in the financing of projects in this field.

The CEB has dedicated € 16 billion, i.e. around half the total amount of its lending, to housing and associated infrastructure projects. This amount includes projects for housing and housing-related infrastructure (€ 10 billion) and also covers cross-sector operations with housing and urban components (€ 6 billion).

Pursuing an integrated approach in its operations, the CEB brings its competence in housing to bear in a larger cross-sector perspective, such as the reconstruction of housing destroyed by natural disasters, the provision of housing for refugees, displaced persons or migrants, the provision of shelter for children in vulnerable situations, the construction of accommodation for the elderly or persons with disabilities. The financing of housing projects is also an important part of comprehensive urban renewal programmes. Finally, the CEB pays particular attention to the residential sector as a potential vector for environmental sustainability through improvements in energy efficiency.

In the years to come, demographic, socio-economic and environmental developments will have an immediate and medium-term impact on housing markets throughout Europe. Overall demand will diversify, raising significant investment needs. Environmental concerns will undoubtedly constitute a challenge in the vast majority of integrated urban renewal programmes. As the sole social development bank in Europe, the CEB will be expected to promote and integrate environmental and energy efficiency standards into all its activities, most obviously when it comes to investment in “green” housing and urban renewal.

A full account of the Bank’s experience to date in the field of housing is now available in the form of a study entitled “Sustainable Housing and Urban Development: the CEB’s Contribution”. The study also examines future trends and needs in the housing markets and provides some reflections on the CEB’s activities in the coming years.

The full text of the study is available on the CEB’s website.



3.2.c.3. Creation and preservation of viable jobs

Micro and small and medium-sized enterprises (SMEs) play a major role in sustainable social and economic development since they have a high potential for generating jobs, lowering regional disparities and strengthening competitiveness. At the same time, micro-enterprises and SMEs today may suffer not only from constrained access to finance but also from a scarcity of well-trained skilled and adaptable workers, thus underlining the importance of improving the quality and relevance of education and vocational training programmes.

Recognising this sector as an important driver for ensuring sustainable economic and social development, the CEB provides long-term loans for productive investment projects (fixed assets) for the prime purpose of promoting the creation and preservation of viable jobs by facilitating access to credit. These projects target micro, small and medium-sized enterprises, as well as entities exercising craft activities or family enterprises carrying out regular economic activity.

Over the past twenty years, the CEB has allocated € 4.8 billion to the creation and preservation of viable jobs in the target group and implemented projects in all target countries except Georgia. This sector represents the most substantial sector of CEB investments in the target group, with 28% of total project approvals in favour of these countries.

Moreover, volumes and the percentage of total lending have substantially increased over the period considered. For instance, in CEE countries (see Table 5), SME financing for the creation and preservation of viable jobs represented only 4% of all investments between 1995 and 1999 (€ 15 million), but increased sharply during 2000-2004 with 27% of total lending to the CEE region (€ 744 million) to reach € 2.3 billion or 37% of the total amount approved over the period 2005-2009. This trend continued in 2010-2011, since this sector received € 546 million or 29% of all approvals in favour of the CEE region in the last two years. Similarly, CEB lending to the SME sector reached € 700 million in Turkey.

This substantial and rapidly-growing SME financing can be explained by impressive economic growth in the CEE region in the 2000s accompanied and supported by the progressive development and diversification of the local banking sector (with a high share of foreign bank ownership), the CEB’s main borrower in this sector. In this context, the CEB has provided substantial aid in the form of credits for SMEs to promote job creation and, more generally, development of the private sector. Since the crisis hit emerging Europe in 2008, the CEB has continued to provide its support to SMEs so as to limit the effects of credit crunch. Over the last four years (2008-2011), the CEB devoted € 1.7 billion or 34% of all its investments in target countries (€ 5.1 billion over the period) to the creation and preservation of viable jobs in SMEs. Against the crisis background and as a complement to investments in employment and SMEs, the CEB has also strengthened its participation in investment programmes aimed at public social infrastructure.

The total amount approved in this sector includes € 1.4 billion in “transit loans” (see Box 3) via KfW Bankengruppe (Germany), Intesa Sanpaolo and Unicredito (Italy), Raiffeisen Bank (Austria) and Skandinaviska Enskilda Banken (Sweden), invested in micro-enterprises and SMEs located in target countries. “Transit loans” for SME financing represented two thirds of all “transit loans” distributed among all CEB sectors. Furthermore, the volume of “transit loans” in the SME sector grew steadily as of 2005, totalling more than € 1 billion over the period 2005-2009. However, their volume and share in total CEB lending have decreased since 2009, partly due to the lack of demand and to the increased credit risk because of the crisis, but also as a result of increased demand for CEB lending from state development banks in target countries.

Also eligible for CEB financing are micro-credit programmes in favour of micro-enterprises, i.e. with less than 10 permanent employees and an annual turnover below € 2 million. Micro-credit addresses “disadvantaged persons” such as unemployed or inactive people, those receiving social assistance, ethnic minorities, immigrants, refugees, women, etc., who wish to go into self-employment but do not have access to traditional banking services. In this sense, micro-credit



targets vulnerable population groups and therefore helps fight against economic and social exclusion, especially in rural areas. With the objective of providing beneficiaries with viable economic opportunities, the CEB has developed micro-credit programmes in order to facilitate the creation of small businesses and vocational training. Small micro-credit projects have been implemented in Albania, the three Baltic countries, Bosnia and Herzegovina, Bulgaria, Croatia, “the former Yugoslav Republic of Macedonia”, the Czech Republic, Poland, Slovenia as well as through “transit loans”, implemented with UniCredito and Intesa Sanpaolo.

Box 3 - Financing projects through “transit loans”

The CEB has made significant use of “transit loans”, i.e. loans granted to intermediaries outside the target group to fund projects in target group countries. Totalling € 2.3 billion, they accounted for 14% of the projects approved in target countries in the period from 1990 to 2010 and for 18% when considering the 2000-2010 period.

Characteristics of “transit loans”

CEB loans are said to be “intermediated” when borrowers from the CEB provide funding for legally separate third parties responsible for implementing one or more projects. The relevant intermediaries must:

- assume operational responsibility for identifying final beneficiaries;

- transfer the funds to the final beneficiaries;

- effect the repayment to the CEB of the loans granted to the final beneficiaries, the CEB’s credit risk being that of the intermediaries;

- assume responsibility for reporting to the CEB on the operations carried out.

The various benefits of “transit loans” for the CEB

Firstly, “transit loans” meet the dual requirement of fostering investments in the target group while minimising the credit risk. In the context of “intermediated loans”, the risk borne by the CEB is the risk of the financial intermediaries, not that of the final beneficiaries. Because of the expertise of the financial intermediaries, which are themselves often monitored by international rating agencies or are backed by guarantees from governments or financial institutions, the credit risk borne by the CEB is reduced.

Secondly, the CEB enjoys a broader spectrum of final beneficiaries by operating through “transit loans”. With the aid of financial intermediary networks, the CEB is able to reach final beneficiaries it would not otherwise have access to.

Thirdly, intermediaries can also offer specific expertise in a given sector and/or geographic area, which the CEB is unable to provide itself because of its limited resources. The CEB can therefore focus its efforts both upstream, by seeking to identify the intermediaries most capable of carrying forward its action, and downstream, in the context of monitoring, by assessing the performance of the intermediaries in relation to the objectives pursued.

In terms of the sectors concerned, “transit loans” have mainly concerned lending to small and medium-sized enterprises (SMEs) for the preservation and/or creation of jobs, funding for social housing and investments in small municipal infrastructure projects, which are naturally suited to the use of intermediaries. This is all the more true since the size of the loans for the sub-projects is sometimes small, as in the case of mortgage loans or micro-credit. With € 1.4 billion, “transit loans” for SME financing represented two thirds of all “transit loans” distributed among all CEB sectors.

The volume and share of “transit loans” in total CEB lending in favour of target countries can also be explained by the significant presence of Western European banks in the CEE banking systems.



3.2.c.4. Improvement of living conditions in urban and rural areas

By facilitating access to credit to modernise local infrastructure, CEB projects, financed in conjunction with national or local authorities and/or transiting via the banking sector, can involve the construction or rehabilitation of:

- Economic infrastructure: urban transport or local transportation networks in rural areas, development of industrial zones, rehabilitation of industrial brown-field sites;

- Social infrastructure: basic educational and medical infrastructure, playgrounds, green areas;

- Utilities: wastewater treatment, water, electricity and gas supplies;

- Irrigation networks in rural areas.

The CEB finances projects in priority in run-down urban areas and neighbourhoods lacking in urban infrastructure and/or public amenities, in accordance with its primary mission of strengthening social cohesion. In rural areas, projects must concern regions characterised by a low population density or activities in fields such as agriculture, forestry, aquaculture and fishing, defined by the national legislation.

Since a vast majority of projects are targeted to developing a specific geographic area, they usually entail a multi-sector approach involving investments in housing, education, health, environment, historic heritage or administrative and judicial public services. Within multi-project programmes that require a large, global borrower, the CEB has mainly worked with the local banking sector, in several cases via “transit loans”. On the other hand, the Bank is also committed to developing operations with national, local or regional government authorities, in CEE countries in particular.

Over the past twenty years, approved loans in this sector totalled € 3.3 billion for the benefit of the target countries. With 19% of total approvals, this represents the second largest sector of action for the CEB in the target group. Between 1990 and 1999, investments represented 30% of total CEB lending to the region (€ 1 billion) and were exclusively aimed at rural areas in Cyprus and Turkey. After 2000, the CEB started financing urban and rural projects in the CEE countries, mostly through “transit loans”. More rapid development came after 2004 and 2007, i.e. after twelve target countries joined the EU, with € 1.7 billion approved since 2005. In 2009 alone, € 463 million or 33% of all approvals in the target group were committed for the improvement of living conditions in urban and rural areas. In the last two years 2010 and 2011, this sector of action has continued to benefit from significant investments, totalling € 518 million or 20% of all new approvals in the target group.

This remarkable increase has been closely linked to the EU enlargement process and to a need for national and local authorities for co-financing EU funds. A large and still growing number of projects are co-financed with EU Structural Funds, mainly in Hungary, Poland, the Czech and Slovak Republics, Slovenia and the Baltic States. Similarly, a number of these projects put the CEB in a position to cooperate with the EIB. Furthermore, the CEB has financed, in co-operation with the EU, municipal infrastructure projects in EU candidate and potential candidate countries, with EU Pre-accession Funds, mainly in Albania, Bosnia and Herzegovina, Croatia, Serbia and Turkey.

FIN

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: A

CH

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Exa

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of

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pro

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TR

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GT

HE

NIN

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RA

TIO

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1.

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to r

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mig

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and

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ons

Coun

try

Am

ount

ap

pro

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Year

of

ap

pro

val

Pro

ject

obje

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es

Bosn

ia a

nd

H

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8.0

2

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4

Reha

bili

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of

the h

ous

ing s

tock

da

mag

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in o

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som

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colle

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and

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Bulg

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8.7

2

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0-2

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1

Cons

truc

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and

reha

bilitation o

f ho

usin

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n fa

vour

of

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dis

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the M

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Sofi

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69

.0

20

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, 20

03

Reco

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of

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mun

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and

re

settle

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, in

colla

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with

loca

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and

UN

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Georg

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1.0

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8

Gra

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anne

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N a

genci

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for

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people

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the c

onf

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ugus

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08

. The

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help

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eha

bili

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colle

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(UN

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serv

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and

liv

eliho

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(UN

DP) a

nd c

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)

Hungary

5.0

2

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5

Imple

ment

ed w

ithi

n th

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am

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of

the “D

eca

de of

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a In

clus

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20

05

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”, a co

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ive pilo

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aim

ed at

the so

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inte

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of

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a by ad

dre

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rious

ho

usin

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educ

ation,

he

alth

and

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pro

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ms

of

the Rom

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unity.

Inve

stm

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s m

ain

ly co

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d on

the p

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of

new

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elli

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re

hab

ilita

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of

the

hous

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ironm

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and

im

pro

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s to

re

late

d

soci

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and

te

chni

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infr

ast

ruct

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clud

ing t

he im

pro

vem

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of

sani

tary

and

env

ironm

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al co

nditio

ns.

Lith

uania

10

.0

19

97

Pro

vision

of

hous

ing f

or

ex-d

eport

ees

and

the

ir f

am

ilies

retu

rnin

g f

rom

the

form

er

USSR (

5,4

00

bene

fici

ari

es)

, aim

ed a

t fa

cilit

ating

the

ir s

oci

o-e

cono

mic

int

egra

tion

Mold

ova

4.9

2

00

6

Pro

vision

of

rent

al

hous

ing u

nits

to s

om

e 1

,50

0 r

egis

tere

d r

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and

soci

ally

-vul

nera

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segm

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s of

the

popul

ation,

withi

n th

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ram

ew

ork

of

a n

ationa

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rate

gy

Serb

ia

2.0

2

00

5

Cons

truc

tion

of

hous

ing uni

ts in

Belg

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fugee or

form

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refu

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useho

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and

oth

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vuln

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gro

ups

that

cann

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ccess

dece

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ous

ing s

olu

tions

thr

oug

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e f

ree m

ark

et

FIN

AN

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OC

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JEC

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IN

CEB

TA

RG

ET

CO

UN

TR

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: A

CH

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AN

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HA

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2.

Hou

sing

for

low

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Coun

try

Am

ount

ap

pro

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Year

of

ap

pro

val

Pro

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obje

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Alb

ania

15

.0

20

06

Pro

vision

of

hous

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pers

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suc

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poor

pers

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, vi

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mig

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with

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ab

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and

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who

have

no a

ccess

to the

form

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et

“the f

orm

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Yugo

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ep

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of

Mace

donia

”

25

.4

20

09

C

ons

truc

tion

of

37

bui

ldin

gs

with

som

e 1

,70

0 r

ent

al ho

usin

g u

nits

in

favo

ur o

f vu

lnera

ble

bene

fici

ari

es,

suc

h as

resi

dent

s of

are

as

aff

ect

ed by na

tura

l dis

ast

ers

; orp

hans

att

ain

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ga

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stitut

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moda

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a;

depend

ent

or

dis

ab

led h

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eho

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perm

ane

ntly

une

mplo

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nd w

elfa

re r

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and

sin

gle

pare

nts

with

youn

g c

hild

ren

Latv

ia

18

.8

20

01

Part

icip

ation

in th

e “H

ous

ing

D

eve

lopm

ent

Le

ndin

g Pro

gra

mm

e”,

im

ple

ment

ed w

ith

the G

ove

rnm

ent

and

M

ort

ga

ge a

nd L

and

Bank

of

Latv

ia, m

ain

ly t

hroug

h th

e r

eha

bili

tation

of

mul

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tore

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part

ment

bui

ldin

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and

th

e c

om

ple

tion

of

unfi

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uild

ings,

in

co-o

pera

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with

lega

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usin

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ntitie

s a

nd s

oci

al ho

usin

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rovid

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Mold

ova

18

.3

20

06

, 20

11

Pro

vision

of

sust

ain

ab

le s

oci

al ho

usin

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o low

-inco

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ers

ons

and

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popul

ations

gro

ups

Monte

negro

25

.0

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C

o-f

inanc

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ort

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chem

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ith

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ove

rnm

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, to

allo

w a

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to p

ropert

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aro

und

1,0

00 h

ous

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elig

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for

soci

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usin

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the f

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nd

36

0.0

20

01

, 20

02

C

ons

truc

tion

and

modern

isa

tion

of

26

,000

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al

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for

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- and

mid

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-inc

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giv

ing t

hem

acc

ess

to d

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nd a

fford

able

hous

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in t

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ate

d r

ent

al

sect

or,

in

co-o

pera

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with

the G

ove

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and

Bank

Gosp

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rstw

a K

rajo

wego

Rom

ania

2

51

.7

20

01

, 20

02

, 2

00

5

Cons

truc

tion

and

reha

bili

tation o

f th

e r

ent

al so

cial ho

usin

g s

ect

or

thro

ugho

ut t

he c

oun

try, esp

eci

ally

for

youn

g

people

in

the 1

8-3

5 a

ge b

rack

et liv

ing o

n lo

w inc

om

es,

withi

n a

larg

e-s

cale

nationa

l ho

usin

g p

rogra

mm

e

Serb

ia

30

.0

20

07

Pro

vision

of

mort

ga

ges

to lo

w-

and

mid

dle

-inc

om

e h

ous

ehold

s (v

ia I

ntesa

Sanp

aolo

Gro

up)

to f

inanc

e t

he

pur

chase

of

pri

mary

resi

denc

es,

esp

eci

ally

in

the m

ain

citie

s of

Serb

ia

Serb

ia

32

.0

20

10

C

ons

truc

tion

of

aro

und 1

,70

0 n

ew

ho

usin

g u

nits

und

er

two n

on-p

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t so

cial

hous

ing s

chem

es:

pub

lic r

ent

al

hous

ing

and

ow

ner-

occ

upie

d ho

usin

g.

Thro

ugh

this pro

ject

, th

e Serb

ian

aut

hori

ties

aim

to

im

pro

ve liv

ing

cond

itio

ns f

or

targ

ete

d p

opul

ations

who

do n

ot

have

acc

ess

to h

ous

ing u

nder

exis

ting

mark

et

cond

itio

ns.

Thi

s obje

ctiv

e w

ill b

e a

chie

ved b

y e

stab

lishi

ng t

he s

usta

inab

le h

ous

ing f

inanc

e m

ech

ani

sm d

eri

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fro

m t

he S

oci

al

Hous

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aw

adopte

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Aug

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200

9.

Slo

vak R

epublic

8.1

2

00

0

Reno

vation

and

revitalis

ation

of

the h

ous

ing

sto

ck, in

clud

ing

sus

tain

ab

le r

epa

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and

refu

rbishm

ent

of

com

mon

pa

rts

in m

ulti-f

am

ily h

igh-

rise

resi

dent

ial bui

ldin

gs,

im

ple

ment

ed w

ith

the S

lova

k G

uara

ntee a

nd D

eve

lopm

ent

Bank

(SZRB)

CEB LENDING TO TARGET COUNTR I ES26

FIN

AN

CIN

G S

OC

IAL P

RO

JEC

TS

IN

CEB

TA

RG

ET

CO

UN

TR

IES

: A

CH

IEV

EM

EN

TS

AN

D C

HA

LLEN

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3.

Cre

ation a

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rese

rva

tion

of

via

ble

job

s

Coun

try

Am

ount

ap

pro

ved

Year

of

ap

pro

val

Pro

ject

obje

ctiv

es

Alb

ania

5.0

2

00

8

Part

ial

fina

ncin

g of

pro

duc

tive in

vest

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pro

ject

s in

m

icro

- and

sm

all-

size

d ent

erp

rise

s at

nationa

l le

vel,

esp

eci

ally

in

ru

ral

are

as,

im

ple

ment

ed

with

the

Gove

rnm

ent

w

ithin

th

e

“Pro

gra

mm

e

for

Sus

tain

ab

le

Deve

lopm

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in

Rur

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oun

tain

Are

as”

and

the

Moun

tain

Are

a F

inanc

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und

(M

AFF)

Bulg

ari

a

12

5.0

2

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2-2

01

0

Cre

dit

lines

to

SM

Es

thro

ugh

the

Bul

gari

an

Deve

lopm

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Bank

(5

0M

€;

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04

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09

, 20

10

),

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06

), R

aif

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Soci

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Expre

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CEB/E

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fW

SM

E F

inance

Faci

lity

41

2.5

2

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0-2

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6

Cre

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es

to SM

Es b

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cr

edit in

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in

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w EU

m

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state

s in

deve

lopin

g th

eir lo

an

opera

tions

with

SM

Es

Cro

atia

10

8.0

20

01

, 20

08

, 2

00

9

Part

ial

fina

ncin

g o

f pro

duc

tive i

nvest

ment

pro

ject

s in

mic

ro,

small a

nd m

ediu

m-s

ized e

nterp

rise

s th

roug

hout

C

roatia, im

ple

ment

ed t

hroug

h th

e C

roatian

Bank

for

Reco

nstr

uction

and

Deve

lopm

ent

(H

BO

R)

Est

onia

, La

tvia

, Li

thuania

15

.0

20

02

-20

03

2

00

7

Mic

ro-c

redit p

rogra

mm

es

in s

upp

ort

of

wom

en’s

ent

repre

neur

ship

, im

ple

ment

ed w

ith

the loca

l b

ank

ing s

ect

or

“the f

orm

er

Yu

g.

Rep

. of

Mace

donia

” 12

.0

20

08

Pro

duc

tive

inv

est

ment

s in

mic

ro-

and

sm

all

ent

erp

rise

s w

ith

Pro

Cre

dit B

ank

to s

upp

ort

job c

reation

in a

coun

try

faci

ng v

ery

hig

h un

em

plo

ym

ent le

vels

Pola

nd

4

80

.0

20

04

, 2

00

7,

20

08

, 20

10

Part

ial

fina

ncin

g o

f pro

duc

tive i

nvest

ment

pro

ject

s in

mic

ro/sm

all

and

mediu

m-s

ized e

nterp

rise

s th

roug

hout

Pola

nd,

exte

nded to

end

-bene

fici

ari

es

in th

e fo

rm of

inve

stm

ent

lo

ans

th

roug

h PKO

Bank

Polski

(2

50M

€;

20

08

, 20

10

), a

nd e

xte

nded i

n th

e f

orm

of

lease

s vi

a E

uropejski

Fund

usz

Leasi

ngow

y (

18

0M

€;

20

04

, 20

08)

and

Raif

fens

en

Leasi

ng P

olska

(50

M€;

200

7)

Slo

venia

12

0.0

20

04

, 20

05

, 2

00

9

Part

ial fi

nanc

ing o

f pro

duc

tive

inve

stm

ent

sub

-pro

ject

s un

dert

ake

n by e

xisting

and

sta

rt-u

p, m

icro

-, s

ma

ll- a

nd

mediu

m-s

ized e

nterp

rise

s, f

inanc

ed w

ith N

ova

Kre

ditna

Ba

nka M

ari

bor

(20

M€;

20

04

), R

aif

feisen

Kre

kova

Bank

a (

30

M€;

200

5), N

ova

Lju

blja

nska

Bank

a (

70

M€;

200

5, 20

09

)

“Tra

nsi

t lo

ans”

(Ita

ly)

62

7.0

2

00

3-2

00

8

Part

icip

ation

in a

seri

es

of

credit p

rogra

mm

es

to S

MEs

, in

clud

ing m

icro

-cre

dit,

loca

ted i

n C

roatia,

Hun

ga

ry,

Cze

ch a

nd S

lova

k Repub

lic

(90

M€;

20

03

-04

, 20

06

), B

osn

ia a

nd H

erz

egovi

na,

Serb

ia (

37

M€;

20

05

-20

07

) w

ith

Inte

sa S

anp

aolo

, and

in

oth

er

targ

et co

untr

ies

thro

ugh

Uni

credito Ita

liano

(50

0M

€;

20

05

, 20

06

, 20

08

)

Turk

ey

5

50

.0

20

03

, 20

05

, 2

00

9-2

01

0

Fina

ncin

g o

f pro

duc

tive

inv

est

ment

s ca

rrie

d o

ut b

y e

ithe

r alread

y e

xisting

or

new

ly c

reate

d S

MEs

thr

oug

hout

th

e c

oun

try,

with

the G

ove

rnm

ent

(20

0M

€;

20

03), T

ürki

ye V

aki

flar

Bank

asi

– ‘

Vaki

fba

nk’

(10

0M

€;

20

05

),

Türk

iye S

ınai K

alk

ınm

a B

ank

ası

(20

0M

€;

20

05

, 20

09

) a

nd T

ürkiy

e K

alk

ınm

a B

ank

ası

(50

M€;

20

10

)


FIN

AN

CIN

G S

OC

IAL P

RO

JEC

TS

IN

CEB

TA

RG

ET

CO

UN

TR

IES

: A

CH

IEV

EM

EN

TS

AN

D C

HA

LLEN

GES

4.

Imp

rov

em

ent of

livin

g c

onditio

ns

in u

rba

n a

nd

rura

l a

rea

s

Coun

try

Am

ount

ap

pro

ved

Year

of

ap

pro

val

Pro

ject

obje

ctiv

es

Alb

ania

40

.0

20

09

Reha

bili

tation

of

seco

nda

ry

and

lo

cal

road

s th

roug

hout

the

coun

try,

imple

ment

ed

with

the

Alb

ani

an

Deve

lopm

ent

Fund

and

the

Worl

d B

ank

Bosn

ia a

nd

H

erz

egovin

a

10

.0

20

07

M

odern

isa

tion

and

re

hab

ilitation

of

loca

l in

frast

ruct

ure

(road

s,

stre

et

light

ing,

wate

r su

pp

ly,

sew

ag

e,

com

muni

ty a

meni

ties,

etc

.) w

ith R

aif

feis

en

Bank

Bosn

a i H

erc

egovi

na

CEB/E

U/K

fW

Munic

ipal Fin

ance

Faci

lity

72

.5

20

03

-20

09

Tr

ipart

ite co

-opera

tion

pro

gra

mm

e in

C

ent

ral

and

Sout

h Ea

stern

Eu

rope aim

ed at

inci

ting

lo

cal

ba

nks

to

expa

nd t

heir l

end

ing t

o m

unic

ipalit

ies

for

smalle

r pro

ject

s in

volv

ing

pub

lic a

nd p

riva

te s

oci

al

infr

ast

ruct

ure

cons

truc

tion

and

reha

bili

tation,

inc

ludin

g in

the s

ect

ors

of

env

ironm

ent

al p

rote

ctio

n, h

ealth

and

educ

ation

Cro

atia

25

.5

20

04

C

ons

truc

tion,

reco

nstr

uction

and/or

equi

pm

ent

of

wate

r ta

nks,

sew

ag

e c

olle

ctio

n ne

twork

s, t

reatm

ent

faci

litie

s,

pri

mary

he

althc

are

fa

cilit

ies

and

cl

inic

s, sc

hool

faci

litie

s, and

so

cial

welfa

re ho

mes,

w

ithi

n th

e ‘N

ationa

l Pro

gra

m o

f Is

land

Deve

lopm

ent

’, in

ord

er

to h

elp

halt a

nd r

eve

rse d

epopul

ation

of

the isl

and

s

Czech

Repu

blic

12

0.0

2

00

9

20

11

Cons

truc

tion

and

modern

isa

tion

of

mun

icip

al

infr

ast

ruct

ure i

n th

e a

reas

of

trans

port

, cu

ltur

al

and

educ

ationa

l am

eni

ties,

and

soci

al

serv

ices

(soci

al

cent

res,

da

y-c

are

cent

res,

sch

ools,

hom

es

for

the e

lderl

y,

etc

.),

fina

nced

with

Cze

ch M

ora

via

n G

uara

nte

e a

nd D

eve

lopm

ent

Ba

nk (

50

M€;

20

09

) and

Kom

erc

ni Banka (

70

M€;

20

11

, in

pa

ralle

l fi

nanc

ing w

ith

EU

Str

uctu

ral Fu

nds)

Est

onia

, La

tvia

, Li

thuania

20

0.0

2

00

9

Reha

bili

tation

of

the r

oad a

nd t

rans

port

netw

ork

s as

well

as

ba

sic

educ

ationa

l, m

edic

al

and

soci

o-c

ultu

ral

am

eni

ties

thro

ugh

the S

kand

inavi

ska E

nskild

a B

ank

en

Gro

up

Hungary

3

20.0

20

06

20

09

20

10

Modern

isa

tion

of

mun

icip

al

envi

ronm

ent

al, c

ultur

al

and

health

care

inf

rast

ruct

ure,

imple

ment

ed w

ith

Mag

yar

Fejle

szté

si B

ank

(M

FB), w

ithin

the

fra

mew

ork

of

the M

unic

ipa

l In

frast

ruct

ure D

eve

lopm

ent

Loan

Pro

gra

mm

e

laun

ched in

200

4 b

y t

he M

FB

Lith

uania

13

0.0

2

00

9

Part

icip

ation

in th

e Sta

te In

vest

ment

Pro

gra

mm

e

20

09

-20

11

ta

rgete

d to

fi

nanc

ing in

vest

ment

s in

so

cial

infr

ast

ruct

ure in

the w

ake

of

the s

eve

re e

cono

mic

dow

ntur

n

Pola

nd

7

84

.0

20

05

-20

11

M

odern

isa

tion

of

pub

lic a

meni

ties

in t

he a

reas

of

health,

educ

ation,

urb

an

trans

port

ation

and

env

ironm

ent

al

pro

tect

ion,

in

co-o

pera

tion

with

Regio

ns o

f Lo

dzk

ie, M

alo

pols

ka, M

azo

via, Podka

rpa

ckie

and

Pom

era

nia, a

nd

Citie

s of

Ka

tow

ice, Kra

kow

, Lo

dz,

Wars

aw

and

Gda

nsk

Rom

ania

10

.0

19

99

Im

ple

ment

ation

of

small-s

cale

sub

-pro

ject

s aim

ed a

t pove

rty a

llevi

ation

and

com

mun

ity-d

rive

n deve

lopm

ent

in

poor

rura

l co

mm

unitie

s, c

o-f

inanc

ed w

ith

the W

orl

d B

ank

CEB LENDING TO TARGET COUNTR I ES28



3.2.d. Managing the environment

For the CEB, sustainable management of the environment is both a sectoral line of action and a constant requirement in its projects, since the CEB systematically takes into account environmental aspects of all projects it finances, in each of its sectors of action. The CEB’s contribution towards building sustainable communities therefore takes place through the integration of environmental considerations in all its lending operations. CEB projects are designed and implemented in such a way as to optimise social and environmental benefits, minimise negative environmental impacts, and comply with appropriate environmental standards (cf. CEB’s Environmental Policy).

To help foster more responsible management of the environment, the CEB finances projects that:

- Undertake sustainable, long-term preventive action to protect populations from the consequences of natural and ecological disasters, including floods, landslides, fires, avalanches and earthquakes;

- Provide emergency aid in the aftermath of natural or ecological disasters;

- Contribute to protecting and improving the environment;

- Aim at preserving historic and cultural heritage.

Over the past twenty years, this sectoral line has represented € 4.7 billion in terms of projects approved for the target countries, i.e. 28% of total approvals. During the same period, loans disbursed in favour of these countries totalled € 2.9 billion, or 25% of all disbursements made since 1990 (see also Table 4).

3.2.d.1. Natural or ecological disasters

Aid to victims of natural or ecological disasters constitutes one of the CEB’s two statutory priorities, together with aid to refugees, migrants and displaced persons. Projects in this sector involve the reconstruction or rehabilitation of destroyed or damaged infrastructure, in particular housing and basic infrastructure, such as water supplies, waste water and solid waste treatment, electricity and gas supplies.

Enhancing the effectiveness and sustainability of the CEB’s contribution to helping populations manage natural risks has meant shifting the operational focus from immediate emergency response to long-term preventive action. This is reflected by the Bank’s pro-active approach to tackling climate change related events first and foremost through adaptation and mitigation rather than emergency reconstruction. Within this sustainability perspective, the CEB’s actions have steadily evolved in favour of prevention so that the breakdown of the CEB’s actions between prevention and reconstruction over the past five years has been approximately 50/50. The CEB projects that help protect populations and livelihoods from damage arising from natural disasters aim at providing lasting solutions for reducing vulnerability to natural disasters, reversing environmental degradation and promoting the Member States’ sustainable development and adherence to national and international environmental standards.

Over the past twenty years, projects in this sector have totalled € 2.1 billion in target countries, located in Bosnia and Herzegovina, Bulgaria, Hungary, Poland, Romania, Serbia, the Slovak Republic, Slovenia and Turkey. These projects have mainly been implemented with central and local government authorities.

As a statutory priority, this sector has always represented a substantial share of CEB loans in the target region. In cumulative amounts over twenty years, it has represented 13% of total lending to the target group. Although the relative share of this sector (in total lending to the target group) has decreased over the years, absolute volumes invested in this sector have continuously increased with a clear shift towards from reconstruction to preventive measures. In effect, in the 1990s, the Bank’s first actions were aimed at post-disaster rehabilitation, after floods in Central Europe or earthquakes in Slovenia and Turkey. However, since the beginning of the 2000s, the CEB has implemented significant large-scale preventive projects in the region, mostly in Hungary, Poland, Romania and Turkey, while still paying attention to post-disaster support in the region.



3.2.d.2. Protection of the environment

The CEB finances projects that contribute to protecting and improving the environment and, thus to improving the living environment. Projects notably involve the reduction and treatment of solid and liquid waste; clean-up and protection of surface and underground water; protection against noise nuisance; production of renewable energy and air pollution prevention; energy saving measures; decontamination of soils and aquifers; protection and development of biodiversity; cleaner transport means and networks.

The initiatives that have been taken in the environmental protection sector are today widely diverse in geographical terms. Over the past twenty years, the Bank has approved projects in this sector for an accumulated amount of € 2.4 billion, implemented in every country in the target group, with the exception of Georgia and Malta. Moreover, three countries, namely, Cyprus, Romania and Turkey, received around 60% of the total amount approved in this sector.

In the last five years, environmental protection has been the fastest growing sector of action in absolute and relative terms in the target group, with more than two thirds of the total amount approved over 2005-2009 and 17% of total lending over the same period. Today, this sector constitutes one of the most important sectors receiving CEB financing in the region. A substantial share of the amounts allocated to this sector is implemented with national and local authorities, and to a lesser extent, with the banking sector.

What is more, the CEB has invested in different types of local infrastructure. For example, it financed a series of projects in Cyprus so as to provide, extend or modernise sewer and drainage facilities (€ 525 million since 1990). In Turkey, the CEB is participating, together with the EIB, in a cleaner urban transport network - a trans-Bosphorus rail link - in Istanbul, also known as the Marmaray Project. The CEB has also taken action in favour of sustainable water management in Romania or Hungary, aimed at preventing flood risks, improving the safety of dams, protecting water sources, improving water supply reliability, treatment of solid or liquid waste, etc. The CEB also took part, in co-operation with the EU and KfW, in the “Energy Efficiency Finance Facility” with the CEB’s contribution amounting to € 61.4 million approved in 2007 and 2008. This tripartite framework is part of the European Commission’s Instrument for Pre-Accession Assistance (IPA) and aims to increase energy efficiency and the use of renewable energies in buildings (commercial, public or private), as well as in the industrial sector. This programme is specifically targeted to IPA countries, namely Albania, Bosnia and Herzegovina, Croatia, Montenegro, Serbia, Turkey, and “the Former Yugoslav Republic of Macedonia”.

Because of the importance of pro-environmental measures for the CEB, a large number of them are integrated within multi-sector projects, usually at municipal or regional level. In the target group countries, a substantial part of these loans are allocated to local authorities via the banking sector, such as programmes implemented in the Czech and Slovak Republics, Poland or Slovenia.

3.2.d.3. Protection and rehabilitation of historic and cultural heritage

The CEB can finance the restructuring and rehabilitation of historic and cultural heritage, classified as such by UNESCO or by the Member States concerned.

Over the period 1990-2010, the Bank approved a total of € 230 million for the protection and rehabilitation of elements of historic and cultural heritage, mostly with the national governments of Croatia, Poland, Romania and the Slovak Republic, as well as several programmes implemented via “transit loans” in Central Europe, Bosnia and Herzegovina, Croatia and Serbia.

FIN

AN

CIN

G S

OC

IAL P

RO

JEC

TS

IN

CEB

TA

RG

ET

CO

UN

TR

IES

: A

CH

IEV

EM

EN

TS

AN

D C

HA

LLEN

GES

Exa

mp

les

of

CEB

pro

ject

s: M

AN

AG

ING

TH

E E

NV

IRO

NM

EN

T

1.

Na

tura

l or

eco

logic

al dis

ast

ers

Coun

try

Am

ount

ap

pro

ved

Year

of

ap

pro

val

Pro

ject

obje

ctiv

es

Hungary

16

9.2

15

0.0

20

04

20

11

Majo

r fl

ood p

reve

ntio

n w

ork

s in

the

valle

y o

f th

e R

iver

Tisz

a, w

ithi

n th

e f

ram

ew

ork

of

the V

ásá

rhely

i Pla

n

Reha

bili

tation

work

s fo

llow

ing f

loods

and

the

toxic

red m

ud d

isast

er

that

occ

urre

d in

201

0

Pola

nd

25

1.0

2

00

5

Larg

e-s

cale

pro

ject

, in

co-o

pera

tion

with

the W

orl

d B

ank

, in

volv

ing t

he f

ina

ncin

g o

f fl

ood p

reve

ntio

n w

ork

s and

the

reco

nstr

uction

of

pro

pert

y a

nd p

roduc

tion

capa

city

in

the O

dra

Riv

er

Basi

n

Rom

ania

15

9.2

2

00

5-2

00

6

Majo

r fl

ood p

reve

ntio

n w

ork

s fo

llow

ing t

he t

orr

ent

ial ra

ins

that

hit

the c

ount

ry in 2

005

and 2

006

: up

gra

din

g

the l

eve

l of

pro

tect

ion

of

the e

xisting

hydro

-tech

nica

l st

ruct

ures

on

the m

ain

wate

rcour

ses,

the

reby e

nsur

ing

optim

um p

rote

ctio

n fo

r th

e inh

ab

itant

s in

the

wors

t-hi

t a

reas

Serb

ia

39

.6

20

05

-20

07

Reco

nstr

uction

and

reha

bili

tation

of

hous

ing a

nd l

oca

l in

fra

stru

ctur

e d

est

royed b

y f

loods

(i)

in t

he N

ort

hern

pa

rt o

f Serb

ia (

Vojv

odin

a P

rovi

nce)

in A

pri

l 20

05

, and

(ii)

in t

he c

ent

re a

nd E

ast

of

the c

oun

try fo

llow

ing

land

slid

es

in s

pri

ng 2

006

Slo

vak R

epublic

30

.0

19

99

C

ons

truc

tion

and

reha

bili

tation o

f fl

ood p

rote

ctio

n in

frast

ruct

ure t

hroug

hout

the

coun

try

Turk

ey

37

0.0

1

99

9-2

00

1

Reco

nstr

uction

of

som

e 1

7,0

00 h

ous

ing

uni

ts i

n t

he a

fterm

ath

of

a s

eve

re e

art

hqua

ke w

hich

occ

urre

d i

n th

e

Marm

ara

regio

n in

Aug

ust

19

99

Turk

ey

25

0.0

2

01

0

Part

ial fi

nanc

ing o

f th

e “

Ista

nbul

Seism

ic R

isk

Mitig

ation

and

Em

erg

enc

y P

repa

redne

ss P

roje

ct”

(ISM

EP), in

co-

opera

tion

with

the W

orl

d Bank

, vi

a in

vest

ment

s fo

r th

e re

cons

truct

ion

of

90

pub

lic sc

hools and

2 st

udent

dorm

itory

ca

mpus

es

2.

Pro

tect

ion

and

rehabilita

tion

of

his

tori

c and

cultura

l heri

tag

e

Coun

try

Am

ount

ap

pro

ved

Year

of

ap

pro

val

Pro

ject

obje

ctiv

es

Cro

atia

1.4

2

00

1

Rest

ora

tion

of

the F

ranc

isca

n M

ona

stery

“M

ala

Bra

ca”,

a U

NES

CO

-cla

ssifie

d m

onu

ment

, in

Dub

rovni

k

Pola

nd

9.0

2

00

9, 20

11

Reha

bili

tation

of

hist

ori

c and

cu

ltur

al

heri

tag

e,

class

ifie

d as

such

by U

NES

CO

or

liste

d in

th

e re

gio

nal

or

nationa

l re

gis

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nd L

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ania

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ala

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3.1

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and

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re


FIN

AN

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OC

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IN

CEB

TA

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CO

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CH

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TS

AN

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3.

Pro

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Coun

try

Am

ount

ap

pro

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Year

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val

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stm

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(EI

B) a

nd t

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for

Inte

rnationa

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oopera

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(JBIC

)

Energ

y-e

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in b

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Coun

try

Am

ount

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28

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s in

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, EU

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ia s

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30

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s




Box 4 - Combating energy poverty in Europe

Between 50 million and 125 million people (or one household in seven) in Europe are estimated3 to be “energy poor”. The term “energy poverty” or “fuel poverty” is used for households that have difficulties to pay heating and electricity bills. Although not clearly defined in every European country, energy poverty results from a combination of three key factors: low household income, poor heating and insulation standards, and high energy prices. In the United Kingdom - with the greatest experience and understanding of energy poverty issues in Europe - energy poverty is said to occur when in order to heat a home to an adequate standard of thermal comfort a household needs to spend more than 10% of its income on total fuel costs (heating fuel plus electricity). In many EU countries, not least in Central and Eastern Europe (CEE), it is common for poor people to spend well over 10% of their income on household energy costs. It is also common for poor people to disconnect from heat and gas supplies to save money. This problem has become known as the “choice between heating and eating”.

In the CEE region, the poorer sections of the population suffer from high household energy bills with low energy efficiency in existing houses and high energy costs. Yet some of these same countries are among the coldest in the CEE region, with the heating season lasting up to seven months. Those who cannot afford adequate levels of energy consumption either go into energy indebtedness and face the threat of disconnection by the utility provider or the prospect of reducing their consumption. Either choice entails hardship, exposure to health risks and feelings of social alienation - which only deepen the vicious circle of social exclusion. The scale of the problem is being further exacerbated, as in many CEE countries residents have increased the levels of use of “dirty” fuels and resorted to cheap stoves, which may have high levels of CO2 emissions and pollution, with the attendant detrimental effects on indoor air quality and health. Households are trapped in energy poverty and society ultimately bears the cost of inequality and underdevelopment.

Energy poverty is a multi-dimensional issue covering housing, energy, health and social services. When tackling energy poverty, it is vital to interlink policies seeking to improve energy efficiency and social policies. The context of “social housing” may provide one of the most productive approaches here, since “social housing” is able to integrate both social welfare policies and energy efficiency measures. The issue of affordability of energy efficiency measures also needs to be addressed. Programmes for energy-poor households should therefore tackle various factors at the roots of poverty and combine several measures such as:

- financial and technical assistance to improve the energy efficiency of the dwelling;

- discounted energy costs may be provided through social tariffs for vulnerable consumers;

- social security benefits can be used to assist with energy expenditure and bill payment.

In this regard, the CEB, as a social development bank, is well positioned to finance projects that combine energy efficiency measures targeted to the most needy or vulnerable persons. On the one hand, the Bank already possesses expertise in the field of housing for lower income persons, “green buildings” and renewable energy. On the other, it has a long-standing experience in financing projects dedicated to vulnerable groups of population such as refugees, migrants and displaced persons, minorities, victims of natural and ecological disaster, children, and the elderly and handicapped persons. Last but not least, it is also well placed to cooperate with its European partners so as to mobilise the resources needed to fight against energy poverty that hits too many households in Europe. And the number of fuel poor is projected to increase in the foreseeable future, in line with rising energy prices and increased fuel bills.

3 Source: European Fuel Poverty and Energy Efficiency Project, co-funded by the European Union



3.2.e. Supporting public infrastructure with a social vocation

Through its third sectoral line of action, the CEB supports the development of public infrastructure with a social vocation in the sectors of health, education and vocational training as well as administrative and judicial public services. In the long term, these actions contribute to fostering more dynamic and more equitable economic and social growth promoting individual fulfilment and collective wellbeing. Overall, the participation in the financing of social public infrastructure programmes enables the Bank – in accordance with its mandate and objectives to support social cohesion in Europe – to foster policies and investments that assist central or regional government authorities in implementing their sectoral policies.

Over the past twenty years, this sectoral line has represented € 2.6 billion in terms of projects approved for the target countries, i.e. 15% of total approvals. During the same period, loans disbursed in favour of these countries totalled € 1.6 billion, or 13% of all disbursements made since 1990 (see also Table 4).

3.2.e.1. Health

The CEB finances various types of projects concerning health and related infrastructure, such as public or private hospitals and medical service infrastructure. Vulnerable populations are given particular attention through home help programmes, the construction or rehabilitation of nursing homes for the elderly and welfare centres, as well as the alteration of premises in order to facilitate access both inside and outside. The Bank can also finance programmes involving the training of specialised staff in the social and health sectors.

Since 1990, CEB lending has amounted to more than € 1 billion in the health sector, with projects located in every target country with the exception of Georgia and Montenegro. Turkey received almost a third of the total amount. In absolute terms, CEB lending to the health sector has increased over the past 20 years and its relative share has remained quite stable over the period, with roughly 7% of the total approved. The CEB has implemented a significant number of health projects in conjunction with central government authorities (75%) and, to a lesser extent, with local authorities and via the local banking sector.

CEB support focused mainly on infrastructure investments through (i) large programmes involving hospital construction or rehabilitation in Albania, Cyprus, Malta, Moldova and Turkey, and (ii) smaller projects in favour of specialised infrastructure for vulnerable populations, such as the elderly (Lithuania), children, mainly in Romania, persons with disabilities in Hungary, Lithuania, Romania, the Slovak Republic and “the former Yugoslav Republic of Macedonia”.

Other projects have contributed to modernising or restructuring national health care systems, like those in Bosnia and Herzegovina and Bulgaria. The CEB has also participated in the rehabilitation, modernisation and equipment of health care facilities - hospitals, clinics, day care centres - throughout Croatia and “the former Yugoslav Republic of Macedonia”, in order to bring the nation’s health infrastructure up to par with European norms and provide local populations with health services in line with modern practice, quality and standards.

3.2.e.2. Education and vocational training

The CEB takes action at different levels of the education system, whether it be in pre- and primary schools, secondary schools or universities. The Bank finances the construction and modernisation of school and university establishments, including sports and cultural equipment, housing for school and university students; vocational training infrastructure as well as the provision of teaching equipment. The CEB can also finance public or private investments involving research and development. Furthermore, the Bank finances programmes providing assistance in the training of specialised staff in the social and education sectors; the unemployed and disadvantaged populations; professional reconversion in declining economic sectors; natural or ecological disaster prevention for members of the civil protection forces; and magistrates, administrators, civil servants and government officials.



Since 1990, loans approved have totalled around € 1.3 billion in the field of education, with investments geographically widespread within the target group. Cyprus (almost 30%) and Romania (14%) are the two main borrowers for education, representing nearly 45% of the total approved in this sector. Other projects are located in Central Europe (close to 30%), Western Balkans (20%), the Baltic States (5%) and Turkey (2%). The relative share of CEB lending to target countries in this sector has decreased over the whole period and today represents a relatively stable level of 7%. On the other hand, taking into account the geographic distribution of the CEB’s total education lending, the Bank allocated about 30% of the total to its target group, with the most significant share of 52% during the sub-period covering 2003-2007.

In the target group, the CEB supported infrastructure investments at all education levels: from kindergartens in Bulgaria and Romania to higher education in Cyprus, Poland or Serbia. In line with its social focus, the reconstruction of schools in war-affected areas has been addressed in Croatia and Bosnia and Herzegovina. Romania and “the former Yugoslav Republic of Macedonia” requested support to develop their sport halls and physical education facilities. More recently, the CEB has approved financing for the construction, rehabilitation and equipment of state-owned secondary school and university dormitories and for the professional development and training of teachers and staff in Serbia.

While the CEB’s support has traditionally focused on investments in infrastructure and equipment, the scope of activities has recently been enlarged to address, as in the case of Cyprus, the introduction of Information and Communication Technologies (ICT) in schools, including the training for teachers. Co-financed with the World Bank and the EIB, a very ambitious project in Albania addresses the overall reform of the education sector, at all education levels, including the construction and rehabilitation of school infrastructure, professional development for teachers, ICT investments and institutional capacity building.

To a very large extent, the CEB has implemented its education projects with central governments within broad national sectoral policies. The Bank has also diversified its portfolio and financed a number of multi-sector projects with an education component through “transit loans”, together with KfW Bankengruppe, Intesa Sanpaolo and SEB, with local authorities in Poland and the local banking sector in Bosnia and Herzegovina, Hungary, Poland and Slovenia. A number of large-scale education programmes have also been implemented in co-operation with other international financial institutions, namely the EIB and the World Bank, for a total amount of € 375 million, located in Albania, Cyprus and Romania. Furthermore, several projects have been co-financed with EU Structural Funds, in particular in Hungary and Poland.

3.2.e.3. Infrastructure of administrative and judicial public services

Conditions in penitentiary centres, in particular in target countries, are often in flagrant contrast to international standards, as embodied in the Council of Europe’s “European Prison Rules”4. Overall, investment needs remain substantial across CEB Member States in order to address the need for the construction and refurbishment of courthouses and upgrading of physical and technical infrastructure of judicial service units. In addition, important deficiencies exist in the capacity of prisons, creating problems in terms of overcrowding, inadequate health/psychiatric services and lack of sufficient communal facilities and activities. It is therefore crucial to bring detention centres up to international standards respectful of basic human rights.

Modernisation of infrastructure for administrative and judicial services is a recent focus for the Bank’s operations. It was in 2007 that the CEB started its first investments in this sector within municipal multi-sector programmes in Poland and Slovenia, following the Third Council of Europe Summit (Warsaw, 2005), where the Bank was asked to assist its Member States in improving their judicial public service infrastructure.

The Bank’s support for projects in this field evidences its originality as a lending institution under the supreme authority of the Council of Europe.

4 Recommendation Rec(2006)2 of the Committee of Ministers adopted on 11 January 2006 at the 952nd meeting of the Ministers’ Deputies



Overall, the Bank has built up a loan portfolio of € 215 million for the financing of administrative and judicial public services in the region, namely in Bosnia and Herzegovina, Croatia, Georgia and “the former Yugoslav Republic of Macedonia” for prison infrastructure, and in the Baltic States, Hungary, Poland and Slovenia within municipal multi-sector programmes.

In the years to come, the CEB intends to further develop lending operations in this sector. A sizeable number of projects in target countries are currently under preparation. The Bank can provide specific input to the relevant authorities in the preparation and implementation phases of construction or rehabilitation of prison facilities. Technical assistance will have to be provided to cover a whole array of specific requirements identified in the “European Prison Rules” and concerning, for instance, the minimum space per detainee, security, medical care, and reinsertion programmes; all these and others must be taken into consideration for this specialised type of infrastructure.

Although it is an important pre-requisite for improved prison administration and better organisation and functioning of administrative and judicial public services, modern prison infrastructure is only one element contributing to humane conditions and the positive treatment of prisoners. Another is prison staff training and development. This is why the Bank also intends to pursue close cooperation with the Council of Europe, especially its European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment (CPT), to discuss possible projects in this sector. In addition, placing appropriate emphasis on creating adequate capacity for inmate activities and their rehabilitation programmes is also an important element in project set-up, in order to create improved conditions for the future re-socialisation of inmates and thus enhance security for the wider community.

FIN

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The geographic deployment of CEB activities in the target group countries has progressively brought about two trends:

diversification of the CEB’s public and private borrowers (section 3.3.);

development of new lending and non-lending instruments (section 3.4.).

3.3. Public and private borrowers

In terms of public/private distribution of the CEB’s counterparties, the breakdown over the twenty-year period 1990-2010 was 75/25. When considering this breakdown per five-year sub-periods, there has been a noticeable increase in CEB lending in favour of private counterparties, spread over a growing number of banking and other financial institutions. The development of lending to the private banking sector started in the target group in the mid-1990s, with a significant share of CEB loans to banks in the target countries guaranteed by their respective governments. These loans therefore appear in the statistics as “public borrowers” (ex. Croatia, Hungary, Latvia, Turkey).

Lending to local banking sectors significantly developed during 2000-2004, in particular thanks to sharp and rapidly-growing SME financing. It reached its peak in 2005-2009, with 35% of total CEB lending to private borrowers in the target group. Moreover, “transit loans” extended through Western European banks have also contributed to the development of the private sector share in CEB lending in the target countries, mainly for SME financing, and to a lesser extent, for municipal infrastructure investments. In the last two years 2010-2011, although reduced, a significant 28% share of new CEB lending went to local banking sectors.

Table 6: Public/private distribution of CEB borrowers in target countries (1990-2011)

Projects approved in favour of Target countries

1990-1994 1995-1999 2000-2004 2005-2009 2010-2011

M€ % M€ % M€ % M€ % M€ %

Public borrowers 1,863 100 1,443 98 2,897 72 4,624 65 1,832 72

Central governments 1,838 99 1,403 95 2,804 70 3,348 47 1,205 47

Regional & Local authorities 25 1 0 0 0 0 531 8 267 11

Public development banks 0 0 40 3 93 2 745 10 360 14

Private borrowers 0 0 28 2 1,129 28 2,517 35 717 28

Local banks 0 0 23 1.5 304 8 1,106 15 709 28

“Transit loans” 0 0 5 <0.5 825 20 1,411 20 8 <0.5

TOTAL TARGET COUNTRIES 1,863 100 1,471 100 4,026 100 7,141 100 2,549 100

Relative share (% as of total projects approved)

50% 16% 44% 60% 58%

Over the whole period, the Bank’s exposure on public borrowers has been considerable, going from 100% in 1990-1994 to 65% in 2005-2009 and up to 72% in 2010-2011. Lending to regional/local authorities in target countries came at the same time as the decentralisation process in the 2000s. To a large extent, CEB loans to local administrations were covered by a sovereign guarantee. It was only after 2005 that the CEB extended loans directly to local authorities, with 8% of total approvals during 2005-2009 and 11% in 2010-2011, the highest rate since 1990. One should note that this high share of public borrowers, as much as 72% of the total, in 2010-2011 includes 14% of total loans granted to public development banks covered by a sovereign guarantee. This can also explain the reduced exposure on the banking sector in 2010-2011, in comparison with the previous five-year period 2005-2009.

Graph 9 illustrates this redistribution in CEB lending to public and private borrowers since 2008 in a challenging crisis environment. On the one hand, CEB lending to private borrowers reached substantial volumes in 2008, but was considerably reduced over 2009-2010, especially in favour of local banking institutions. Similarly, the CEB saw a strong decrease in lending through “transit loans”, i.e. to Western European banks for projects in target countries, during the same period. On the other hand, the CEB lent substantial volumes to public borrowers, including domestic development banks, during 2009-2010. The year 2011 shows a more balanced



distribution between public and private borrowers, with a higher share of new loans granted to local banking sectors than during 2009-2010. Moreover, 2011 did not see any new lending through “transit loans”.

Graph 9: Public/private distribution of CEB borrowers in target countries (2005-2011)

3.4. Developing new lending and non-lending instruments

Over the years, traditional lending instruments have constituted the main tool for the CEB’s action in the target group countries. Indeed, CEB support has primarily been channelled through the provision of flexible long-term loans at favourable interest rates. However, the CEB has been able to diversify its financing instruments. Firstly, “transit loans” have represented an additional means of action to develop CEB activities in target countries, while improving the lending risk profile. Secondly, the CEB has introduced subsidised loans through the Selective Trust Account in very specific cases involving the CEB’s statutory priorities and the most fragile countries. Thirdly, the CEB has implemented joint project activities with the European Union and other international financial institutions active in its countries of intervention (see Chapter 4).

Moreover, the CEB has progressively developed various grant financing facilities in target countries. As a complement to the favourable financing conditions provided on its loans, the Bank can also offer its “non-lending instruments”, mainly in the form of technical assistance. This can be funded either from different CEB trust accounts or via various EU grant facilities.

In concrete terms, the CEB can open and manage trust accounts (or trust funds) to receive voluntary contributions from its Member States, from the Bank and from the Council of Europe. Trust accounts constitute a very important additional means of action for the CEB and contribute to enhancing the social added value of its operations. In effect, the use of these accounts has proven to be of major interest for the appraisal and preparation phases of increasingly complex projects, primarily in favour of the 21 target group countries, as well as for the accompanying measures during their implementation.

Today, the CEB has three different sources of grant financing:

- Selective Trust Account (STA), set up in 1995, to provide interest rate subsidies on loans extended by the Bank for projects with high social value added or to grant donations, in eligible countries in the target group. Since 1995, CEB Member States have contributed almost all of its funding directly via transfers from the Bank’s annual profits, nearly € 100 million. This amount has enabled the approval of loans bearing subsidised interest rates totalling around € 2 billion and donations totalling € 14 million.

- Various bilateral Trust Funds, opened with the CEB on behalf of individual donor countries (Finland, Norway, Spain, etc.), used for technical assistance for the identification, preparation and/or implementation of projects in the target group countries (developed in the next chapter, in section 4.2).

- EU grant facilities for pre-accession, candidate, potential candidate and neighbourhood countries (developed in section 4.1).

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011

“Transit loans”

Local banks

Public development banks

Regional & Local authorities

Central governments



Box 5 - Supporting sector policies in target countries

As a further example of the Bank’s co-operation at European level and its contribution to supporting policies and reforms in target countries, the CEB has organised different high-level events within its mandate and published a series of publications, available on the CEB’s website www.coebank.org, on various social issues and challenges in these countries.

As far as the housing sector is concerned, the CEB organised, with the World Bank, a Ministerial Conference (Paris, 2003) for the promotion of socially sustainable housing policies in South Eastern Europe, in particular as regards refugees and vulnerable populations. As a follow-up to the conference, a sector report on “Social housing in South Eastern Europe – Solving a puzzle of challenges” was published in 2004 in collaboration with the World Bank. In 2005, a report study on “Trends and progress in social housing reforms in South Eastern Europe” was published in co-operation with the United Nations Economic Commission for Europe (UNECE) and the Council of Europe. Finally, the CEB financially contributed to a study “Housing policy reforms in post-socialist Europe: Lost in transition” (2009), which explores the impacts of housing reforms on housing system performance in post-socialist countries during their transition to democracy and the market economy. In 2010, the CEB published a study “Sustainable Housing and Urban Development: the CEB’s Contribution” describing and analysing its specific approach and experience in financing projects in this field.

In the health sector, the CEB has been part of the efforts to foster the provision of health services in particular in SEE. The CEB, the Council of Europe and the World Health Organisation (WHO) jointly organised the Second Forum of Health Ministers (Skopje, 2005). Following on from the conference, the joint CEB/WHO report entitled “Health and economic development in South Eastern Europe” (2006) highlighted the close links that exist between economic performance and public health. The CEB also contributed, through its Norway Trust Account, to the implementation of the assessment of public health services performance in the SEE region. The results of this work are presented in the joint WHO/CEB publication “Evaluation of public health services in South Eastern Europe” (2009). This study marks an important step forward in understanding the challenges faced by the countries of the region in reforming and developing their health systems, as well as the opportunities available to them for improving the health of their populations.

Within the framework of the CEB’s statutory priorities, the CEB was one of the founding international partner organisations of the “Decade of Roma Inclusion 2005-2015”. The Decade is a political commitment by governments in Central and South Eastern Europe to improve the socio-economic status and social inclusion of Roma, following on from a regional conference “Roma in an Expanding Europe” (Budapest, 2003), jointly organised by the World Bank, the Open Society Institute (Soros Foundation), the European Commission and the CEB.

The CEB was also invited to share its longstanding experience by participating, as a co-sponsor, in the OECD workshop entitled “The Future of International Migration to OECD countries” (Paris, 2008), where the CEB presented a study “Migration in Europe: the CEB’s experience” (2008). This study provides a comprehensive account of the Bank’s experience to date in financing projects in favour of refugees, displaced persons or migrants, including those financed in target countries over the last twenty years.

In the field of natural disasters, the CEB strives to provide appropriate responses to the most urgent needs and to the necessity to undertake sustainable action in a long-term perspective of prevention. One cannot help but observe that natural disasters are increasingly frequent phenomena in Central and Eastern Europe. It is therefore all the more important to develop preventive measures, while improving the quality of projects through the learning effect of monitoring and ex post evaluation. It is with this in mind that the conference “Disaster Risk Management: Taking Lessons from Evaluation” (Paris, 2006), jointly organised with the World Bank’s Independent Evaluation Group, brought together a great variety of multi- and bilateral organisations and NGOs to share their experience in the evaluation of disaster projects, programmes and policies.


CO-OPERAT ION MECHANISMS : PARTNERS & DONORS 42

4. CO-OPERATION MECHANISMS: PARTNERS & DONORS

Since the mid-1990s, the CEB has conducted a policy of co-operation with international institutions, first and foremost the European Union, United Nations (UN) specialised agencies and other international financial institutions (IFIs). Through this policy of partnerships, the CEB has been able to widen its scope of action, leverage its expertise and affirm its specific nature as a social development bank in Europe.

The CEB has implemented various co-operation mechanisms for project and grant financing activities in the target group countries. The nature of these partnerships, theirs objectives and results will be detailed in this chapter. In total, over the past two decades, the CEB has financed € 5 billion in loans through various co-operation mechanisms in the target group countries and provided some € 20 million in grants either to respond to emergency and highly social situations, or to finance technical assistance via trust accounts funded by donors.

Such collaboration aims to better respond to the demand for financing in target countries, through complementary contributions that maximise the impact of each partner’s capacity and expertise. Partnerships are particularly relevant in the target group countries, where the demand for social investments is high and often requires the blending of loans with grants or the provision of technical assistance. In such cases, co-operation minimises project-related risks and creates a financial leverage effect, which contributes to the successful implementation of ambitious projects.

4.1. Co-operation with the EU – a strategic orientation for the CEB

Co-operation between the CEB and the EU in the target group countries has grown substantially over the last years, due to increasing geographic and operational synergies.

On the one hand, geographically, the EU’s field of action coincides more and more with CEB’s area of operations as a result of EU enlargement from 15 to 27 member states between 2004 and 2007, as well as with other South Eastern European countries, which are simultaneously CEB members and EU candidates, potential candidates or neighbours.

On the other hand, co-operation with the EU and, under its auspices, with other international organisations, allows the CEB to provide its Member States with a higher value added. In fact, the Bank can use EU grants to offer better lending conditions or to fund technical assistance. Additionally, this co-operation ensures a better share of roles with other financial institutions that collaborate with the EU, leveraging their respective skills and avoiding duplications.

40 CEB Member States which are also:

EU Members States

Members of EFTA/EEA

EU (potential) candidates

EU Neighbourhood countries

CEB TARGET COUNTRIES



4.1.a. Pre-accession assistance: taking part in the EU enlargement process

The CEB has been accompanying the EU enlargement process since the beginning of the 2000s in order to promote the legislative alignment of candidate and potential candidate countries and the economic and social development of the new EU Members. Concretely, CEB co-operation with the EU in target countries has consisted in a combination of CEB loans and EU pre-accession instruments and, after 2004, for those countries that joined the EU, in co-financing with EU Structural Funds in favour of new EU members (see 4.1.c. Co-financing with EU Structural Funds).

Historically, the CEB signed the first general Memorandum of Understanding (MoU) on cooperation for pre-accession preparation of Central and Eastern European countries with the European Commission and other IFIs on 30 March 2000. The main objective was to reinforce co-operation among the institutions in the countries, to coordinate the available financial support and to facilitate co-financing with EU pre-accession instruments, including PHARE (a programme of Community aid to the countries of Central and Eastern Europe), CARDS (Community Assistance for Reconstruction, Development and Stabilisation) and MEDA (financial and technical measures to accompany the reform of economic and social structures in the Mediterranean region, namely in Cyprus and Turkey).

On 11 April 2006, the CEB signed an amended MoU with the European Commission and partner IFIs, on co-operation in (i) economic development in the new EU Member States in Central and Eastern Europe, Cyprus and Malta, and (ii) EU accession preparation in candidate or potential candidate countries. This MoU set a legal framework for CEB co-financing with EU Structural Funds and with the Instrument for Pre-accession Assistance (IPA), which replaced all the previous instruments after 2007.

On this legal basis, since 2000, CEB co-financing with EU pre-accession funds has amounted to around € 1 billion, involving nearly € 300 million in EU grant facilities. The Bank co-financed a substantial € 632.4 million share of these projects within a tripartite MoU signed on 11 December 2000 between the CEB, KfW and the European Commission. This co-operation led to the implementation of various projects in target countries, under several contribution agreements, namely the SME Finance Facility (SMEFF, co-financed with PHARE and MEDA funds) and the Preparatory Action Programme (PAP) for SME financing, the Municipal Finance Facility (MFF, co-financed with PHARE), and the Small Enterprises Loan Programme (SELP II) implemented in Turkey. Since 2007, the CEB and KfW have also co-operated on several IPA projects in Southern Europe, under the Energy Efficiency Finance Facility (EEFF) in Bulgaria, Romania, Turkey and the Western Balkans, and under the Municipal Window of the Infrastructure Project Facility (IPF-MW) in Albania, Bosnia and Herzegovina, and Serbia. The new MoU signed on 26 October 2010 provides a framework for further co-operation between the CEB and KfW.

The CEB’s recent participation in the Western Balkans Investment Framework (WBIF, see Box 6 for detailed information) comes within the framework of the MoU on Enlargement Policy signed in April 2006. Officially launched on 9 December 2009 in Brussels, the WBIF is a coordination system aimed at facilitating access to European financings for the countries in the Western Balkans. It combines loans from the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the CEB with grants from the EU, Member States and the three above-mentioned institutions within the framework of their respective procedures. This initiative aims to further strengthen co-operation between the CEB and the EU in upcoming years, in a region that has become a priority for both institutions.



Box 6 - Western Balkans Investment Framework

Officially launched in December 2009, the Western Balkans Investment Framework (WBIF) is a joint initiative of the European Commission together with the Council of Europe Development Bank (CEB), the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) (collectively referred to as “partner IFIs”), endorsed by the European Council. It is an innovative financing initiative which pools grant resources in order to leverage loans for the financing of priority infrastructure in the Western Balkans.

Geographical scope

Projects receiving a grant contribution from WBIF must be on the territory of one or more of the following beneficiaries in the Western Balkans: Albania, Bosnia and Herzegovina, Croatia, “the former Yugoslav Republic of Macedonia”, Montenegro, Serbia and Kosovo (under UNSCR 1244/1999).

Sector priorities

Investment projects should support any sector that contributes to the economic, social and environmental development of the Western Balkans. Eligible sectors include infrastructure development within the environment, energy, transport and social sectors, and also private sector development (since 2011). Priority projects are defined and proposed by the beneficiaries.

Financing

The WBIF provides grant resources to projects likely to be supported by loans from the partner IFIs and other financing partners. Grants have the objective of preparing projects, accelerating existing loans or enabling projects by bridging a funding gap. The WBIF offers beneficiaries an integrated financial package for investment projects in priority infrastructure and for private sector development. These grant resources originate from: the EC Instrument for Pre-Accession (IPA); grant contributions from the CEB, the EBRD, the EIB and the World Bank (IBRD); and grant contributions from bilateral donors through the European Western Balkans Joint Fund (EWBJF).

Participating financial institutions and donors*

Multilateral IFIs: CEB, EBRD, EIB and the World Bank Group

Bilateral development finance institution: KfW Entwicklungsbank (KfW)

Donors: Austria, Czech Republic, Denmark, Finland, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Norway, Poland, Slovak Republic, Slovenia, Spain, Sweden and United Kingdom * Source: www.wbif.eu

Governance

The governing structures of the WBIF comprise the Steering Committee and the Project Financiers’ Group. The Steering Committee takes all decisions related to the Joint Grant Facility including project approvals and provides strategic guidance for the WBIF. The Project Financiers’ Group is responsible for screening and assessing requests for financial support from the Joint Grant Facility with the objective of establishing a pipeline of priority projects. During the first half of 2011, the CEB co-chaired the Project Financiers Group, together with the European Commission.

CEB involvement in the WBIF

Several CEB projects have benefited from this facility, in Albania, Bosnia and Herzegovina, Croatia, “the former Republic of Macedonia” and Serbia for a total amount approved of around € 340 million, involving € 56 million in WBIF resources (as at 31 December 2011). Furthermore, other CEB projects for a further amount of around € 130 million, involving € 14 million in WBIF resources, are currently under preparation.

Over its first two years, the WBIF has proved to be a very useful mechanism for increasing the financing capacity for investments in the region. Looking ahead, the CEB aims to further strengthen co-operation with the EU and participating IFIs in the region and intends to pursue its efforts to increase the number of social projects to benefit from WBIF financing.



4.1.b. The CEB’s contribution to the European Neighbourhood Policy

Other CEB target countries, namely Georgia and Moldova, are neither EU members nor potential candidates but “EU neighbouring countries”, which are eligible for the European Neighbourhood Policy (ENP). In recent years, the Bank has been reinforcing its co-operation with the EU to the benefit of these two countries, signing the MoU on Co-operation for Eastern Europe, Southern Caucasus, Russia and Central Asia, within the framework of the European Neighbourhood Policy and jointly with the European Commission and other IFIs on 13 July 2007.

In operational terms, the Bank also takes part in the Neighbourhood Investment Facility (NIF). Signed between the CEB, the European Commission and other IFIs on 14 December 2009, this facility comes under the MoU on the European Neighbourhood Policy.

Similar in its objectives to the WBIF, the NIF aims to combine loans from the CEB and other financial institutions with donations. The latter may be used to supplement or subsidise the aforementioned loans and through the provision of technical support to improve the preparation or implementation of the projects concerned. As of end 2011, the Bank approved one project under the NIF in Moldova for a total amount of € 9 million, involving € 3 million in EU grant resources.

The recent WBIF and NIF initiatives show a continuing strengthening of CEB/EU co-operation, through geographic and operational synergies that enable a better response to the region’s high demand for social financing. A further reinforcement of this collaboration can be foreseen, based on persisting social challenges in the EU candidate and neighbouring countries, which constitute a shared priority.

4.1.c. Co-financing with EU Structural Funds

Within the existing legal framework, the CEB has also co-financed a number of regional and municipal projects in the new EU member countries, with CEB lending as a complement to EU Structural Funds, in direct co-operation with national and/or local authorities. Since 2004 loans approved by the CEB in this context total around € 1.5 billion, involving an estimated amount of around € 4 billion in EU Structural Funds, implemented in the Baltic States, Cyprus, the Czech and Slovak Republics, Hungary, Poland and Slovenia.

In order to further enhance its operations in urban development, on 30 May 2006 the CEB signed a tripartite MoU with the European Commission and the EIB, which defines a co-operation framework for the implementation of the European Union’s integrated urban development policy for the Community Structural Funds programming period 2007-2013. Subsequently, the JESSICA Initiative was launched by the European Commission with the support of the EIB, in collaboration with the CEB.

JESSICA stands for “Joint European Support for Sustainable Investment in City Areas”. It is an innovative way of using EU funding to promote sustainable investments and development in urban areas. Under the new procedures, EU Member States are given the option of using some of their EU grant funding, originating from the Structural Funds, to make repayable investments in projects forming part of an integrated plan for sustainable urban development. This initiative aims to more strongly (i) mobilise private capital for investment in urban development, (ii) increase the efficiency of public funding and (iii) create long-term financing instruments based on integrated concepts. The EU has thus created the possibility under this initiative of promoting and financing urban development projects using “revolving” instruments to make investments in the form of loans, equity and guarantees in lieu of one-time grants.

Within the JESSICA framework, CEB financing can be employed at various stages. First, managing authorities interested in starting up a JESSICA operation within their country or region can borrow from the CEB. In this way, the CEB can facilitate compliance with eligibility criteria for receiving the EU’s Structural Funds. Second, the CEB can lend to the selected Urban Development Funds, thereby enabling additional finance for investing in the final projects. The CEB can thus provide financial leverage in the way it is designed by the JESSICA financial



engineering mechanism. And finally, the CEB can directly contribute to the financing of individual JESSICA projects. CEB-financed urban revitalisation projects carried out within the framework of JESSICA include a project in Poland, approved for € 75 million in 2011 in favour of Bank Ochrony Srodowiska, which has been selected as one of the Urban Development Funds in Poland. A third of this loan is earmarked for projects under the JESSICA initiative in the Westpomerania region, more specifically for projects outside the Szczecin metropolitan area.

4.1.d. Other co-operation instruments under the aegis of the European Union

On 30 May 2006 the CEB signed the “Declaration of European Principles for the Environment”, which brings together the European Commission and five IFIs, i.e. the CEB, the EBRD, the EIB, the NIB, the Nordic Environment Finance Corporation, in a joint effort to implement the “fundamental right for both present and future generations to live in a healthy environment”. These principles provide a common approach to environmental management associated with the financing of projects, in order to promote sustainable development and to protect and improve the environment. They are defined as the guiding environmental principles in the EC Treaty and the practices and standards incorporated in EU secondary environmental legislation. This declaration concerns countries of operation of each signatory institution, in particular the Member States of the EU, the countries of the European Economic Area, the EU acceding, accession, candidate and potential candidate countries.

Lastly, the Bank, alongside the EU and other states and institutions, participates in the Regional Co-operation Council (RCC). This body, inaugurated on 27 February 2008, is the successor to the Stability Pact for South Eastern Europe, of which the Bank had been a partner since 2001. It has been set up to promote co-operation and European and Euro-Atlantic integration in south-eastern Europe, in order to foster its economic and social development.

4.2. The CEB and bilateral donors

Over the years, the CEB has developed several bilateral partnerships with donor countries, namely with Finland via the Finland Trust Account (FTA), Norway through the Norway Trust Account for the Western Balkan countries (NTA) and most recently, with Spain within the Spanish Social Cohesion Account (SCA). The CEB also co-operates with Norway, Finland, Netherlands and Germany through the Human Rights Trust Fund (HRTF).

The CEB can thus combine loans with grants from trust funds in complex or high-risk projects. This co-operation enables the Bank both to enhance its means of action and to better serve its social mandate, especially in favour of the Target Group countries.

On the one hand, combining CEB loans with grants from donor countries allows the CEB to:

- Increase the added value of its actions by using grants from donor countries to improve the preparation and monitoring of financed projects through technical assistance.

- Ensure the economic viability of social projects by more favourable financing conditions; in certain cases, without technical assistance, projects would have been delayed or maybe even never financed.

- Demonstrate its specificity (compared to other international financial institutions) as a social development bank acting in favour of disadvantaged populations and regions.

On the other hand, this collaboration offers several advantages to the donors such as:

- A bilateral trust account (or fund) allows the donor, in conjunction with the Bank, to focus on the specific type of social projects the donor country is most interested in supporting. Donor countries may thus pursue their political objectives in a context of multilateral visibility with the assurance of well-targeted projects. In the case of the CEB, this advantage is compounded by its specific social mandate, unique amongst IFIs. Indeed, a donor trust fund has a substantial leverage effect on social infrastructure as its grants will be combined with much higher CEB loans.



- The Bank’s streamlined procedures for project implementation ensure an efficient link between the donor and the final beneficiary as well as relatively short lead times between a decision on, and the actual provision of, technical assistance.

- The Bank’s procurement procedures ensure that donor funds are correctly allocated.

Furthermore, the Bank’s new Development Plan 2010-2014 has enshrined the strengthening of partnerships with donor countries as one of its strategic orientations, in light of the mutual benefits of this type of collaboration.

4.2.a. Finland Trust Account

Finland was the first country to set up a trust account with the Bank. The “Finland Trust Account” was created in 2001. It was endowed with € 168,000. Two thirds of this allocation financed technical assistance and project preparation in the Baltic countries, in particular in projects aimed at promoting gender equality, through increasing access to financing for women entrepreneurs in these countries. Furthermore, an amount of about € 60,000 from the Finland Trust Account contributed to the creation of a Roma Education Fund5 (2005), on top of the contribution of € 500,000 drawn from the CEB’s Selective Trust Account.

4.2.b. Norway Trust Account for the Western Balkans

Since November 2003, the CEB has administered an innovative assistance mechanism, the “Norway Trust Account” (NTA), set up on the initiative of the Norwegian Authorities, in order to provide important means for technical assistance and other measures for the preparation and implementation of CEB-financed projects in the Western Balkan countries. The NTA also provides means for different activities which, although important, were difficult to set up before either because of the small amount of investment required or because of the beneficiary’s limited loan absorption capacity.

By end 2011, the NTA had enabled support totalling € 3 million in the following eligible sectors: (i) facilitating the sustainable return/integration of refugees, displaced persons and minorities; (ii) job creation through SME and micro-credit schemes; (iii) reform of the security sector; and (iv) institution building. Around 60% of the allocated NTA resources were used for direct support to CEB projects (totalling around € 190 million of CEB loans), either for preparatory or feasibility works or to strengthen the implementation capacity of the institution or ministry in charge of the project in the beneficiary country.

Also, the NTA provided resources for additional activities not necessarily directly related to CEB lending activities, such as institution building, regional studies, organisation of workshops or training, which offered extra support to CEB-financed projects and increased their impact, while at the same time enhancing the CEB’s visibility.

Finally, NTA funds also made it possible for the CEB to participate in the substantial efforts by the international community for the region, through increased co-operation and partnerships with other international bodies and with non-governmental organisations, United Nations agencies such as the UNDP, the UNECE, the UN-Habitat, the IOM, the WHO, and other international organisations.

5 Jointly set up by the CEB, the World Bank and the Open Society Institute (Soros Foundation) in 2005, the Roma Education Fund (REF) is targeted to providing financial support, through grants, for the implementation of training and remedial learning projects for Roma of all ages. The creation of the REF came within the Decade of Roma Inclusion 2005-2015, which is a political commitment by governments in Central and South-Eastern Europe to improve the socio-economic status and social inclusion of Roma within a regional framework. The Decade focuses on the priority areas of education, employment, health, and housing, and commits governments to take into account the other core issues of poverty, discrimination, and gender mainstreaming. The CEB is one of the founding international partner organisations of the Decade.



4.2.c. Human Rights Trust Fund

To better enforce the decisions adopted at the 3rd Council of Europe Summit in Warsaw (2005), the CEB, Norway and the Council of Europe - with additional contributions from Germany, the Netherlands and Finland – in 2008, established a “Human Rights Trust Fund”, endowed in December 2011 with a total amount of € 6 million. This new instrument, aimed at supporting the consolidation of the State of Law and the European system of human rights protection in Europe, is devoted to financing technical assistance in favour of projects in this field.

4.2.d. Spanish Social Cohesion Account

Set up in September 2009 on the initiative of the Spanish Authorities, the “Spanish Social Cohesion Account” has been endowed with € 2 million by Spain. It serves to finance different project-related activities in the target group countries, such as technical assistance, feasibility studies, monitoring activities, institution building at borrower level, environmental and social impact assessment, sectoral studies, etc. that contribute to reinforcing the quality and the value added of the projects. By end 2011, the SCA had enabled preparation of five projects in Albania, Georgia, Moldova (2) and Serbia, totalling € 245 million in investments and involving € 133 million in CEB loans.

4.3. Long-standing partnerships with other International Financial Institutions

A strategy of closer partnerships woven over the past years with the other international financial institutions (IFIs) enables the CEB to capitalise on its expertise and increase its capacity for action, in particular for the benefit of the target group countries. This co-operation is based on complementary and constructive, rather than competitive, relations. Such collaboration fosters the sharing of expertise, ensuring a maximum impact of the joint action and avoiding duplication. Through these partnerships, the Bank thus ensures mutual benefits and a higher added-value of the projects.

Not only is the CEB associated with IFIs through several co-operation instruments signed under the aegis of the European Union, but it has also signed three bilateral co-operation agreements with, respectively, the European Bank for Reconstruction and Development (EBRD) in 1999, the World Bank (including the IDA) in 2000 and the Nordic Investment Bank (NIB) in 2002. In addition, on 2 June 2008 the CEB and the EIB signed a “Joint Statement on Co-operation”. This statement is a consecration of the long-standing co-operation between the two institutions and is also aimed at defining the modalities for future co-operation between the Banks.

This framework for co-operation facilitates the implementation of joint operations with other IFIs. Over the past twenty years, the CEB has approved over € 1 billion in co-operation with the World Bank for projects implemented with national authorities in Albania, Bosnia and Herzegovina, Bulgaria, Cyprus, Poland, Romania, Slovenia and Turkey, two thirds of which were invested after the signing of the agreement, in 2000. The CEB has also organised, jointly with the World Bank, several international conferences (see also Box 5), including one on social housing in South Eastern Europe (2003) and another on natural disasters (2006).

In addition, CEB loans in favour of projects co-financed with the EIB, over the past two decades, amounted to around € 3 billion in Albania, Bulgaria, Croatia, Cyprus, Hungary, Latvia, Poland, Romania, Serbia, Slovenia and Turkey.

Finally, the CEB participates as an observer in the meetings of the Development Committee of the World Bank and the International Monetary Fund. The CEB also has close relationships with other multilateral development banks such as the Inter-American Development Bank and the Asian Development Bank.



4.4. Enhancing collaboration with UN agencies

The CEB has developed valuable co-operation with UN agencies, in highly social projects in favour of the most vulnerable population groups. In order to facilitate this collaboration, the Bank has concluded bilateral agreements with UN agencies active in the CEB’s Member States:

- United Nations High Commissioner for Refugees (UNHCR) in 2005, renewed and amended in 2008;

- United Nations of International Children’s Emergency Fund (UNICEF) in 2006, amended in 2008;

- United Nations Development Programme (UNDP) in 2007, renewed in 2011.

These agreements endorse the long-standing co-operation that exists between the CEB and the UNHCR, UNICEF and UNDP, whereby the Bank contributes, through its grant resources, to financing projects initiated by these specialised agencies.

As of end 2011, the CEB financed grants, via its Selective Trust Account, for a total amount of close to € 9 million in favour of projects in target countries in the fields of aid to refugees, migrants and displaced persons, education and health, implemented by the:

- UNHCR in Albania, Bosnia and Herzegovina, Georgia, Montenegro and Serbia,

- UNICEF in “the former Yugoslav Republic of Macedonia”, Georgia and Moldova,

- UNDP in Bosnia and Herzegovina, “the former Yugoslav Republic of Macedonia” and Georgia.

Furthermore, the Bank maintains close collaboration with other UN agencies active in its fields of action including, in particular, the World Health Organisation (WHO), International Organisation for Migration (IOM), United Nations Human Settlements Programme (UN-Habitat) and United Nations Educational, Scientific and Cultural Organisation (UNESCO).

4.5. Perspectives for co-operation with the European Union and donor States

Efforts to intensify co-operation with other financial and non-financial international institutions, either in the form of joint operations or through the exchange of expertise and best practices, should enable the CEB to increase the added value of its actions, especially for the benefit of vulnerable groups of population.

In particular, the CEB will continue to increasingly seek to:

- develop co-financing opportunities with the European Union through EU Structural Funds in EU-27 countries; EU grant facilities for pre-accession, candidate, potential candidate and neighbourhood countries; JESSICA initiative, as well as further opportunities for co-operation under the aegis of the EU, with the other IFIs active in its countries of intervention;

- strengthen co-operation with individual donor countries, and thereby increase external sources of financing for technical assistance.

Combining CEB financing with EU grants will provide the CEB with opportunities: (i) to offer more advantageous financial conditions, when EU grants are used to subsidise interest rates on CEB loans, and (ii) to increase the added value of its actions, when EU grants are used to improve the quality of projects financed through the provision of technical assistance. These resources will thus be complementary to CEB financing for programmes that require important levels of investments. As co-operation with the European Union will be strengthened over the foreseeable future, the space for projects combining CEB loans with EU financial resources will widen.

Last but not least, the CEB will also be paying particular attention to reflections and discussions on better collaboration and effectiveness among the actors in development on the European scene.


50

Box 7 - Inter-institutional relations: CEB co-operation instruments

Over the last years, the CEB has worked to intensify relations of cooperation that it has fostered with the European Union in order to strengthen its means of action and expertise. In doing so, it is highlighting its specific nature as a social development bank working for disadvantaged populations and regions within the international community.

To this end, the nature of the intended relationship has, in priority, been aimed towards implementing projects in partnership and, in particular, in the form of co-financing and/or by parallel financing, sharing complementary expertise by way of the exchange of best practices and giving ample consideration to the social dimension of the projects.

In this environment, in addition to its natural links with the Council of Europe, the CEB has become a highly valued partner for the European Union and is working in cooperation with other IFIs as well as United Nations specialised agencies in fields of common interest.

Co-operation instruments with the European Union

Memoranda of Understanding concluded with the European Commission

Co-operation for Eastern Europe, Southern Caucasus, Russia and Central Asia, within the framework of the European Neighbourhood Policy – signed on 13/07/2007. Cosignatories: European Commission, BSTDB, EBRD, EIB, IBRD, IFC, NIB

Neighbourhood Investment Facility (NIF) Framework Arrangement – signed on 14/12/2009. Cosignatories: European Commission, AFD, EBRD, EIB, KfW, NIB, OeEB, SIMEST, SOFID

Coordinated approach to financing urban regeneration and development (including within the framework of JESSICA) for the Community Structural Funds programming period 2007-2013 – signed on 30/05/2006. Cosignatories: European Commission, EIB

Economic development in the new European Union Member States in Central and Eastern Europe, in Cyprus and in Malta, and preparation for EU accession by candidate or potential candidate countries – signed on 11/04/2006. Cosignatories: European Commission, EIB, EBRD, IBRD, IFC, NEFCO, NIB, BSTDB

Declaration in respect of the Western Balkans Investment Framework (WBIF) – signed on 09/12/09. Cosignatories: European Commission, EU Presidency, EIB, EBRD

Other co-operation instruments signed under the aegis of the European Union

Declaration of European Principles for the Environment – signed on 30/05/2006. Cosignatories: EBRD, EIB, NEFCO, NIB

Regional Co-operation Council (RCC) – on 15/11/2007 CEB declared its readiness to cooperate with the RCC, successor since 27/02/2008 to the Stability Pact for South Eastern Europe of which the CEB had been a partner since 28/06/2001

Co-operation in the Central & Eastern European countries, including Turkey: signing of 18 tripartite contribution agreements with KfW and the European Commission on the basis of a MoU signed on 11/12/2000 with KfW

Co-operation instruments with financial institutions

ADB: General co-operation – signed on 25/09/2011

KfW: General co-operation – signed on 25/10/2010

EIB: Joint statement on co-operation – signed on 02/06/2008

NIB: General co-operation – signed on 15/01/2002

IBRD, IDA: General co-operation – signed on 30/05/2000

EBRD: General co-operation – signed on 05/05/1999

Memoranda of Understanding with UN specialised agencies

UNDP: General co-operation – signed on 03/09/2007, renewed on 24/03/2011

UNICEF: General co-operation – signed on 20/12/2006, amended on 17/10/2008

UNHCR: General co-operation – signed on 24/02/2005, renewed and amended on 31/10/2008

CO-OPERAT ION MECHANISMS : PARTNERS & DONORS


SOCIAL IMPACT OF CEB F INANCING 51

5. SOCIAL IMPACT OF CEB FINANCING

The CEB enjoys a unique position among financial institutions with a development focus. Founded in 1956, it is the oldest multilateral financial institution in Europe. By virtue of its Articles of Agreement and its purpose, the CEB is the sole IFI exclusively concerned with social matters and giving priority to financing social projects, especially in favour of the most vulnerable populations. Its approach addresses the entire range of social issues and challenges confronting its member countries. Beyond offering a source of long-term financing on favourable terms, projects funded by the CEB help create tangible possibilities of access to social rights and basic social services and therefore foster social cohesion in its member countries. With its unique mandate, the CEB is “the social development bank in Europe”. Along its sectoral lines of action, the CEB contributes to the implementation of social investment projects. Within the European continent, characterised by significant and still rising disparities between regions, CEB lending can be considered as an important catalyst for investment in social development at local level.

5.1. The added value generated by CEB activities

Overall, CEB lending is demand-oriented and based on the borrowers’ needs. However, the value added by CEB activities goes further than providing long-term loans on favourable terms for the borrower, i.e. “financial added value”. CEB projects have not only material added value by responding to the lack of infrastructure but also a qualitative aspect and a strong “social impact” through improved living conditions and enhanced integration into society of the final beneficiary groups. Over and above loans, the CEB also provides sectoral expertise and delivers assistance, monitoring and support at all stages in the project cycle, i.e. “non-financial added value”.

Projects are the Bank’s principal means of creating added value. CEB projects financed through long-term loans on favourable terms constitute an important contribution by the Bank to the social development of its Member States. In deciding to fund a project on the best possible terms, the Bank aids the pursuit of a social objective and seeks, together with the borrower, to improve a particular situation. Funds raised on the capital markets are used to achieve social objectives and are invested in fields on which the market usually does not focus.

The CEB co-operates with national, regional or local authorities and also takes action through intermediary banks competent in the funding of eligible projects. The aim of the CEB’s activities, particularly in the target group countries, has been to aid reforms establishing a market economy together with respect for social rights. This first and foremost entails improving the terms offered by the Bank for the financing of eligible social projects, thereby encouraging the tangible implementation of social policies.

At national level, the work of preparing social projects necessitates co-operation between the ministries responsible for the different sectors concerned and finance ministries. The development of a social project thus helps to foster inter-ministerial dialogue within each country. The Bank is increasingly working hand in hand with regional or local authorities, in particular in target countries, whether directly or through financial intermediaries. This form of partnership develops close contacts between local authorities and end-beneficiaries to generate added value at local level.

Working with the banking sector allows the CEB to help ensure the continuing availability of financing for social projects regardless of market volatility and risk sensitivity. Moreover, the favourable loan terms provided by the CEB, which the intermediary banks undertake to pass on to end-beneficiaries, can serve as an incentive for increased involvement of the banking industry in the social sector. Last but not least, the Bank develops its activities in the target group countries in close co-operation with the EU, other IFIs and international organisations (as described in chapter 4) and therefore plays an important role in international co-operation and coordination to foster social development in these countries.



5.2. Measuring the social impact: methodology and assessment

When evaluating the impact generated by CEB activities, it is crucial to consider it across social, economic and environmental dimensions.

First, the main purpose of CEB projects is to improve living conditions/standards and the integration into society of a population group in a sector-specific and/or region/country-specific situation. CEB projects have clearly set social objectives, on the one hand, and the relevant quantitative social indicators to measure the level of satisfaction of the needs concerned before and after the project, on the other. Therefore, the starting point for the CEB in designing a project is to determine the needs of the population, which in turn is the reference point for impact evaluation, which assesses whether the completed project has satisfied the needs of the targeted final beneficiaries. In this perspective, evaluating the social impact offers the Bank a vector for efficiency and a means for improving the quality of future projects.

Basically, CEB projects have to be in conformity with the political and social aims of the Council of Europe. In particular, they must respect the provisions contained in the “Convention for the Protection of Human Rights and Fundamental Freedoms” and the “European Social Charter”. For each project, the Opinion of Admissibility issued by the Secretary General of the Council of Europe ensures the coherence of the CEB’s operations with the orientations fixed on the occasion of Council of Europe Heads of State and Government Summits. Moreover, the Secretariat of the Partial Agreement of the CEB prepares each year an annual report on the social effects of projects completed during the previous year and transmits it to the CEB’s Organs6.

Second, the relationship between the financial resources employed and the social objectives to be achieved needs to be efficient in time and space. Also, the economic burden of CEB projects is to be shared out fairly and acceptable for the final beneficiaries, the institutions involved at all administrative levels or ultimately taxpayers.

Third, all CEB projects are designed and implemented in such a way as to optimise social and environmental benefits, minimise negative environmental impacts, and comply with appropriate environmental standards (cf. CEB’s Environmental Policy). The CEB does not finance projects which are likely to cause significant and irreversible negative environmental impacts and unable to meet the CEB’s environmental and social requirements.

Taking into consideration the priority given to social objectives within CEB projects, this section mainly focuses on the social effects of CEB projects, i.e. direct effects on end-beneficiaries targeted in the projects. The assessment will be carried out at micro-level on the basis of a sample of completed projects in selected sectors of action and selected target countries. It will focus on direct quantitative effects generated by the projects (such as number of dwellings built, number of new hospital beds available, number of schools built or rehabilitated, etc.) and qualitative effects (number of beneficiaries) through the improvement of living conditions at very local level. Particular attention will be paid to projects targeting the most vulnerable populations.

5.2.a. Strengthening social integration

Rental housing for low-income persons in Poland

Within the framework of the national housing programme in Poland, during 2001-2006, the CEB financed two projects totalling € 360 million, in co-operation with the Government and Bank Gospodarstwa Krajowego. The objective was to build and modernise more than 26,000 social dwellings for 80,000 dwellers in low- and middle-income groups, giving them access to decent and affordable housing in the regulated rental sector. The programme also aimed at introducing effective management methods and competition rules in the social housing rental market, assisting

6 Under Article VIII of the Articles of Agreement, the Bank is organised, administered and controlled by the following organs: the Governing Board, the Administrative Council, the Governor, and the Auditing Board. In accordance with Article XIII of the Articles of Agreement, the secretariat of the organs of the Bank is provided by the “Secretariat of the Partial Agreement on the Council of Europe Development Bank”, Council of Europe, Strasbourg.



local authorities in performing their legal obligation to provide decent housing and promoting labour mobility. The ex-post evaluation of this programme, carried out in 2007, was very positive and concluded that the CEB had contributed significantly to the new housing stock. According to the main evaluation findings, the programme was relevant, very effective in achieving its objectives and efficient in its management and cost control.

Municipal infrastructure in run-down rural and urban areas in Albania

Over the period 2001-2009, the CEB financed nearly € 4 million, through the Albanian Development Fund and in co-operation with the World Bank, to provide basic infrastructure services to a large number of villages and small towns, mainly in rural areas (84% of total areas). The project contributed to improving the daily life of 1/6 of the country’s population by providing better access to social and educational services. Local community works allowed for the completion of numerous sub-projects related to rural modernisation, rehabilitation of roads in poorly accessible areas, water supply, sewerage networks, as well as bridges and footbridges. This project thus directly benefited a broad range of citizens, contributing to poverty reduction and laying the foundations for stable development through social integration.

Blood transfusion safety programme in Moldova

With a loan of € 6 million, implemented during 2004-2011, the CEB contributed to strengthening the quality and efficiency of Moldova’s health care delivery by upgrading the supply, quality and safety of blood and blood products at all stages of the process from collection to transfusion. The project included four blood transfusion poles covering 330,000 patients per year needing blood transfusions: Balti Regional Transfusion Centre (North), Cahul Regional Transfusion Centre (South), National Blood Transfusion Centre in Chisinau covering the centre and the bulk of the country’s beneficiaries and finally the Transnistria region bordering Ukraine. In addition, in 2010, the CEB approved the introduction of a new component into the project: Secondary Plasma Fractioning.

Renovation of higher education and science establishments in Lithuania

Within the framework of the national school renovation programme, the CEB financed two projects totalling nearly € 9 million over the period 2002-2006 to rebuild and modernise buildings at 53 Lithuanian state higher education and science institutes. The programme was aimed in particular at: (i) energy saving measures and thereby cost savings; (ii) improving health and safety conditions in the buildings and (iii) improving living conditions in student dormitories. The works carried out have improved the living, working or studying conditions for over 130,000 persons throughout Lithuania.

5.2.b. Managing the environment

Post-flood rehabilitation along the Tisza River in Hungary

Between 1999 and 2009, the CEB financed € 90 million for the reconstruction (54% of total amount) and development of flood prevention infrastructure (46% of total) on the upper and middle Tisza River. The project concerned a protected area of 2,576 km2 with 166 settlements and 192,300 inhabitants, 117,300 of whom were directly endangered. The investment increased flood security in the upper Tisza region, making it more attractive to hold back population set for migration and to farming communities.

Reconstruction of the areas destroyed by the 1999 earthquake in Turkey

The CEB participated in the reconstruction of housing in the aftermath of a severe earthquake which occurred in the Marmara region in August 1999. The CEB contributed with almost € 370 million to the reconstruction of over 17,000 housing units either destroyed or seriously damaged by the earthquake. The aim of the project was to rebuild dwellings in accordance with anti-seismic standards. Within this project, Turkey received considerable international financial support and technical assistance, from the World Bank and the EIB among others.


54

Extension of sewerage infrastructure to the suburbs of Nicosia

Implemented with the Sewerage Board of Nicosia and in co-operation with the EIB, the CEB financed a € 101 million loan during the period 2002-2009 for the construction/extension of sewerage collection networks, pumping stations and treatment facilities in the Greater Nicosia Area. By providing infrastructure for waste water management, the project created better living conditions for all the inhabitants of the area and contributed to the promotion of sustainable development in the region. It is anticipated that by 2025, in addition to some 110,000 people currently served by the existing system, another 250,000 will have been connected.

Rehabilitation of the heating network in Bucharest

The CEB’s first energy efficiency operation in the housing sector in the CEE region was approved in Romania in 1997. The CEB contributed to the rehabilitation of the heating system network in Bucharest with a € 10 million loan to the Government in favour of the municipal operator of the Bucharest heating system distribution (RADET). This project allowed for the renovation of the heating system that was developed in the 1950s. The poor condition of old installations, lack of fuel and high network losses had been limiting the heat supply. A majority of the population living in the city sectors concerned had been suffering from this shortage and inefficiency, especially during the winter. The rehabilitation led to reduced energy losses, lower operating costs, higher energy efficiency and has largely increased the heat supply and its quality for 567,000 apartments and thus a vast majority of the population of Bucharest.

5.2.c. Supporting vulnerable population groups

Sustainable (re)integration of refugees and displaced persons in the Western Balkans

In Croatia, in collaboration with local authorities and UNHCR, the Bank supported the return and resettlement of some 27,000 refugees and displaced persons by financing the reconstruction of nearly 6,200 damaged houses and basic municipal infrastructure (€ 69 million, 2001-2005). The Bank also helped accelerate the process of repossession of occupied property by the rightful owners and the provision of alternative accommodation for eligible temporary users. The CEB thus participated in one of the most important housing programmes ever implemented in the Balkan region.

In Bosnia and Herzegovina, the CEB financed € 8 million during 2005-2010 to rehabilitate the housing stock damaged during the war in order to provide for sustainable return and contribute to the stabilisation of the return process of some 4,500 internally displaced persons then living in temporary accommodation (collective centres and alternative accommodation). The project was implemented in collaboration with UNHCR, national and local authorities. It also received significant support from the CEB’s grant resources.

Integration of Roma in Central Europe

The Bank’s action has also been oriented towards vulnerable migrant groups, especially Roma, one of the poorest communities in Europe. The CEB has financed several housing projects for Roma, for instance in Hungary (€ 5 million). Implemented within the framework of the “Decade of Roma Inclusion 2005-2015”7, the overall objective of the project was to promote the social integration of Roma by addressing the serious housing, education, health and employment problems of the Roma community. Investments were concentrated on the improvement of housing conditions through transfer to new dwellings, rehabilitation of the housing environment and improvements to related social and technical infrastructure, including the improvement of sanitary and environmental conditions. The “housing component” was implemented for the benefit of nearly 1,000 Roma families, in 36 municipalities, where segregated settlement problems were the most serious. Additionally, some 350-400 Roma civil society organisations and members of minority self-governments benefited from capacity building.

7 The Decade of Roma Inclusion 2005-2015 is a political commitment by governments in Central and South Eastern Europe to improve the socio-economic status and social inclusion of Roma within a regional framework. The Decade focuses on the priority areas of education, employment, health, and housing, and commits governments to take into account the other core issues of poverty, discrimination and gender mainstreaming. The CEB was one of the founding international partner organisations of the Decade.

SOCIAL IMPACT OF CEB F INANCING



Rehabilitation of infrastructure for the disabled and vulnerable children

Under the “National Programme for Improving the Living Conditions of People with Disabilities” implemented in the Slovak Republic over the period 2001-2006, the CEB contributed with a € 5 million loan to the construction and rehabilitation of buildings and infrastructure in 23 residential care centres that provide social services for nearly 1,700 people suffering hardship or social exclusion because of mental or physical disabilities. This project has proven to have a high social impact in the targeted vulnerable population. One of the most important results has been the improvement of living conditions for the targeted population and the possibility of creating a working space for the development of social and therapeutic activities.

Similarly, the CEB financed a € 10 million loan in favour of vulnerable children in Romania. Implemented over the period 1998-2007 with the Government of Romania and co-financed with the World Bank, the project involved the conversion of 37 existing residential care institutions (orphanages) for around 4,500 children in difficulty and disabled children into new community-based institutions, such as maternal, day care centres and family-style healthcare centres. Institutionalised children benefited from significantly improved living conditions and thousands of children at risk of being institutionalised and their families were supported in order to avoid child abandonment.

5.3. Main findings from the CEB’s experience in project financing

In light of past experience, this section attempts to review the main messages and findings and raises several issues related to the CEB’s financing policy. Overall, the results obtained proved the capacity of the CEB to fulfil its mandate of implementing social objectives via banking operations. This section will be followed by a more extensive chapter 6 summarising broader lessons learned and addressing the main challenges for the CEB in the years to come.

Integration within national sectoral policies

An important feature to be stressed is that CEB projects are, as far as possible, designed and implemented within national sectoral policies. The CEB’s role is not to define national policies, but to help implement them. The CEB thus contributes to existing policies which in turn provide a coherent framework for its operations. By channelling funds to eligible projects, the Bank makes possible the implementation of social policies. Experience shows that the socio-economic impact of the projects is closely determined by its integration into broader sector policies. Indeed, the existence of a sound legal and institutional sector framework and the alignment of the CEB’s activities with national strategies are particularly important in order to achieve sustainable project results.

Vulnerable groups

When targeting vulnerable groups, institutional arrangements and political commitment are crucial for the implementation of the projects on the one hand, and for the sustainable impact on beneficiaries’ living conditions and their social integration or revalorisation, on the other. Indeed, these projects can be difficult to implement due to reasons as diverse as lack of motivation to borrow for these categories of projects, lack of political support, local authorities’ lack of project experience, and the high risk of such projects in terms of sustainability.

Furthermore, in specific cases, such as complex and high-risk projects, CEB financing can prove to be essential for the launching and/or implementation of these projects. Indeed, without CEB financing, certain projects would have been delayed or maybe even never financed. The CEB’s involvement from the early stages of a project’s development can improve project design and facilitate implementation later on.

In the particular case of a number of grant-funded activities for the most vulnerable groups, in addition to the main project objectives, the CEB has indirectly assisted the beneficiary countries in the stabilisation process and contributed to a lasting reinforcement of institutional capacity at national, regional and local levels.


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Municipal investments

When supporting municipal investments, which often operate in decentralised contexts, the CEB provides support for a large spectrum of infrastructure such as housing, health, education, environment, historic heritage, administrative and judicial public services. In some cases, the broad scope of these projects can make it difficult to set them within the context of well-defined policies and to attain social objectives and targeted populations.

In the case of programmes implemented through commercial banks, the role of these intermediaries consists solely in selecting final borrowers, leaving implementation of investments within the responsibility of the final borrowers. Financial intermediaries focus on credit aspects and other creditworthiness-related considerations of the respective borrower, be it a private person or local authorities. In this case, it is essential to pay particular attention to the selection process of final beneficiaries so as to target the expected groups of population. Indeed, commercial banks are not necessarily the best intermediaries to incorporate the CEB’s specific eligibility criteria related to final beneficiaries. In addition, in certain cases, commercial mortgage loans do not guarantee either home-owners’ occupancy or the duration of the occupancy, two of the CEB’s eligibility criteria. Last but not least, the success of the projects is directly dependent on the quality of the management by the entities in charge of their implementation.

Infrastructure of administrative and judicial public services

Since 2008, the CEB has built up specific know-how in penitentiary infrastructure and significant experience in providing technical assistance for preparing projects for prison rehabilitation and construction. This includes expertise on working closely and effectively with external technical consultancy services funded through multilateral and bilateral donors and the CEB’s own funds. Experience to date shows that there are a number of key considerations for preparing sound projects in this sensitive sector. These include appropriate institutional arrangements for a timely and effective implementation of the projects, on the one hand, and compliance of the legal penal framework with international human rights policies and practices, and European Prison Rules, on the other. The CEB pays particular attention to these issues. In this regard, the Bank co-operates closely with the European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment. It is recognised that prison projects, and the CEB’s financing thereof, have an important impact on the sector, in terms of infrastructure and policies.

Sustainability

Ensuring the social, economic and environmental sustainability of CEB projects over the long-term is essential. Given the often complex institutional, economic and social factors surrounding project preparation and implementation, merely “transferring financial resources” would clearly not suffice to ensure the long-term viability of projects. The Bank therefore places strong emphasis on technical support during project preparation and on institutional capacity building. In practice, the Bank teams are closely involved in the process of designing, preparing and monitoring projects with a view to maximising both the resources employed and the quality of projects.

Capitalisation on experience

The CEB continually strives to enhance the quality of the projects it finances. Regular monitoring and on-site visits are an important stage in the project cycle with regular evaluations of the projects’ progress and social impact while highlighting the problems encountered in the course of their implementation. This “capitalisation on experience” is supplemented by ex post evaluation (see Box 8) reinforcing organisational learning within the institution through the dissemination of lessons and good practices. Its main objective is to improve the Bank’s assistance and services to clients on the one hand, and to improve the selection, design and quality of future projects, on the other.

SOCIAL IMPACT OF CEB F INANCING



Box 8 - Ex Post Evaluation: Lessons learned from the CEB’s operations

The CEB continually strives to enhance the quality of the projects and programmes it finances. Ex post evaluation seeks to enhance the transparency of operations, contribute to assessing the impact and sustainability of projects and programmes financed by the CEB, and appraise their performance and quality. It is aimed at providing accountability to the CEB’s shareholders; improving planning, selection and design of future projects/programmes; and fostering organisational learning within the CEB through the dissemination of lessons and good practices, with a view to improving the CEB’s assistance and services to borrowers.

Created in 2002, the Ex Post Evaluation Department (DEP) has defined guidelines in accordance with international best practice and DAC-OECD Guidelines. Each evaluation assesses the design, preparation and implementation of the project or programme under review. A rating system is applied, based on the evaluation criteria defined by DAC-OECD, the use of which is generally accepted in evaluation: - relevance (did objectives respond to needs, problems, challenges?), - effectiveness (were objectives achieved?), - efficiency (how optimally were financial, human and organisational resources used?), - impact (what were the positive or negative effects beyond the achievement of objectives?), - sustainability (will the positive effects last after project completion?).

Ex Post Evaluation activities in target countries

Since 2003, the DEP has carried out a large number of evaluation programmes in numerous target countries in various CEB sectors of action. The department started work with evaluating projects involving the Bank’s statutory priorities. Evaluations covered five natural disaster projects (ex. earthquake in Turkey; floods in Poland and Romania) and a series of CEB grant projects to assist vulnerable populations such as refugees, IDPs and Roma in South Eastern Europe (Bosnia and Herzegovina, Serbia, Bulgaria, FYR Macedonia) implemented by UN agencies, NGOs and local partners. Evaluations concluded that the projects evaluated were successful in achieving their basic purposes. Projects fulfilled priority needs and were found relevant, effective and efficient. Going forward, it will be an operational task to establish, with the implementing agencies, suitable reporting instruments which could further enhance CEB visibility, given the high social value added that was noted for these projects.

The DEP also concluded a significant evaluation programme in the field of job creation covering twelve programmes in several CEE countries (ex. Baltic States, Bulgaria, Croatia, the Czech Republic, Hungary and Slovenia). The evaluations found that the expected social objective of creating jobs was largely achieved or even exceeded, though the relevance of CEB support in the pre-crisis context was found to be on the wane. Very broadly defined SME programmes tend to lead to lower relevance ratings; while more targeted programmes involving smaller lending volumes and a narrower social objective (ex. targeted to special social groups such as women entrepreneurs) have a higher added value.

In the field of social housing, the DEP carried out its evaluation work on large housing programmes implemented in target countries such as Hungary, Poland and Romania. Overall, the CEB-financed programmes were rated satisfactory or highly satisfactory and constituted a substantial contribution within national housing policies. Emerging issues relate to the importance of aligning the programmes’ social objectives with national social housing policies and local developments; ensuring sufficiently detailed documentation to ascertain effective social targeting; and approaching such programmes from a perspective of sustainable development principles, in particular financial sustainability at local level.

In the education sector, the DEP carried out a highly satisfactory evaluation of the school rehabilitation project in Romania, co-financed by the World Bank. Embedded in a broader education reform process, the project was timely and highly relevant. It also outperformed its initial target (in terms of the number of rehabilitated schools) by one third. Several other evaluations are on-going and/or under completion in the sectors of environment (Cyprus) and rural modernisation (Albania, Romania).


LESSONS LEARNED AND CHAL LENGES AHEAD 58

6. LESSONS LEARNED AND CHALLENGES AHEAD

The purpose of this chapter is to summarise the main lessons from the Bank’s long-standing experience in financing social projects in the target group countries and to outline the challenging operational environment in which the CEB will be working in the years to come.

Section 6.1 seeks to clarify the Bank’s reasons to focus on this particular group of countries, while maintaining its lending to countries enjoying higher incomes. Section 6.2 will be dedicated to various aspects of the absorption capacity which differs from one country to another, from one borrower to another, on the one hand, and can change over time due to a number of factors, on the other.

To conclude, the last two sections (6.3 and 6.4) will help understand the significant challenges for the CEB and its borrowers on the road to strengthening social cohesion in Europe. Restoring a self-sustained path of growth with more and better jobs in the whole region will be a challenging task for any country. In this difficult and uncertain environment, the main challenge for the CEB will be to achieve tangible and sustainable results while investing in social infrastructure over the long term and preserving its financial solidity and high standing in international financial markets.

6.1. Why does the CEB focus its lending on “target countries”?

According to the strategic orientations set forth in its last two Development Plans, CEB lending has been geographically focused on so-called “target countries” in order to first develop and then increase the Bank’s operations in favour of this Eastern part of Europe. When establishing the list of target countries, no specific criteria were set. Rather all formerly socialist countries were seen as a group warranting particular attention in the Bank’s activities. It was felt that the development process in Turkey deserved a similar degree of support. In addition, Malta and Cyprus were included in the group as they joined the European Union at the same time as some of the Central European countries.

This “political” orientation finds its economic rationale in persistent, although diminishing, gaps between Eastern and Western Europe. It also highlights the importance of social sector reforms and investments for economic growth, social development and the catch-up process with the more advanced countries. When considering the country classification by income8 (see Table 2), target countries such as the Western Balkans, Georgia and Moldova are among the poorest CEB member countries. After two decades of political and economic transition, these countries continue to face considerable challenges related to poverty, unemployment, social exclusion, access of vulnerable population groups to health, education and housing. Social infrastructure still falls far short of the level in Western Europe. In the countries and regions still lagging behind, the upgrading of social infrastructure plays a key role with respect to the sustainability of economic and social development.

However, CEB activities are spread across all its countries of intervention without being geographically limited to the poorest and most fragile countries. Indeed, the CEB finances various types of social investment projects in both richer and poorer parts of Europe, with a particular focus on the target group countries. Beyond the geographic targeting of its lending, the CEB operates on a sectoral basis, according to eligibility criteria applying to all its member countries, including those enjoying higher incomes. In this sense, vertical-sectoral and horizontal-geographical approaches can be seen as complementary lines of action to sustainable social development at local and national levels.

From the risk management point of view, the CEB’s capacity for action is largely determined by the level of risk it incurs and by trends in that risk. In concrete terms, lending to high-rated borrowers is essential because it enables the CEB to balance the Bank’s risk profile with regard to “below-investment-grade” counterparties without jeopardising the Bank’s rating. This relative balance between the tendency to minimise its risks and the desire to strengthen the social added

8 The World Bank’s country classification by income set each year on 1 July for operational and analytical purposes: based on i ts gross national income (GNI) per capita, every economy is classified as low income, middle income or high income.



value of its loans is backed up by a strong prudential framework and conservative risk management with rigorous control standards. These provisions have enabled the CEB to develop its activities in its target countries, including those in the most fragile countries, without undermining either the soundness of the Bank’s rating or its financial solidity over the years. On the other hand, the highest rating has enabled the Bank to obtain the finest financial conditions in financial markets and to on-lend them to its borrowers in target countries.

6.2. Addressing the absorption capacity issue

From many perspectives, target countries constitute a heterogeneous group of countries. They differ in terms of economic development, living standards, social needs, EU integration progress or absorption capacity. What is more, these countries may increasingly tend to become an even more diversified group of countries in terms of growth trajectories and post-crisis outlooks. However, this section attempts to summarise some common constraints that these countries may have faced in absorbing CEB loans over the years since they joined the Bank.

Experience shows shorter or longer lead times between the accession to the Bank and the approval of a first project (see Table 1). These may be explained by a number of factors linked to various aspects of the absorption capacity of CEB borrowers such as: the ability to define eligible investments in a complex institutional environment; the need for technical assistance in the case of social projects that are often challenging to identify, prepare and implement; the high social value of the project in itself; full identification of the necessary financial resources for meeting the costs of the project; a time lag between planning and executing in sectoral policies. Nevertheless, these constraints exist through the whole relationship between the Bank and its borrowers. They can vary in intensity over time, but prove to be stronger in the design, development and implementation of the very first projects. From a broader vantage point, a country’s capacity to absorb foreign lending depends on factors such as the quality of the labour force, the availability and quality of the infrastructure, the depth and efficiency of the financial system, and the overall institutional and policy environment.

Absorption capacity can be defined as the extent to which a borrower is able to fully spend the allocated financial resources from a CEB loan in an effective and efficient way. Over the past twenty years, target countries have made significant progress in improving their capacity to absorb CEB loans effectively and efficiently. However, there is still room for improvement in the absorption capacity in certain countries. There are also other constraints that have recently appeared in the challenging economic and financial context for the others.

The absorption capacity can be determined by the following three main aspects:

Macroeconomic absorption capacity can be defined and measured in terms of the country’s GDP. In other words, the volume of CEB lending depends on the size of the economy. Indeed, CEB lending to large target countries such as Turkey or Poland involves more significant volumes than to smaller countries such as the Baltic States or the Western Balkan countries. However, the CEB pays attention to both aspects of its lending, quantitative in terms of volumes to be invested and qualitative in terms of social added value generated by each project. Indeed, small amounts do matter and social impact can often be higher and more evident in “small” social projects than in the case of big infrastructure investments. Also, the added value can indicate the scale of the needs to be met in social sectors in the poorest and most fragile countries, which also happen to be “small” CEB member countries.

Moreover, from a macroeconomic perspective, CEB lending has an impact on a country’s balance of payments, debt dynamics and sustainability, exchange rates and their consequent impact on export competitiveness, and the behaviour of the macro-economy in general. In this perspective, any increase/decrease in IFI lending must be considered with regard to these macroeconomic constraints. Furthermore, section 6.3 will show how, as a result of the global financial and economic crisis, fiscal and external debt constraints have become even more important factors to be taken into consideration today, when it comes to new external funding from lenders such as the CEB.


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Financial absorption capacity has two aspects.

First, it assesses the availability of “fiscal space” for social investments. In the specific case of public borrowers, national and local budget constraints can prove to be crucial limitations to a country’s ability to borrow from the CEB. Indeed, the total project’s costs, including the CEB’s participation in the financing of the project, are included in the budget expenditure and accounted as part of the budget deficit. The available fiscal space entails sensitive political choices when timing government investment programmes. Experience shows that social investments are often the first to be cut when fiscal consolidation efforts are needed (see section 6.3 on the CEB’s public borrowers).

Second, it can be defined as the ability of borrowers to co-finance CEB loans in terms of multi-annual budgetary constraints. The major factors that influence the financial absorption capacity are: (i) the CEB’s co-financing requirements, (ii) the co-financing ability of CEB borrowers in a multi-annual perspective, and (iii) the borrowers’ capacity to repay CEB loans over a multi-year period.

As a general rule, the CEB’s share of the financing may not exceed 50% of the total eligible cost of the project. This share may be higher in the case of projects in favour of refugee populations, migrants and displaced persons; and for any project concerning reconstruction and/or rehabilitation of destroyed or damaged infrastructure in the wake of a natural or ecological disaster. Projects of this type may also involve the financing of preventive measures in terms of future natural or ecological disasters and also projects implemented in the CEB’s target group countries. In any event, the share of financing may not be more than 90%, subject to an assessment of all the other advantages granted and of the characteristics of the project. Also, in the case of a subsidy through the Selective Trust Account, the share of financing would in principle be limited to 50% of the total eligible cost of the project. This means that the borrower is required to identify a clear financing plan for the project with all the other contributions to the project in a multi-annual perspective. Also, the borrower must be able to repay CEB loans on a multi-annual basis.

Administrative or institutional absorption capacity can be considered at two levels.

The first level involves the institutional framework of the management of CEB lending, including institutional arrangements, human resources and the existing procedures and instruments in the implementing institutions/bodies.

The second level is focused on aspects related to the preparation, elaboration, implementation and monitoring of the projects on the one hand, and the performance of the public service, financial management and public procurement, on the other.

In concrete terms, the institutional absorption capacity covers the ability and skills of CEB borrowers – central, regional and local authorities or public/private financial institutions – in a given institutional framework, to prepare suitable projects in due time, to decide on programmes and projects, to arrange co-ordination among the principal partners, to cope with the administrative and reporting requirements, and to finance and supervise implementation properly. As far as the CEB is concerned, this capacity also involves the existence of coherent and prioritised sector strategies on which the CEB can align its lending.

For the CEB, the institutional capacity constitutes the most important aspect of the absorption capacity from a practical point of view, since the successful implementation of the projects is inherently linked to the institutional capacity of CEB borrowers. In this respect, the CEB can partially help compensate for a lack of institutional capacity through the financing of technical assistance. The CEB can also transfer its longstanding experience acquired when implementing projects in Western European countries to projects in target countries. This transfer of knowledge can also directly operate from the CEB’s Western European borrowers to those from target countries in order to help them successfully implement projects in target countries.

The Bank pays particular attention to the quality of its projects in order to optimise their social impact. In this context, technical assistance constitutes an essential component of the Bank’s

LESSONS LEARNED AND CHAL LENGES AHEAD



added value. This support, provided as a complement to financing, has proven to be an essential element in the success of a project, depending on the degree of complexity of the project. It can be used to support project preparation (through studies), to improve project design, implementation or operation (through project level technical assistance) or to improve the often essential institutional framework (through upstream capacity building).

Considering the growing complexity of projects, one of the key challenges for improving the quality and successful implementation of CEB projects is to increase financial resources for technical assistance for the identification, preparation and implementation of projects through strengthened co-operation with individual donor countries, the EU and other institutions. Technical assistance and experts can be provided through institutional co-operation initiatives within the

European framework which can grant resources via various channels (EU Structural Funds, grant

facilities such as WBIF and NIF, JESSICA, see chapter 4 for details).

6.3. Borrowers dealing with crisis- and post-crisis challenges

The global financial and economic crisis has had a strong economic and social impact on the CEB’s target countries. At the time of writing, the overall pace of recovery remains fragile and sluggish, with increasing cross-country divergence, overshadowed by the Eurozone sovereign debt crisis, financial market volatility and increasing pressures to accelerate fiscal consolidation both in East and West.

The impact of the crisis has materialised in the target group countries through different transmission channels:

- financial markets: reduced access to credit, falling value of savings and assets;

- product markets: lower growth and production, lower demand for exports;

- labour markets: reduced employment, wages and remittances.

The impact on household welfare has included reduced consumption, attempts to smooth consumption inter-temporally and decreased household investments in health and nutrition. While the global crisis has caused economic losses across the income spectrum and even forced a number of households into a new situation of poverty, the chronic poor have suffered the most severe impact.

Besides affecting the private sector, the global economic downturn has had a far-reaching impact on government balances. As country budgets are squeezed tight, social programmes which directly help poor and vulnerable people have become pressure points for reducing government spending, even as the need for unemployment benefits increases. In many countries of the region, two years of rising food prices, high energy costs and the global economic downturn have been combined with other shocks such as natural disasters and political instability.

In the aftermath of the global crisis, target countries are facing new challenges. How well are CEB borrowers positioned to respond to these challenges in the years to come? To what extent are these challenges likely to affect demand for CEB lending?

6.3.a. Public borrowers: need for fiscal consolidation

The fiscal deficits of the governments throughout the region widened as the economic slowdown reduced tax revenues and increased expenditures through automatic stabiliser mechanisms, in addition to discretionary fiscal expansions. The impacts of the crisis on public finances differ across individual countries, depending on the severity of the crisis, policy responses by central and local governments, the nature of government finances and the structure of local economies.

While countries with fiscal capacity have adopted stimulus packages to promote economic recovery, most financially constrained CEE countries have had to revise their government budgets, including in the social sector. In Central and Eastern Europe, the crisis has highlighted the weaknesses of public finance systems mostly based on indirect taxation and resulted in large cuts


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in spending programmes and painful rises in taxes. As a result of the crisis, public spending on social sectors may have actually decreased both in absolute amounts and as a percentage of GDP. These public spending cuts may lead to pressure for an increased role for private sector provision of health, education and other social programmes.

Several target countries - mainly the new EU member states (with the exception of Bulgaria and Estonia), Croatia and Serbia - need to rein in large public sector deficits to secure debt sustainability and avoid negative reactions from the financial markets. However, the speed and scope of fiscal consolidation will need to be tailored to individual country circumstances. In comparison with Western Europe, target countries have started their fiscal adjustment earlier and the scope for further consolidation is generally estimated to be smaller, since target countries are in a relatively better fiscal shape and less indebted as percentage of GDP (with the exception of Hungary). In the longer run, increased deficits and debts will mean that government budgets and therefore available fiscal space will remain under strain, and funding for social investments may be reduced.

The crisis also worsened the fiscal positions of local governments, but less than those of central governments and social security funds9. The increase in local government deficits has translated into a modest rise in local government debt (by less than 1% of GDP on average from 2007 to 2009). The increase in public debt in many target countries has been almost exclusively due to higher central government debt. Overall, local government debt in the new EU Member States was only 7% of general government debt and less than 5% of GDP in 2009, which reflects mainly balanced budgets prior to the crisis.

The main reason for the moderate worsening in local government finances is that local governments operate, to varying degrees, within a fiscal straitjacket. Indeed, local governments bear the risk of any shortfall in revenues, as rules impose limits on borrowing, own source revenues cover only a minor part of their budgets, and central governments are reluctant to cover budget gaps through higher transfers. Local governments also have almost no control over their revenues, either because they are set annually at the discretion of the central government (e.g. the education subsidy) or are based on fixed shares of central revenues (e.g. the personal income tax). As they also have limited control over their expenditures, including centrally mandated salary increases, their ability to manage these risks is constrained. This forces local governments to take substantive measures to balance their books (by drawing down accumulated reserves; cutting spending in categories they do control, principally capital works, eliminating tax exemptions, broadening tax bases, or increasing rates); and to increase absorption of EU funds.

However, the absorption rate of EU funds is, on average, still proving to be low in the new EU Member States due to the lack of eligible projects, limited capacity in the public administration or budgetary constraints in national budgets to co-finance EU funds. For instance, Romania has absorbed only 4% of the € 19 billion allocated to it for the 2007-2013 budgeting period. Bulgaria has spent only 9% of its € 7 billion allocation for the same period. The average absorption rate for the group of 12 new EU Member States is around 9% of the funds allocated for the current budgeting period. The 27 EU countries as a whole have spent € 71 billion, i.e. 21% of the seven-year budget10.

The crisis has led private sector providers of public infrastructure financing to reduce their offer. This scarcity of alternative financing resources has actually resulted, over the last three years, in higher demand for CEB loans for the financing of public infrastructure. This demand from public borrowers could be less significant in the post-crisis period, considering the fiscal consolidation efforts underway and ahead and/or still limited absorption capacity of the most fragile target countries.

9 Source: World Bank, In Focus: Impact of the Global Financial Crisis on Local Government Finances, November 2010 10 Source: Financial Times, Growth funds fail to reach poor countries, 19 October 2011. These figures exclude advance payments made by the European Commission to countries that have yet to spend the funds on projects on the ground.

L ESSONS LEARNED AND CHAL LENGES AHEAD



6.3.b. Bank borrowers: economic and financial linkages with European banks

The course of the crisis has emphasised the degree to which the region’s economies are dependent on developments at the broader European and global levels. While the integration process has brought enormous benefits to the region in the past two decades, the downside is that crises that originate elsewhere affect the region, no matter what actions are taken to mitigate these effects. This openness to extra-regional influences can also be explained by a strong presence of international banking groups, mainly headquartered in Austria, Belgium, France, Germany, Greece and Italy, in the region’s banking sectors. Stricter capital adequacy requirements on Western European parent banks may have a strong impact on credit and domestic demand growth in CEE countries in the coming months. The crisis has generally weakened the region’s financial sectors, with many countries experiencing sharp increases in non-performing loans (NPLs). The dilemma facing banks is how to strengthen their balance sheets while reviving their lending operations, so vital in private-sector led growth that should create employment. For the CEB, lending to SMEs for job creation and preservation continues to play an important role in the region’s recovery.

While more stringent lending practices, weakened demand and the market’s general uncertainty weighed on loan volumes in 2009, lending has started growing again since 2010, although at moderate levels in comparison to the double-digit growth of the pre-crisis era. With the exception of those countries with the largest pre-crisis credit booms and the slowest recoveries (Baltics, Hungary and South Eastern Europe), credit growth was resuming by end-2010. Bank loans in target countries are projected to grow moderately in the next two years, although cross-country divergences will persist. Yet, recovery in lending volumes could be tempered by continued provisioning of NPLs (between 5% and 15% of total loans) and by the fact that banks still face elevated stress in the form of regulatory (Basel III) and policy measures, such as bank taxes (ex. Hungary). Regulatory tightening will limit the degree to which the recovery is supported by credit growth.

Following the adoption of the proposals by the Basel Committee of Bank Supervisors in September 2010, EU countries, accession candidates and pre-accession countries are likely to phase in stricter requirements on bank capital and liquidity over the period 2013-18. While the long-term growth impact of these measures could well be positive, there is general agreement that they will have output costs over the medium term, with estimates for the advanced countries ranging from a loss of GDP of 0.4% over five years (BIS, 2010) to 3.1% (IIF, 2010).

What is more, the fragility of a number of Eurozone parent banks could potentially lead to a new credit squeeze in Eastern Europe11. In fact, there are signs that Western European banks are likely to cut their lending to Eastern Europe and may even sell their subsidiaries there in response to higher capital requirements imposed by Eurozone leaders after the 26-27 October 2011 European Summit12. In effect, banks can reach that higher ratio by raising more capital. But they can also do it by cutting lending, and that appears likely to play a big part in their plans to meet the new target.

As Western European banks are the dominant lenders in most Eastern European countries, deleveraging is therefore likely to spread beyond the Eurozone’s borders. Moreover, important crisis challenges remain. These include vulnerabilities arising from foreign exchange denominated borrowing by unhedged entities (households and corporates), the limited amount of local currency savings, the underdevelopment of local capital markets, adjustments to the new regulations including possible capital increases, and balance sheet constraints on lending in countries where non-performing loans are high or still rising13.

11 Sources: EBRD, Press release: Sustaining growth in central and south-eastern Europe, EBRD President warns of potential credit squeeze, 4 November 2011; The Wall Street Journal , EBRD Chief Economist Sees “Considerable” Deleveraging in Eastern Europe, 10 November 2011; Financial Times, Eastern Europe has most to fear from bank’s retreat, 15 November 2011; Fitch Ratings, Eurozone Crisis: Funding Risks for Emerging Europe, 21 November 2011 12 Western European banks have until 30 June 2012 to meet the new capital ratio target of 9%. 13 Source: EBRD/EIB/WB, Final Report on the Joint IFI Action Plan, March 2011


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Even though the banking sectors in the CEE have made significant gains over the past decade, the region’s levels of financial intermediation remain far removed from Eurozone averages. For example, when measured as a percentage of GDP, total banking assets in the CEE represent roughly one-third of the Eurozone average, while the CEE’s total loan volume to nonbanks is not even one-half of that for the Eurozone14. Looking ahead, the CEE’s catch-up process, with a gradual approach to Eurozone-like levels, should continue in a longer-term perspective.

In the near future, the CEB expects public development banks to continue to play an important role in the financing of local investment projects. These investments can also be implemented through commercial banks, i.e. financial intermediaries which on-lend CEB loans to municipalities and SMEs, particularly threatened by a possible new credit squeeze. Therefore, the CEB will continue to deploy its efforts in providing loans to local banking sectors in addition to public borrowers.

14 Source: Raiffeisen Zentral Bank Group, Raiffeisen Research, CEE Banking Sector Report, September 2010




6.4. Challenges for the CEB

Within the strained context characterised by the sovereign debt crisis and the strong tensions within the euro zone, the Bank continued to show sound results in 2011 and to consolidate its role as a financial instrument of solidarity in Europe. In the face of the crisis, the CEB has capitalised on its strong points, namely its rigorous financial and risk management, inseparable from the banking nature of its activity, the originality of its mandate to promote social cohesion, and its capacity for adaptation and rapid response.

Looking ahead, the CEB needs to mobilise additional resources and means of action to meet the current Development Plan’s ambitious objective of addressing the social challenges aggravated by the financial crisis, particularly in the CEB’s target countries.

6.4.a. Pursuing objectives defined for 2010-2014

The current medium-term Development Plan sets forth the strategic orientations for the activity for

the five-year period 2010‐2014. These orientations reaffirm and strengthen those set forth in

the previous Development Plan (2005‐2009), which notably aimed to significantly increase the activity in favour of the target group of countries in Central, Eastern and South Eastern Europe.

Thus, the Development Plan primarily provides for:

a 15% increase in the overall volume of loans in 2010-2014 in relation to 2005-2009;

a continued effort in favour of the Bank’s target group countries in order to reach up to 60% of the total loans outstanding by 2014;

strengthened collaboration with the EU and with donor countries in order to increase the CEB’s capacity for action and the added value of its operations.

These objectives have appeared even more challenging since the crisis affected the CEB’s target group countries and has led to significant social challenges in terms of investment in infrastructure, access to financing for businesses and increased needs of the most vulnerable population groups. What is more, the deterioration in the operational environment due to the crisis may, to some extent, have limited the Bank’s operational capacities, determined by the level and evolution of risk incurred. The crisis has brought a new risk assessment of the region, in particular when it comes to borrowers rated “below investment grade” or just at the limit of the “below investment grade”. In effect, rating downgrades for some counterparties have had a direct impact on the Bank’s credit risk and prudential ratios.

Yet the CEB should be able to continue to perform healthily not only thanks to its strict risk management policy, but also following the approval of the 6th capital increase on 4 February 2011 by the CEB’s Governing Board. The capital increase from € 3.3 billion to € 5.5 billion (representing a 67% increase) will raise the level of its own funds (capital plus reserves) from € 4.9 billion to € 6.8 billion (representing a 40% increase), when fully subscribed.

The 6th capital increase became effective on 31 December 2011, reaching a subscription rate of 75%, therefore exceeding the minimum threshold of 67%. The CEB’s subscribed capital thus increased from € 3.3 billion to € 4.9 billion. Once all Member States have subscribed, this figure will reach € 5.5 billion. The subscription period will continue to run until 30 June 2012.

This strengthening of the Bank’s financial structure illustrates the support of its shareholders and should enable the CEB to mobilise additional means of action, notably in favour of its least advantaged Member States. The CEB should therefore be in position to reach its operational objectives, set forth in the Development Plan 2010-2014, for the entire target group.


66

6.4.b. Underlying challenges

The impact of the global financial and economic crisis on the target countries’ economies may be more long-lasting than initially expected. At least two important differences with the previous impressive growth performance appear obvious: (i) post-crisis growth is expected to be slower and slower growth implies that (ii) the labour market situation is set to be very far from normal as unemployment remains high, with young and low-skilled workers being especially affected. Any improvement in the labour markets can be expected only gradual and delayed. It will take long time and great efforts to fully resorb the social impact of the crisis.

The sharp drop in GDP in most target countries during the crisis resulted in both absolute and relative declines in their per capita income levels. The catching-up process of the previous decade has thus been interrupted and income gaps vis-à-vis Western Europe have widened: indeed, the crisis has set the whole region back several years. According to the Vienna Institute for International Economic Studies (WIIW) medium- and long-term GDP growth scenario for the target group countries, a renewed catch-up process should have started as early as 2011, after losing five to seven years in terms of income convergence. However, most CEE countries are expected to reach the pre-crisis per capita income levels only in 201515.

For the target countries, the challenges remain considerable while budgetary constraints, although essential to stabilise and reduce public indebtedness, are set to continue to weigh heavily on the growth perspectives of the European countries in the years ahead. Given the consolidation efforts and the limited fiscal space in most target countries, it cannot be expected to see any additional growth-stimulating measures from the public sector.

After a moderate and multi-speed recovery currently under way in Europe, restoring a self-sustained path of growth with more and better jobs in the whole region will be a challenging task for any country. It has become evident that the countries have no other choice than to turn back to the fundamentals – continuing and intensifying reforms to create better business environments; introducing prudent fiscal measures; stimulating productive, export-oriented industries and promoting wise long-term investments in education, innovation and entrepreneurship. Some countries in the region have to resolve long-standing political issues in the interest of stability, complete the transition agenda and join forces around regional recovery and development projects.

For the CEB, the main challenge will be to achieve tangible and sustainable results over the long term while promoting social cohesion and inclusion and preserving its financial solidity and high standing in international financial markets.

Combating social exclusion, promoting social justice and fundamental rights have long been the main pillars of activity of the Council of Europe Development Bank, founded fifty-five years ago as a financial instrument of solidarity in Europe. The CEB, as the social development bank in Europe, intends to remain committed to its social mandate and to be part of the necessary international support designed to improve living conditions of populations throughout Europe and more specifically in its target countries. The enhanced means the CEB should have at its disposal in the future should enable it to continue to provide substantial support to its Member States in a difficult and uncertain environment.

15 Source: WIIW, Current Analyses and Forecasts, Economic Prospects for Central, East and Southeast Europe, Recovery- in Low Gear across Tough Terrain, February 2011



CONCLUDING REMARKS 67

7. CONCLUDING REMARKS

Founded in 1956 in order to bring solutions to the problems of refugees in Europe, the CEB has progressively widened its scope of action to include other sectors of action directly contributing to strengthening social cohesion in Europe. In parallel, the geographic spectrum of the Bank’s activities has also developed over the years. In particular, the accession of countries from Central, Eastern and South Eastern Europe – the CEB’s so-called “target countries” – after the fall of the Berlin Wall has given a renewed impetus to the financing of highly social projects on the one hand, and to the co-operation with other international institutions and the European Union, on the other.

Over the past twenty years, the CEB has significantly increased its lending to target countries in line with its strategic orientations. The Bank financed an overall amount of € 17 billion in social projects located in target countries, structured around three sectoral lines of action: strengthening social cohesion, managing the environment and supporting public infrastructure with a social vocation. This study has shown the progressive geographic deployment and sectoral diversification of the CEB’s activities in the target group. It also confirmed the importance of close co-operation and coordination among institutions in maximising their synergies, impact and added value.

Against the background of economic uncertainty, the CEB has proved to be an even more effective tool of European solidarity. In a difficult economic and financial crisis context, the Bank has continued to provide support for projects promoting European solidarity and complying with the values of the Council of Europe. Since the global financial and economic crisis has spread to its countries of intervention, the CEB has been committed to deploying every possible effort to best fulfil its social mandate and to adapt its means of action in the service of its Member States. The Bank has particularly strengthened its action in the target group countries and in favour of the most vulnerable population groups, severely affected by the crisis.

Building on these sound achievements, the CEB, as the social development bank in Europe, intends to remain committed to its social mandate to improve the living conditions of populations throughout Europe and more specifically in its target countries. The decision on the CEB’s 6th capital increase, adopted on 4 February 2011 and effective on 31 December 2011, is of major importance for the Bank since it should enable it to strengthen its financial soundness and to ensure its possibilities for action in favour of the target group countries. The enhanced means the CEB should have at its disposal in the future should enable it to continue to provide substantial support to its Member States in a difficult and uncertain environment.


B IB L IOGRAPHY 68

BIBLIOGRAPHY

Bruegel Blueprint Series, by T. Becker, D. Daianu, Z. Darvas, V. Gligorov, M. Landesmann, P. Petrovic, J. Pisani-Ferry, D. Rosati, A. Sapir and B. Weder Di Mauro, Whither growth in central and eastern Europe? Policy lessons for an integrated Europe, Volume XI, 2010

Bussière E. and Willaert E., Council of Europe Development Bank 1956-2006, October 2006

CEB Annual Reports

CEB, by L. Athenosy, Migration in Europe: the CEB’s experience, 2008

CEB, by L. Athenosy, Sustainable Housing and Urban Development: the CEB’s contribution, 2010

European Bank for Reconstruction and Development, the European Investment Bank Group, the World Bank Group, Final Report on the Joint IFI Action Plan, March 2011

European Bank for Reconstruction and Development, Transition Report 2009, 2009

European Bank for Reconstruction and Development, Transition Report 2010, 2010

European Bank for Reconstruction and Development, by P. Sanfey, South Eastern Europe: lessons from the global economic crisis, Working Paper n°113, February 2010

European Commission, Directorate-General for Regional Policy, Investing in Europe’s future: Fifth Report on economic, social and territorial cohesion, November 2010

Fitch Ratings, Sovereigns, Central and Eastern Europe, Eurozone Crisis: Funding Risks for Emerging Europe, 21 November 2011

Raiffeisen Zentral Bank Group, Raiffeisen Research, CEE Banking Sector Report, Gradually gaining momentum and leaving the storm behind, September 2010

UNDP, by Balázs Horváth, Andrey Ivanov and Mihail Peleah, with Michaela Pospíšilová, The Human Development Impact of the Global Crisis in Central, Eastern and Southern Europe, and the CIS, November 2009

Wiener Institut fur Internationale Wirtschaftsvergleiche (WIIW), by P. Havlik et al., Current Analyses and Forecasts, Economic Prospects for Central, East and Southeast Europe, Recovery- in Low Gear across Tough Terrain, volume 7, February 2011

World Bank, by E. Korczyc, K. Richter and E. Skrok, In Focus: Impact of the Global Financial Crisis on Local Government Finances, November 2010

World Bank, by N. Sugawara, V. Sulla, A. Taylor, E.R. Tiongson, The Crisis Hits Home: Stress-Testing Households in Europe and Central Asia, in Economic Premise n°12, May 2010

World Bank, by P. Schneider, Mitigating the Impact of the Economic Crisis on Public Sector Health Spending, in Knowledge Brief, Vol.8, August 2009

World Bank, by K. Lindert, A. Schwarz, Social Protection Responses to the Global Economic Crisis in ECA, in Knowledge Brief, Vol.8, August 2009


STAT IS T ICAL ANNEX 69

STATISTICAL ANNEX

TABLE I: DEMOGRAPHIC TRENDS

Population (total number, 2009) and population projections (2015, 2030, 2050)

Population by age (aged 0-15 years, 15-64 years, above 65 years) as of 2009 and projections (2030, 2050)

Old age dependency ratio (ratio of the population aged above 65 years over the population aged 15-64) as of 2009, and projections as of 2030, 2050

Population density (population / sq. km) as of 2008

Current (2008) and projected (2015) urban population (in %)

Net migration as of 2009 and 2015 (total number of immigrants less the total number of emigrants, including both citizens and non-citizens, over the period)

TABLE II: SOCIO-ECONOMIC DISPARITIES

GDP per capita, PPP, in EUR as of 2010: absolute and relative to EU-27=100 base

Unemployment rate, as a percentage of total labour force, ILO definition, as of 2010

Gini index (measure of the deviation of the distribution of income among individuals or households within a country from a perfectly equal distribution, the last available year (2000-2008) compared to values recorded in 1991-1999

Income quintile share ratio as of 2009, measuring inequality of income distribution (ratio of the total income or expenditures of the highest 20% of the population over the total income or expenditures of the lowest 20% of the population)

Ratio of female to male earned income, as of 2007

Gender Inequality Index (a composite index measuring loss in achievements in three dimensions of human development- reproductive health, empowerment and labour market, due to inequality between genders), as of 2008, 0=perfect equality; 1=total inequality

At-risk-of-poverty before and after social transfers, as of 2009 (Eurostat definition: households or people whose equivalised income is below 60% of the median equivalised income of the reference group)

TABLE III: HEALTH AND EDUCATION SYSTEMS

Life expectancy at birth, in years, as of 2010

Maternal mortality ratio, number of maternal deaths per 100,000 live births, 2003-2008

Number of hospital beds, per 1,000 people, 2003-08

Total fertility rate, number of births per woman, 1990-95 and 2010-15

Population with at least secondary education, as of % of ages 25 and older, 2010

Pupil-teacher ratio, number of pupils per teacher in primary education, 2005-08

Gross enrolment ratio in primary, secondary and tertiary education, as of % of primary, secondary and tertiary school-age population, 2001-09

Labour force participation rate, in %, female and male, as of 2008



TABLE IV: ENVIRONMENT AND ENERGY

CO2 emissions, in metric tons per capita, as of 1990 and 2006

Greenhouse gas emissions: Kyoto targets, 1990/1995-level = 100

Fossil fuel energy consumption, % of total, as of 1990 and 2007

Renewable energy consumption, % of final consumption, as of 2008 and 2020 target

Energy imports, % of total energy use, as of 1990 and 2007

SOURCES:

Eurostat

European Commission DG ECFIN

European Environment Agency (EEA)

EUROPOP2008

IMF World Economic Outlook Database

UNDP (Human Development Report)

UNESCO

UN-Stats

UN World Population Prospects: The 2008 Revision

WHO

WiiW Current Analyses and Forecasts

World Bank (World Development Indicators)

national statistical offices

FIN

AN

CIN

G S

OC

IAL P

RO

JEC

TS

IN

CEB

TA

RG

ET

CO

UN

TR

IES

: A

CH

IEV

EM

EN

TS

AN

D C

HA

LLEN

GES

Table

I: D

em

ogra

phic

tre

nds

Pop

ula

tion

(m

illio

ns)

Pro

po

rtio

n o

f in

div

idu

als

(%

of

tota

l p

opu

latio

n)

Old

age

dep

end

en

cy r

atio

Pop

ula

tion

d

ensi

ty

(pop

/km

²)

200

8

Urb

an

popu

latio

n

(%

of

tota

l p

op

ula

tion

)

Net m

igra

tio

n

(th

ou

san

ds)

aged

<1

5

aged

15

-64

aged

>6

5

200

9

201

5

203

0

205

0

200

9

203

0

205

0

2

00

9

203

0

205

0

2

00

9

203

0

205

0

200

9

203

0

205

0

200

8

201

5 200

9

(2005)

2

01

5

Alb

an

ia

3.1

3

.3

3.4

3

.5

2

4

19

1

5

6

7

64

6

1

9

1

7

24

13

2

6

39

1

10

47

5

3

-10

0

n/a

Belg

ium

1

0.8

1

1.1

1

1.7

1

2.2

17

1

6

16

66

6

1

58

17

2

3

26

26

3

8

44

3

50

97

9

8 55

4

1

Bosn

ia a

nd

H

erz

egov

ina

3.8

3

.7

n/a

n/a

1

6

n/a

n/a

7

1

n/a

n/a

1

3

n/a

n/a

1

8

n/a

n/a

75

47

5

2 61

n/

a

Bu

lgari

a

7.6

7

.4

6.8

5

.9

1

3

13

1

3

7

0

64

5

6

1

7

23

3

1

2

4

36

5

5

69

71

7

3 -1

6

2

Cro

atia

4.4

4

.4

4.4

4.2

1

5

14

1

3

6

8

63

5

8

1

7

23

2

9

2

5

37

5

0

78

57

6

0 -1

3

n/a

Cy

pru

s 0

.8

0.9

1

.1

1.3

17

1

6

15

70

6

6

62

13

1

8

23

19

2

7

37

8

4 7

0

72

-3

9

Czech

Repu

blic

10

.5

10

.5

10

.4

9.9

14

1

3

14

71

6

4

55

15

2

3

31

21

3

6

55

1

34

74

7

4 28

2

8

Denm

ark

5

.5

5.6

5

.8

5.9

18

1

7

16

66

6

0

60

16

2

3

24

24

3

8

41

1

27

87

8

7 21

9

Est

on

ia

1.3

1

.3

1.3

1

.2

1

5

15

1

4

6

8

62

5

9

1

7

23

2

7

2

5

34

4

7

31

70

7

0 0

0

Fin

lan

d

5.3

5

.4

5.6

5

.5

1

7

16

1

6

6

6

58

5

7

1

7

26

2

7

2

6

44

4

7

17

63

6

3 15

1

0

Fra

nce

6

4.4

6

4.2

6

8.0

7

1.0

19

1

7

17

64

6

0

57

17

2

3

26

27

3

9

45

1

01

77

7

9 71

9

7

Geo

rgia

4

.3

4.2

3

.9

3.7

1

7

15

1

4

6

9

64

5

9

1

4

21

2

7

2

0

33

4

6

61

53

5

4

-30

9

n/a

Germ

any

82

.0

81

.9

80

.2

74

.5

1

4

12

1

2

6

6

60

5

6

2

0

28

3

2

3

0

46

5

6

23

0 7

4

76

-13

1

66

Gre

ece

1

1.3

1

1.5

1

1.6

1

1.4

14

1

3

13

67

6

3

55

19

2

4

32

28

3

9

57

8

6 6

1

61

27

4

0

Hun

gary

1

0.0

9

.9

9.7

9

.1

1

5

14

1

4

6

9

64

5

7

1

6

22

2

9

2

3

34

5

1

10

8 6

8

70

16

2

2

Icela

nd

0.3

0

.33

0.3

7

0.4

1

2

1

19

1

7

6

7

62

5

9

1

2

19

2

4

1

8

30

4

1

3 9

2

94

-5

n/a

Irela

nd

4.5

5

.1

5.9

6

.5

2

1

19

1

7

6

8

65

5

9

1

1

16

2

4

1

6

25

4

0

64

61

6

4 6

3

5

Italy

6

0.0

6

0.9

6

1.9

6

1.2

14

1

2

12

66

6

2

55

20

2

6

33

30

4

3

59

2

01

68

7

0 31

8

24

9

Latv

ia

2.3

2

.2

2.0

1

.8

1

4

13

1

0

6

9

65

6

0

1

7

22

3

0

2

5

35

5

1

37

68

6

9 -5

-0

.3

Lith

uan

ia

3.3

3

.3

3.1

2

.7

1

5

14

1

4

6

9

63

5

6

1

6

23

3

0

2

3

35

5

1

54

67

6

7 -1

5

-0.7

Lux

em

bou

rg

0.5

0

.52

0.6

0

.7

1

8

17

1

6

6

8

64

6

1

1

4

19

2

3

2

1

31

3

8

18

3 8

2

83

7

4

"the

form

er Y

ugosl

av

Rep

ublic

of M

ace

donia

"

2.0

2

.0

2.1

2

.1

1

8

16

1

5

7

0

64

6

0

1

2

18

2

5

1

7

27

4

2

80

67

7

5 -1

n/

a

Malta

0

.4

0.4

2

0.4

3

0.4

2

1

6

14

1

3

7

0

62

5

8

1

4

24

2

9

2

0

39

5

0

1,2

81

94

9

7 -2

1

Mo

ldo

va

3.6

3

.7

3.1

2

.5

1

7

14

1

1

7

2

69

6

2

1

1

17

2

7

1

5

25

4

3

10

8 4

2

50

-3

20

n/

a

Mo

nte

negro

0

.6

0.6

0

.6

0.6

20

1

7

17

68

6

4

59

12

1

9

24

18

3

0

41

4

5 6

0

60

-51

n/

a

Neth

erl

an

ds

16

.5

16

.7

17

.2

16

.9

1

8

16

1

5

6

7

60

5

8

1

5

24

2

7

2

2

40

4

6

48

5 8

2

85

41

8

No

rway

4.8

5

.0

5.5

5

.9

1

9

18

1

7

6

6

61

5

9

1

5

21

2

4

2

3

34

4

1

16

78

7

8 39

1

8

Po

land

38

.1

38

.1

37

.0

33

.3

1

5

13

1

3

7

1

64

5

5

1

4

23

3

2

2

0

36

5

6

12

2 6

1

64

-1

9

Po

rtu

gal

10

.6

10

.9

11

.3

11

.4

1

5

13

1

3

6

7

64

5

7

1

8

23

3

0

2

7

37

5

3

11

5 6

0

64

15

5

0

Ro

man

ia

21

.5

21

.1

20

.0

18

.1

1

5

13

1

2

7

0

67

5

7

1

5

20

3

1

2

1

30

5

4

95

54

5

6 -2

4

Serb

ia

7.4

7

.3

6.9

6

.4

1

8

14

1

4

6

8

64

5

9

1

4

22

2

7

2

1

34

4

6

11

2 5

2

53

-3

38

n/

a

Slo

vak R

epu

blic

5.4

5

.4

5.3

4

.9

1

5

13

1

2

7

3

61

5

6

1

2

26

3

2

1

6

32

5

5

11

0 5

7

58

4

5

Slo

ven

ia

2.0

2

.1

2.0

1

.9

1

4

13

1

3

7

0

63

5

4

1

6

24

3

3

2

3

41

5

9

10

0 4

9

53

12

5

Sp

ain

4

5.8

4

9.3

5

2.7

5

3.2

15

1

3

13

68

6

4

55

17

2

3

32

25

3

6

59

8

7 7

7

78

58

3

76

Sw

ed

en

9.3

9

.6

10

.3

10

.7

1

7

17

1

6

6

5

60

5

9

1

8

23

2

5

2

8

37

4

2

22

85

8

5 63

3

3

Sw

itzerl

an

d

7.7

7

.9

8.6

9

.1

1

5

15

1

4

6

8

62

5

9

1

7

23

2

7

2

5

38

4

6

18

9 7

4

79

66

n/

a

Tu

rkey

71

.5

81

8

6

92

26

2

2

20

67

6

8

62

7

10

1

8

1

0

15

2

7

90

69

7

2 23

5

n/a

S TAT IS T ICAL ANNEX 71

FIN

AN

CIN

G S

OC

IAL P

RO

JEC

TS

IN

CEB

TA

RG

ET

CO

UN

TR

IES

: A

CH

IEV

EM

EN

TS

AN

D C

HA

LLEN

GES

Table

II: S

oci

o-e

conom

ic d

ispari

ties

GD

P p

er

cap

ita

in E

UR

at PP

P

(2010

est

.)

GD

P p

er

cap

ita

in E

UR

at PP

P

EU

-27

(20

10

) =

10

0

Un

em

plo

ym

en

t ra

te

(ILO

, 2

01

0)

Gin

i in

dex

Inco

me q

uin

tile

sh

are

ratio

Ratio

of

fem

ale

to

male

earn

ed

in

com

e

(2007

)

Gen

der

Inequ

ality

In

dex

(0

=p

erf

ect

eq

ua

lity

)

At-

risk

-of-

po

vert

y r

ate

(20

09

)

Befo

re/A

fter

soci

al

tra

nsf

ers

20

00

-08

1

99

1-9

9

20

09

2

00

0

20

08

R

an

k

Befo

re

Aft

er

Alb

an

ia

6,8

00

28

1

2.5

0

.33

0.2

9

4.1

n/

a

0.5

4

0.5

45

61

n/

a

13

Belg

ium

2

8,9

00

11

8

8.4

0

.33

0.2

5

3.9

4

.3

0.6

4

0.2

36

6

27

1

5

Bosn

ia a

nd

Herz

ego

vin

a

6,6

00

27

2

7.2

0

.36

0.2

8

n/a

n/a

0.6

1

n/a

n/a

n/a

18

Bu

lgari

a

10

,60

0

43

1

0.3

0

.29

0.2

5

5.9

3

.7

0.6

8

0.3

99

36

2

6

22

Cro

atia

15

,10

0

62

1

2.3

0

.29

0.2

4

4.5

4

.0

0.6

7

0.3

45

30

2

6

18

Cy

pru

s 2

4,0

00

98

6

.8

n/a

n/a

4.2

4

.0

0.5

8

0.2

84

15

2

3

16

Czech

Repu

blic

19

,50

0

80

7

.3

0.2

6

0.2

5

3.5

3

.4

0.5

7

0.3

30

27

1

8

9

Denm

ark

3

0,5

00

12

5

4.2

0

.25

0.2

5

4.6

3

.0

0.7

4

0.2

09

2

31

1

3

Est

on

ia

15

,90

0

65

1

6.9

0

.36

0.3

8

5.0

6

.3

0.6

5

0.4

09

39

2

6

20

Fin

lan

d

28

,30

0

11

6

8.4

0

.27

0.2

6

3.7

3

.3

0.7

3

0.2

48

8

26

1

4

Fra

nce

2

6,1

00

10

7

9.7

0

.33

0.3

3

4.4

4

.2

0.6

1

0.2

60

11

2

4

13

Geo

rgia

n/

a

n/a

16

.8

0.4

1

0.3

7

n/a

n/a

0.3

8

0.5

97

61

n/

a

31

Germ

any

29

,00

0

11

9

6.9

0

.28

0.3

0

4.5

3

.5

0.5

9

0.2

40

7

24

1

6

Gre

ece

2

1,8

00

89

1

2.5

0

.34

0.3

3

5.8

5

.8

0.5

1

0.3

17

23

2

3

20

Hun

gary

1

5,7

00

64

1

1.2

0

.30

0.2

4

3.5

3

.3

0.7

5

0.3

82

34

2

9

12

Icela

nd

26

,70

0

11

0

8.1

n/

a

n/a

4.2

3

.4

0.6

2

0.2

79

13

2

0

10

Irela

nd

30

,60

0

12

5

13

.6

0.3

4

0.3

6

4.2

4

.7

0.5

6

0.3

44

29

3

8

15

Italy

2

4,5

00

10

0

8.5

0

.36

0.2

7

5.1

4

.8

0.4

9

0.2

51

9

23

1

8

Latv

ia

12

,60

0

51

1

9.0

0

.36

0.3

2

7.3

5

.5

0.6

7

0.3

16

22

3

0

26

Lith

uan

ia

14

,20

0

58

1

7.8

0

.36

0.3

2

6.3

5

.0

0.7

0

0.3

59

33

2

9

21

Lux

em

bou

rg

69

,10

0

28

3

6.1

n/

a

0.2

7

4.3

3

.7

0.5

7

0.3

18

24

2

7

15

“th

e f

orm

er

Yu

go

slav

Rep

ub

lic

of

Ma

ced

on

ia”

8,6

00

35

3

2.2

0

.43

0.2

8

n/a

n/a

0.4

9

n/a

n/a

n/a

29

Malta

2

0,3

00

83

6

.5

n/a

n/a

4.1

4

.6

0.4

5

0.3

95

35

2

3

15

Mo

ldo

va

n/a

n/a

7.4

0

.37

0.4

1

n/a

n/a

0.7

3

0.4

29

40

n/

a

29

Mo

nte

negro

9

,80

0

40

2

0.0

0

.37

n/a

n/a

n/a

0.5

8

n/a

n/a

n/a

n/a

Neth

erl

an

ds

32

,80

0

13

4

4.5

0

.31

0.3

3

4.0

4

.1

0.6

7

0.1

74

1

21

1

1

No

rway

43

,80

0

17

9

3.6

0

.26

0.2

6

3.4

3

.3

0.7

7

0.2

34

5

25

1

2

Po

land

15

,20

0

62

9

.0

0.3

5

0.3

0

5.0

4

.7

0.5

9

0.3

25

26

2

4

17

Po

rtu

gal

19

,80

0

81

1

1.0

0

.39

0.3

6

6.0

6

.4

0.6

0

0.3

10

21

2

4

18

Ro

man

ia

11

,00

0

45

7

.6

0.3

2

0.2

8

6.7

4

.5

0.6

8

0.4

78

49

2

9

22

Serb

ia

9,0

00

37

1

9.4

0

.28

n/a

5.6

4

.6

0.5

9

n/a

n/a

23

n/

a

Slo

vak R

epu

blic

18

,10

0

74

1

4.4

0

.26

0.1

9

3.6

3

.3

0.5

8

0.3

52

31

1

7

11

Slo

ven

ia

21

,30

0

87

7

.2

0.3

1

0.2

8

3.2

3

.0

0.6

1

0.2

93

17

2

2

11

Sp

ain

2

4,7

00

10

1

20

.1

0.3

5

0.3

3

6.0

5

.4

0.5

2

0.2

80

14

2

4

20

Sw

ed

en

30

,10

0

12

3

5.4

0

.25

0.2

4

3.7

3

.4

0.6

7

0.2

12

3

27

1

3

Sw

itzerl

an

d

35

,70

0

14

6

3.6

0

.34

0.3

3

4.6

n/

a

0.6

2

0.2

28

4

22

1

5

Tu

rkey

11

,80

0

48

1

1.9

0

.41

0.4

1

9.9

1

3.0

0

.26

0.6

21

77

3

1

26


FIN

AN

CIN

G S

OC

IAL P

RO

JEC

TS

IN

CEB

TA

RG

ET

CO

UN

TR

IES

: A

CH

IEV

EM

EN

TS

AN

D C

HA

LLEN

GES

Table

III:

Health a

nd E

duca

tion s

yst

em

s

Li

fe e

xp

ect

an

cy

at b

irth

(i

n y

ears

, 201

0)

Mate

rnal

mo

rtality

ratio

(2

003

-08

)

Nu

mb

er

of

hosp

ital b

ed

s

per

1,0

00

peo

ple

(2003

-08

)

To

tal fe

rtility

rate

(b

irth

s p

er

wo

ma

n)

Po

pu

lation

with

at le

ast

se

con

da

ry e

du

cation

(% a

ges

25

an

d o

lder,

20

10

)

Pu

pil-

tea

cher

ratio

(20

05

-08

)

Gro

ss e

nro

lmen

t ra

tio

(%

of

sch

oo

l-a

ge p

op

ula

tion

, 2

00

1-0

9)

Lab

ou

r fo

rce p

art

icip

ation

(%

, 2

00

8)

19

90

-95

2

01

0-1

5

Fem

ale

M

ale

P

rim

ary

Seco

nd

ary

Tert

iary

Fem

ale

M

ale

Alb

an

ia

76

.9

92

2

.9

2.8

1

.9

83

.2

89

.2

n/a

10

2.1

7

7.7

1

9.3

5

5.5

7

6.4

Belg

ium

8

0.3

8

5

.3

1.6

1

.8

75

.7

79

.8

12

.6

10

2.3

1

09

.5

62

.1

60

.9

73

.5

Bosn

ia a

nd

Herz

ego

vin

a

75

.5

3

3.0

1

.5

1.2

n/

a

n/a

n/a

11

1.0

8

9.1

3

3.5

6

5.4

7

8.1

Bu

lgari

a

73

.7

11

6

.4

1.5

1

.5

69

.1

70

.6

16

.1

10

1.1

1

05

.2

49

.7

63

.4

73

.8

Cro

atia

76

.7

7

5.3

1

.5

1.5

5

7.4

7

2.3

1

7.3

9

8.6

9

3.6

4

7.0

5

8.9

7

1.7

Cy

pru

s 8

0.0

1

0

3.7

2

.4

1.6

6

4.0

7

5.2

1

5.0

1

02

.5

97

.8

36

.2

64

.5

78

.5

Czech

Repu

blic

76

.9

4

8.1

1

.7

1.5

8

5.5

8

7.6

1

7.3

1

02

.1

95

.0

54

.3

61

.1

78

.1

Denm

ark

7

8.7

3

3

.5

1.8

1

.9

59

.0

65

.6

n/a

99

.0

11

9.2

8

0.3

7

7.2

8

4.3

Est

on

ia

73

.7

25

5

.6

1.6

1

.8

94

.4

94

.6

n/a

99

.2

99

.7

65

.0

70

.2

78

.6

Fin

lan

d

80

.1

7

6.8

1

.8

1.9

7

0.1

7

0.1

1

5.9

9

7.6

1

11

.3

93

.8

73

.9

77

.7

Fra

nce

8

1.6

8

7

.2

1.7

1

.9

79

.6

84

.6

20

.3

11

0.2

1

13

.3

54

.7

65

.8

74

.9

Geo

rgia

7

2.0

6

6

3.3

2

.1

1.6

8

9.7

9

2.7

1

2.5

1

07

.4

90

.0

34

.4

59

.8

77

.4

Germ

any

80

.2

4

8.3

1

.3

1.3

9

1.3

9

2.8

1

8.0

1

05

.7

10

0.6

n/

a

70

.8

82

.3

Gre

ece

7

9.7

3

4

.8

1.4

1

.4

64

.4

72

.0

10

.1

10

1.2

1

01

.8

90

.8

55

.4

79

.0

Hun

gary

7

3.9

6

7

.1

1.7

1

.4

93

.2

96

.7

10

.6

97

.9

96

.7

67

.2

54

.8

68

.0

Icela

nd

82

.1

4

7.5

2

.2

2.1

6

6.3

5

7.7

n/

a

97

.2

11

0.0

7

2.3

8

1.7

8

9.9

Irela

nd

80

.3

1

5.3

2

.0

1.9

8

2.3

8

1.5

1

7.8

1

05

.4

11

3.4

6

1.2

6

2.8

8

0.7

Italy

8

1.4

3

3

.9

1.3

1

.4

76

.5

84

.1

10

.4

10

3.8

9

9.9

6

7.1

5

1.6

7

4.5

Latv

ia

73

.0

10

7

.6

1.6

1

.5

94

.8

96

.2

12

.8

96

.8

11

4.5

6

9.2

7

0.6

7

8.8

Lith

uan

ia

72

.1

11

8

.1

1.8

1

.4

91

.9

95

.7

9.7

9

6.1

9

9.1

7

5.9

6

5.5

7

1.6

Lux

em

bou

rg

79

.9

12

6

.3

1.7

1

.7

66

.4

73

.9

13

.1

10

0.3

9

5.4

1

0.0

5

8.1

7

3.9

“th

e f

orm

er

Yu

gosl

av

R

ep

ub

lic

of

Mace

don

ia”

74

.5

10

4

.6

2.1

1

.5

n/a

n/a

n/a

92

.8

84

.2

35

.5

50

.4

74

.8

Malta

8

0.0

8

7

.8

2.0

1

.3

64

.4

73

.5

12

.1

99

.0

98

.1

33

.0

41

.3

77

.7

Mo

ldo

va

68

.9

22

6

.1

2.1

1

.5

85

.8

92

.3

n/a

89

.2

83

.1

39

.9

53

.4

55

.6

Mo

nte

negro

7

4.6

1

4

4.0

1

.8

1.7

9

7.5

9

8.8

n/

a

n/a

n/a

n/a

n/a

n/a

Neth

erl

an

ds

80

.3

6

4.8

1

.6

1.8

8

6.3

8

9.2

n/

a

10

6.8

1

19

.5

60

.1

73

.4

85

.4

No

rway

81

.0

7

3.9

1

.9

1.9

9

9.3

9

9.1

n/

a

98

.4

11

2.5

7

5.9

7

7.3

8

2.6

Po

land

76

.0

8

5.2

1

.9

1.3

7

9.7

8

3.9

1

1.0

9

7.1

9

9.8

6

6.9

5

6.9

7

1.0

Po

rtu

gal

79

.1

11

3

.5

1.5

1

.4

44

.6

43

.8

11

.7

11

5.2

1

01

.3

56

.9

69

.0

79

.6

Ro

man

ia

73

.2

24

6

.5

1.5

1

.4

83

.8

90

.5

16

.3

10

4.7

8

7.5

5

8.3

5

5.3

7

0.7

Serb

ia

74

.4

14

5

.4

2.0

1

.6

61

.7

70

.7

n/a

10

0.6

9

0.5

4

8.7

n/

a

n/a

Slo

vak R

epu

blic

75

.1

6

6.8

1

.9

1.4

8

0.8

8

7.1

1

8.6

1

01

.9

92

.8

50

.1

61

.3

76

.5

Slo

ven

ia

78

.8

6

4.7

1

.4

1.5

4

5.9

6

3.7

1

7.1

1

02

.9

93

.5

85

.5

67

.5

75

.4

Sp

ain

8

1.3

4

3

.4

1.3

1

.6

70

.9

75

.7

13

.1

10

5.4

1

19

.1

68

.5

63

.2

81

.7

Sw

ed

en

81

.3

3

n/a

2.0

1

.9

87

.9

87

.1

10

.7

94

.2

10

3.1

7

4.5

7

7.1

8

1.8

Sw

itzerl

an

d

82

.2

5

5.5

1

.5

1.5

6

2.9

7

4.5

1

8.1

1

02

.4

95

.7

47

.2

76

.6

87

.8

Tu

rkey

72

.2

44

2

.8

2.9

2

.1

27

.1

46

.8

n/a

97

.6

82

.1

37

.1

26

.9

74

.6


FIN

AN

CIN

G S

OC

IAL P

RO

JEC

TS

IN

CEB

TA

RG

ET

CO

UN

TR

IES

: A

CH

IEV

EM

EN

TS

AN

D C

HA

LLEN

GES

Table

IV

: Envir

onm

ent and E

nerg

y

C

O2 e

mis

sion

s (m

etr

ic to

ns

per

cap

ita)

Gre

enh

ou

se g

as

em

issi

ons

: K

yo

to T

arg

ets

(1

990

/95-l

ev

el =

100

)

Fo

ssil f

uel en

erg

y

consu

mp

tion

(% o

f to

tal)

Ren

ew

ab

le e

nerg

y c

onsu

mp

tion

(%

of

fin

al co

nsu

mp

tion

) N

et en

erg

y im

po

rts

(% o

f en

erg

y u

se)

1

99

0

200

6

Targ

et

200

8

off

targ

et

on

/bey

on

d targ

et

199

0

200

7

200

8

202

0 targ

et

199

0

200

7

Alb

an

ia

2.3

1

.4

n/a

n/a

76

.5

67

.8

n/a

n/a

8

51

Belg

ium

1

0.8

1

0.2

9

2.5

9

1.4

7

6.0

7

3.1

3

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13

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73

7

5

Bosn

ia a

nd

Herz

ego

vin

a

1.2

7

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n/a

n/a

93

.9

91

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n/a

n/a

34

3

0

Bu

lgari

a

8.8

6

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92

5

5.4

8

4.3

7

7.8

9

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16

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66

5

1

Cro

atia

3.8

5

.3

95

n/

a

86

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86

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9.0

n/

a

43

5

7

Cy

pru

s 6

.8

9.6

n/

a

n/a

99

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96

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4.1

1

3.0

1

00

97

Czech

Repu

blic

12

.7

11

.2

92

7

2.8

9

3.2

8

3.0

7

.2

13

.0

18

2

6

Denm

ark

9

.8

9.9

7

9

92

.1

89

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82

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18

.8

30

.0

42

-3

8

Est

on

ia

16

.3

13

.0

92

4

7.5

9

9.8

9

1.3

1

9.1

2

5.0

4

7

22

Fin

lan

d

10

.2

12

.7

10

0

98

.8

55

.5

50

.0

30

.5

38

.0

57

5

6

Fra

nce

7

.0

6.2

1

00

93

.5

58

.0

51

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11

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23

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50

4

9

Geo

rgia

2

.9

1.3

n/

a

n/a

88

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70

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n/a

n/a

85

6

8

Germ

any

12

.0

9.8

7

9

77

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86

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80

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8.9

1

8.0

4

7

59

Gre

ece

7

.2

8.6

1

25

11

8.6

9

4.6

9

3.4

8

.0

18

.0

57

6

2

Hun

gary

6

.0

5.7

9

4

63

.4

81

.5

79

.0

6.6

1

3.0

4

9

62

Icela

nd

8.1

7

.6

11

0

14

4.9

3

3.0

1

9.2

8

1.0

n/

a

33

1

9

Irela

nd

8.8

1

0.3

1

13

12

1.3

8

4.8

9

1.0

3

.8

16

.0

65

9

1

Italy

7

.5

8.0

9

3.5

1

04

.8

93

.4

90

.5

6.8

1

7.0

8

3

85

Latv

ia

5.1

3

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92

4

5.9

8

1.6

6

4.2

2

9.9

4

0.0

8

6

61

Lith

uan

ia

6.0

4

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92

4

9.2

7

5.8

6

1.9

1

5.3

2

3.0

6

9

59

Lux

em

bou

rg

26

.0

22

.8

72

9

4.9

8

9.2

8

9.2

2

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11

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99

9

8

“th

e f

orm

er

Yu

gosl

av

Repu

blic

of

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don

ia”

5.6

5

.3

n/a

n/a

98

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85

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n/a

n/a

49

5

0

Malta

6

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6.7

n/

a

n/a

10

0.0

1

00

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0.2

1

0.0

1

00

10

0

Mo

ldo

va

4.8

2

.1

n/a

n/a

99

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90

.0

n/a

n/a

99

9

7

Mo

nte

negro

n/

a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Neth

erl

an

ds

11

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10

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94

9

7.1

9

6.0

9

2.9

3

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14

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8

24

No

rway

7.4

8

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10

1

10

8.2

5

1.9

5

4.8

5

6.0

n/

a

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7

-69

6

Po

land

9.1

8

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94

7

0.2

9

7.8

9

4.8

7

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15

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25

Po

rtu

gal

4.5

5

.7

12

7

13

0.3

8

0.4

7

9.1

2

3.2

3

1.0

8

0

82

Ro

man

ia

6.8

4

.6

92

5

2.4

9

6.1

8

2.8

2

0.4

2

4.0

3

4

29

Serb

ia

n/a

n/a

n/a

n/a

90

.6

89

.2

n/a

n/a

31

3

8

Slo

vak R

epu

blic

8.4

6

.9

92

6

7.8

8

1.6

7

0.8

8

.4

14

.0

75

6

7

Slo

ven

ia

6.2

7

.6

92

1

04

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71

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69

.2

15

.1

25

.0

46

5

3

Sp

ain

5

.9

8.0

1

15

14

0

77

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83

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10

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20

.0

62

7

9

Sw

ed

en

6.0

5

.6

10

4

88

.7

37

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32

.9

44

.4

49

.0

37

3

3

Sw

itzerl

an

d

6.4

5

.6

92

1

00

.8

59

.9

51

.6

18

.0

n/a

59

5

1

Tu

rkey

2.6

3

.7

n/a

n/a

81

.8

90

.5

10

.0

n/a

51

7

3


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