It will be interesting to see how quickly it will dawn on the Eastern Europeans that the EU needs them almost as much as they need the EU. “The absorption capacity of the Central and Eastern European countries, in particular, seems to be gathering pace.”In other words, the economic health of western Europe depends on nurturing the growth of demand – especially for machinery – in the east.When they first kicked over their Communist legacy in 1989, the CEECs were the flavour of the month.They were spoken of asthe new ‘tiger’ economies, where low wages combined with a skilled workforce could achieve double-digit growth rates and suck in all the capital goods that western Europe could possibly manufacture.The EBRD was created to ride this wave.It was born as an intellectual folly, straight out of the pages of a work of political philosophy by a trusted aide to former French President François Mitterrand – the now notorious Jacques Attali.Opening for business in April 1991 and allocated 10 billion ecu of capital by its shareholders – including the CEECs, the CIS, the US and the EU – the bank soon ran into serious problems. To be fair to Attali, much of this turnaround reflects changes on the ground rather than the vastly superior quality of the new regime.In 1995, growth in the CEECs strengthened while the pace of decline slowed in the CIS.The enormous strides in market-oriented reform and the attraction of big-ticket inward investment – especially by the Czech Republic, Hungary and Poland – played a major part in this process.The pursuit of predictable monetary and exchange rate policies, leading to convertibility in the most advanced states, has all but killed off investors’ fears.Major investments are announced every week. In December, Ameritech and Deutsche Telekom paid 670 million ecu to increase their stake in Hungarian telecoms operator Matav Rt to 67%, while 20 of the world’s biggest investment banks are vying to manage the sale of Polish copper giant, KGHM Polska Miedz SA.This sea-change is not lost on EU finance ministers. Those who, in previous years, often sent their officials to EBRD annual meetings instead of attending themselves are, this time, heading straight to Sofia from their meeting in Verona. Ever since the Berlin Wall came down seven years ago, member states have – in public at least – gone along with Germany’s view that nothing is more important than tying these countries to the bosom of a stable and workable Union.The moral debt owed to the Eastern Europeans is due to culminate in full EU membership for at least a handful of them within the next decade.But, in reality, the priorities have been very different. While unemployment, along with the single currency plan, have long been at the front of EU decision-makers’ minds, words about their desire to help the Eastern Europeans have not been matched by deeds.When Eastern European finance ministers are invited to meetings of their EU counterparts, they are, as often as not, left to discuss micro-economic reform with officials while ministers board their planes home.But times are changing.EU finance ministers heading for Sofia on 15-16 April to attend the annual meeting of the European Bank for Reconstruction and Development (EBRD) may find that a boot is starting to take shape on the collective foot of their Central and Eastern European (CEEC) counterparts.On the same day in February when he revealed EU growth would slow to less than 2% this year, Economics Commissioner Yves-Thibault de Silguy made a highly-revealing comment.“In exports, the Community has been able, until now, to maintain its position on the world market,” he said. A former managing director of the International Monetary Fund and long-time governor of the Banque de France, de Larosière brought some much-needed banking know-how to the operation.Administrative spending has been brought under tight control, with only marginal increases over the past two years despite a huge increase in the volume of operations. In 1995, the bank boasted a net profit of 7.5 million ecu after provisions, up from 1 million ecu in 1994.By the end of 1995, it had approved more than 370 projects for a total of 7.8 billion ecu, with more than 300 for 5.9 billion ecu committed.The EBRD has also started to achieve one of its fundamental aims – withdrawing from investments with a profit and handing over the management of projects to a willing and eager private sector.In December, it sold its 26-million-ecu holding in Czech confectioner Cokoladovny to its partners Danone and Nestlé, once the company restructuring was complete.The strong growth in operations means, however, that the bank will exhaust its resources within two years. This has prompted de Larosière to ask shareholders for another 10 billion ecu for his capital base – a request they will accept in Sofia. For Attali, it was always meant to be more than just a bank. He saw it as a sort of community of European values, the central focus of the European economic and political space.But the truth is that it was meant to be a new bank, albeit of a new type: a development bank intended to act as a catalyst for private-sector investment. For example, a favourite EBRD target would be a credit facility for small and medium-sized enterprises (SMEs), agribusiness or an equity participation in a firm’s capital spending programme.Its ambitious president wanted the best staff and salaries to match, he wanted a figure-head headquarters in London and had to pay dearly for that, and he loved to travel to spread the word, which was not cheap.While the bank was spending lavishly on travel budgets, staff salaries and – most famously – on replacing the foyer of its headquarters with marble, at a cost of 60 million ecu, progress on the job it was created to do was very slow.Because it was mandated to take a hard-headed business approach to its lending activities, the EBRD found it difficult to identify high-quality investment opportunities.Eventually, the credibility gap became too wide. In 1993, Attali was forced to resign and was replaced by Jacques de Larosière for a four-year term which runs until the middle of next year.