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EBRD Meeting Opens in Sofia

Prague, April 12 (RFE/RL) - Jacques de Larosiere, President of the European Bank for Reconstruction and Development (EBRD), says that the bank's "existence" depends on whether shareholders agree to double its capital.

The proposed 12,500 million dollar capital increase is the key issue to be considered on Monday and Tuesday. In Sofia by more than 60 EBRD shareholders at the bank's board of governors meeting.

The board is chaired by Italian Prime Minister Lamberto Dini and includes numerous finance ministers, such as Germany's Theo Waigel and Britain's Kenneth Clarke.

De Larosiere said the vote will be "a very crucial moment in the history of (the) bank." He said that without a capital increase, the EBRD's ability to commit loans and equity "would fall drastically."

The EBRD was set up five years ago to assist the transition to capitalism in Eastern and Central Europe and in former Soviet republics. De Larosiere said that about 10,000 million dollars in loans and equity investments already have been approved out of an initial capital base of about 12,500 million dollars.

The EBRD was severely criticized in the past. De Larosiere's predecessor, Jacques Attali, was forced to resign in 1993 after it emerged that the EBRD had spent millions of dollars to refurbish its London offices. At the time, the EBRD had allocated a far smaller amount for loans to countries which the bank was supposed to be helping.

Critics in the United States have suggested that the EBRD might more efficiently achieve its goals if it were privatized. But De Larosiere contends that the bank's mandate has not yet been completed, and that it must remain a public institution for the foreseeable future.

He says "transition takes time," adding that the EBRD would "one day be out of business (but) is far from that point."

The bank's vice president, Bart le Blanc, says the EBRD aims to increase the level of average annual commitments to more than 3,000 million dollars.

Since De Larosiere has taken over, the EBRD's costs have remained stable. The bank has cut its workforce by 10 percent and reorganized its operations. Last month, the bank announced net profits of more than 9 million dollars for 1995.

De Larosiere said the bank exceeded its annual commitment target last year and increased its impact on the transition process. The bank entered new territory by making disbursements for the first time in Azerbaijan, Croatia, Georgia and Kyrgyzstan.

But some investments have, again, put the bank at the center of controversy. A year ago, the EBRD paid Slovakia's National Property Fund about 59 million dollars for a 10.5 percent share in the petrochemical group Slovnaft. But a few months later, the state managers of Slovnaft bought nearly four times as many shares at a total price of less than four million dollars - about 1.5 percent of the price that the EBRD had paid.

The head of the EBRD's Slovak and Czech team, Jiri Huebner, said the bank was "unhappy with a number of aspects" of Slovnaft's management buy-out. He said that the sale was executed without a competitive tender, and that it had not been announced in a prospectus under which the EBRD had bought its shares. The EBRD was forced to admit that it had been fooled by the Slovak government on the deal.

At the Sofia meeting, the EBRD is likely to paint a bright picture of its activities in 24 countries. In addition to the 60-odd shareholders who have voting rights, about 4,000 delegates from more than 50 countries are expected to attend.