The EU bank

The southern and eastern Mediterranean countries did not escape the global economic crisis but demonstrated that they were well placed to respond to it.

In order to provide some key pointers for analysing the consequences of the crisis and exit scenarios for the Mediterranean partner countries[1], the European Investment Bank (EIB) asked the Forum Euro-méditerranéen des Instituts de Sciences Économiques (FEMISE) to carry out a new study.

The main points of this study, which has been published on the EIB and FEMISE (www.femise.org) websites, may be summarised as follows:

• After a decade of economic progress and reforms that led to strong growth (4 to 6% per annum), the partner countries felt the impact of the global economic crisis as a result of their heavy dependence on the developed economies (including Europe), which had gone into recession. The partner countries in fact very much rely, for their macroeconomic equilibria, on external flows – international trade, their migrants’ financial transfers, FDI (foreign direct investment) and services (such as tourism). Growth therefore slowed to 3.7% in 2009, and this had repercussions for the fiscal balances.

• The global context of emergence from the crisis – characterised by a change in the relative ranking of economies, a return to structural policies and increased competition between different regions of the world – provides an opportunity for the partner countries to improve their competitiveness but also poses a challenge, namely that of developing new forms of growth (7 to 8% per annum), in order to drive both the modernisation of their economies and the creation of some 60 million new jobs.

• In this connection, the partner countries will have to formulate an overall strategy based on intensifying the opening up of their economies to the outside world, developing new activities and achieving growth that is more inclusive, i.e. clearly targeted at reducing inequalities, the emergence of a middle class and the achievement of a better regional balance. In this context, three courses of action appear to be particularly relevant: (a) consolidation of the free trade area in the Mediterranean with a view to creating a bigger internal market, augmented by a policy of encouraging foreign direct investment; (b) a gradual move towards a knowledge-based society (human capital formation and increased business innovation) that will accelerate the transition to productivity-driven growth; and (c) the implementation of structural policies to address the problem of poor basic infrastructure provision and raise the standard of essential services, as well as improve the business environment (modernisation of the banking sector, improving the regulatory and economic framework within which businesses operate, etc.).

• The recommendations contained in the FEMISE study have implications for the relationship between Europe and the Mediterranean, particularly with regard to the content and management of this relationship. Thus the establishment of a more integrated economic area will mean joint management, at the regional level, of the approach to projects (type of project, method of financing and investment priorities), people (human capital formation, mobility and governance) and economic flows (both financial and trade-related).

The problems arising in connection with the emergence from the crisis and the new relationship between Europe and the Mediterranean will be at the heart of the discussions at the 6th “Rendez-vous de la Méditerranée” (Mediterranean Forum), the annual meeting of the Cercle des économistes and the Institut de la Méditerranée, dealing with the socioeconomic development of the partner countries. This forum will be held, with the active involvement of the EIB, on 4 December in Marseille.

Note to editors:

The European Investment Bank gives concrete expression to the economic and financial partnership between Europe and the Mediterranean through its dedicated instrument FEMIP (Facility for Euro-Mediterranean Investment and Partnership), which groups together all the instruments made available for the socioeconomic development of the partner countries (loans, private equity, technical assistance, studies). FEMIP has been operating since October 2002 and is today the leading financial player in the southern and eastern Mediterranean, having lent more than EUR 10bn, including EUR 1.6bn in 2009. Its priorities are to develop the local private sector, especially SMEs, improve the business environment by financing basic infrastructure, modernise the financial sector and protect the environment. Under the Union for the Mediterranean (UfM), the EIB is overseeing – via FEMIP – three of the six priorities of the Paris Declaration (13 July 2008): the Mediterranean Solar Plan, the cleaning up of pollution in the Mediterranean and the maritime and land highways. For further information, visit the website: www.eib.org/femip.

FEMISE is a network of 87 economic research institutes from 14 European Union and 10 partner countries that specialise in matters relating to the socioeconomic development of the Mediterranean countries. It is coordinated jointly by the Cairo-based Economic Research Forum and the Institut de la Méditerranée in Marseille. For further information visit its website: www.femise.org.

This study was undertaken under the auspices of the FEMIP-FEMISE partnership, which was established in March 2006 and strengthened in July 2009. Financed by the FEMIP Trust Fund, this partnership provides for a number of studies by 2012, to be carried out by FEMISE on behalf of and in collaboration with FEMIP, and with the involvement of FEMISE in some of the work undertaken by the Marseille Center for Mediterranean Integration (see: www.cmimarseille.org). Under this partnership FEMIP is also involved in formulating FEMISE’s work programme.