1989: how the fall of the Berlin Wall led to the birth of the EBRD

By Andrew Kilpatrick

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The fourth of June 1989 marks a political turning point in history. In central Europe the drive for freedom became unstoppable after the trade union movement Solidarność won a resounding victory in the country’s first partially free election in more than 40 years. A few hours earlier, on the same day in communist China, tanks and armoured personnel carriers surrounded Tiananmen Square and opened fire on student protestors, crushing weeks of protests. The communist universe split to follow very different paths. As 1989 came to a close, central and eastern Europe had liberated itself of a repressive regime and many countries were preparing for free and democratic elections.

The West looked on and cheered as the East teetered. But when it came to financial help to support the people’s democratic quest, Western leaders were far more cautious. The G7 discussed the issue in Paris at their annual Summit on 14 July – at a spectacular show as 1989 also happened to be the 200th anniversary of the French Revolution ­– but their declaration on East-West relations ducked any serious effort at financial support.

Later that summer, while sitting at his desk – reputedly used by Napoleon – immediately outside President François Mitterrand’s office in the Elysée palace, Jacques Attali, his long-time adviser, came up with the idea of a ‘Bank for Europe’. He had in mind a Marshall-type plan to bring the two halves of Europe back together after four decades of separation by the Iron Curtain. It was a grand vision, and a prescient one. Attali wanted to create a strong Europe, culturally and economically, one based on the larger market he envisaged, which could compete globally with America and Japan.

Too many brilliant ideas are sliced and diced to death at the hands of overcautious officials. The same fate seemingly awaited Attali’s proposal. Almost. Mitterrand’s speechwriter carefully excised ‘risky’ language on a European bank from a speech being prepared for delivery at the European Parliament. “No-one believes in your idea,” he told Attali. But the wily conseillère slipped it back into the speech and so President Mitterrand announced on 25 October: “What can Europe do?...Why not set up a Bank for Europe!”

Few people took notice. Observers saw it as a nice rhetorical gesture. But then nobody foresaw what happened next. Less than two weeks later, on the evening of 9 November, a botched announcement by the East German leadership on a new travel regime was interpreted by East Berliners as permission to travel to West Berlin. Almost immediately, some 50,000 headed for the Wall’s crossing points. By midnight East and West Berliners sat atop the Wall, united once again. By morning, people began to demolish the structure that had separated Berlin, Germany, Europe and, symbolically, the world for 28 years, which seemed like an eternity.

The world was astonished at this sudden turn of events. The West now faced direct questions as to how it intended to help. The United States of America, still wary of the Soviet Union, had sidestepped taking the baton that summer, when secretary of state James Baker suggested the European Commission coordinate assistance efforts. Financial support for central Europe was essentially a European issue.

For the forthcoming European Council meeting in December 1989, chaired by France, Mitterrand’s key goal was to move to the next stage of the Maastricht process: the creation of the European Central Bank and a single European currency. Rather than risk derailing these plans, he called an emergency Council for 18 November to discuss the situation in the East. This gave him an opportunity to float his idea of a ‘Bank for Europe’. At the Council dinner he did just that, but was rebuffed.

Rapid shuttle diplomacy took place in the following weeks. Germany’s Chancellor Helmut Kohl had not pronounced on the issue but it soon became clear that his interest was German reunification. With several key players voicing concerns, Mitterrand realised how this issue could be used to serve the European Union cause. He reckoned it gave scope to push the ‘Bank for Europe’ idea, too. It helped that other ideas commensurate with the extraordinary situation were manifestly absent.

In the run-up to the Council meeting it was by no means clear whether Mitterrand would succeed. But momentum was on his side. At the Council, Chancellor Kohl, a committed European, gave way on the question of the EU’s Economic and Monetary Union. Would the British Prime Minister Margaret Thatcher now stop the ‘Bank for Europe’ as she had tried to block so many European issues? She did not, and no others objected. The Danish Prime Minister Poul Schlüter proposed the name EBRD, and on 9 December, the European Council “approved the creation of a European Bank for Reconstruction and Development...”

The EBRD thus began its journey, ready to respond to the needs of the East. It took several months of hard negotiations before the Bank’s charter was agreed. By then it was no longer a purely European construct, though it was based in London with a French President, the same Jacques Attali.

Two years earlier, US-President Ronald Reagan had stood at the Brandenburg Gate in Berlin imploring the Soviet leadership: “Mr Gorbachev, tear down this wall!” People in the East had made it a reality, against all odds. The crowds chanted: “We are one people”. Thirty years on, some would say the transition is not yet complete.

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