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EU lending arm to override Turkey ban with $540m earthquake aid

REUTERS/Eloisa Lopez
People affected by the deadly earthquake receive aid in Hatay, Turkey, on February 24, 2023

The European Union’s (EU) lending arm, the European Investment Bank, is to temporarily override its near four-year long ban on financing in Turkey to provide €500 million ($540 million) for the country’s post-earthquake rebuilding efforts.

The EIB stopped virtually all lending in Turkey after a row over oil and gas drilling off Cyprus in 2019, but the severity of last month’s earthquake, which killed nearly 56,000 people in Turkey and neighbouring Syria, has prompted it to make an exception.

“We are working together with the European Commission on a joint comprehensive package, of which up to €500 million is to be delivered by the EIB,” the bank’s vice president, Lilyana Pavlova, said in a statement.

“We will shortly present it to our board of directors for approval.”

Speaking at an international donor conference, Commission President Ursula von der Leyen, said the overall package by the commision and EIB would add up to €1 billion ($1.1 billion).

While it is understood that all EU countries, including Cyprus, will give the green light for the EIB funding, formal approval might not come until June as the plans still need to be fleshed out and the timing is sensitive.

“It goes without saying that it is our absolute priority to make sure the financing goes to those who need it most in the context of the reconstruction efforts,” the EIB’s Pavlova said.

“It does not include budget support for the national government to support investments outside the scope of the recovery.”

Turkey is set to hold pivotal presidential and parliamentary elections on May 14 and EU members are wary of the €500 million, while not a long-term resumption of EIB lending, being seen as some kind of indirect backing of incumbent president Tayyip Erdogan’s re-election campaign.

The EU has long accused Erdogan of human rights violations and the bloc’s ties with Turkey are tense over Ankara’s crackdown on dissent following a 2016 coup attempt as well as the oil and gas row in the Eastern Mediterranean.

More recently, Turkey has blocked a bid by Sweden – an EU member – to join Nato in the wake of Russia’s war against Ukraine although it has just given Finland’s membership its blessing.

The EIB lent around €2 billion a year in Turkey between 2009 and 2016 before the concerns about Ankara’s domestic crackdown first saw the bank scale back its lending in the country.