Mr Chairman, President, Governors, Ladies and Gentlemen,

It is a great pleasure for me to be here in Belgrade for this Annual Meeting and I am grateful to the Authorities of Serbia and Montenegro as well as to the City of Belgrade for their warm hospitality and excellent arrangements.

In the context of the Annual Meeting, the Bank has co-hosted seminars in other Balkan countries. I am grateful that you, President Lemierre, are taking such a strong personal interest in the Balkan region. The contributions of the EBRD to the development and stability in this region may form a core part of the legacy of the Bank.

The Bank performed remarkably well in 2004. All parameters on the scorecard were on or above the targets set out in the budget. The Bank’s Management and Staff deserve credit for their excellent achievements. I note that the Bank has been able to disburse more of its loans, putting our capital to work better than ever before.

A record 85 percent share of the projects approved last year represented projects rated good or excellent with regard to potential transition impact. The Bank has also put in place a monitoring system that measures the stock of projects in terms of their transition impact and risk. This shows that the Bank fulfills its mandate and refines its toolbox for that purpose.

As another part of its mandate, the Bank only engages in operations where it is needed. The Bank’s scrutiny of its additionality in each potential investment has resulted in a decline in business volumes in the advanced transition countries. With the fourth Capital Resources Review underway it is comforting to know that a natural graduation process is already happening – through the consistent application of the Bank’s procedures.

I am pleased to see that the Bank has developed a step-wise and thorough approach to dealing with the many issues of the Capital Resources Review. Fortunately, the Bank is not under an imminent capital constraint. Nevertheless, the Bank must strive to maximize its impact. It must gradually move south and east. However, an abrupt re-orientation to the most difficult environments is not a guarantee for transition impact. The EBRD and other institutions have only limited impact in partner countries unless there is a willingness to reform. Happily, the Bank’s Early Transition Countries Initiative seems to produce results, although the real impact will only be seen in a few years time – when the projects have matured.

The gradual move to the early and intermediate transition countries will increase the portfolio risk and probably reduce profitability for the Bank. Safeguarding financial soundness should be a strong objective for the Board in the course of the Review. Also, the Bank must not compromise its high standards regarding corporate governance. And, a more lax attitude regarding the political criteria in Article 1 of the Statutes of the Bank is not acceptable.

Fortunately, there are some distinct moves towards democracy and pluralism in some of the early and intermediate countries. I am thinking of Georgia and Ukraine in particular. In those countries, the Bank must respond promptly and assist through policy dialogue and investments. If reforms are not followed by improvements for people in their daily lives, disillusion may erode the foundation for real change. I encourage the Bank to co-operate closely with the international community in these delicate cases.

Finally, the EBRD has an important task in promoting environmentally sustainable development. It so happens that green energy production is an area where Iceland has something to contribute. My Government would be extremely proud to see among others Icelandic expertise in geothermal energy and hydro power come to use in the Balkan countries and other transition countries. Is there a better instrument for that than the EBRD, Mr. Chairman? I don’t think so.

Thank you, and I wish you all the best.