Proposed formation of a European Bank for Reconstruction and Redevelopment is being hailed as the most important move in international finance since the World Bank and the International Monetary Fund were established after World War II.
The United States and 39 other countries would give $12 billion to the new bank to foster economic reforms and aid to emerging democracies in Eastern Europe.The Soviet Union has expressed interest in the project, and therein lies an obstacle to U.S. participation.
U.S. officials are concerned that Soviet participation, unless strictly limited, could undermine the bank's special purpose.
The United States wants Soviet use of the bank to be limited to the amount of Soviet capital invested in the venture. And it wants a charter provision ensuring that loans go only to countries with democratic governments.
There are good reasons for the U.S. demands.
The proposed bank is a special purpose institution. It is intended to provide economic support for Eastern European countries whose economies were devastated by communist rule and recent political upheaval and change.
Other alternatives are available to the Soviets for meeting that country's economic needs, including the World Bank and IMF.
It would be wrong - even foolhardy - to create a new lending institution without building in safeguards to ensure assets are used for their intended purpose.
The United States has good reasons for its demands and should stick by those requests when officials reconvene in April for further discussions.