[Press release] Off their trolley! EBRD gives Kaufland benefit of the doubt and a EUR 100m loan

Protestors from the German organization ver.di demonstrate in front of EBRD headquarters before its Board considered a loan to finance Kaufland operations in Romania

The approval yesterday by the European Bank for Reconstruction and Development (EBRD) of a controversial EUR 100 million loan for the expansion of the Kaufland discount hypermarket chain in Romania has been strongly criticised by CEE Bankwatch Network. The decision followed the adjournment of a previous EBRD board vote on the loan and a subsequent two week EBRD investigation into employee rights’ violations carried out by Kaufland and reported by the Polish National Labour Inspectorate. [1] International unions and NGOs had attacked Kaufland’s unsound business practices, deeming the company completely unworthy of receiving further public financing.

On the eve of yesterday’s EBRD vote, the Romanian Federation of Free Commerce Unions met with the management of Kaufland Romania, part of the German Schwarz Group which now has annual turnover of EUR 40 billion.

Vasile Gogescu, president of the Romanian Federation of Free Commerce Unions, said: “We are well aware that employee rights and labour legislation are being violated in numerous Schwarz Group stores all across Europe. We have no reason to believe that the story will not repeat in Romania. Our February 5 meeting with Kaufland Romania’s management was amiable but inconclusive. It didn’t bring new facts into light, so uncertainty is still there about Kaufland’s operations from the labour perspective. Our relationship with the territorial labour inspectorates is quite good, and we will be working together to ensure that the practices of the Schwarz Group are not replicated in our country.”

Bankwatch believes that following the EBRD’s non-transparent investigation into the Polish case, and now with no access to the management plan agreed on as part of the new loan with Kaufland Romania, any claims from the EBRD that it will ensure the company’s management conforms with national laws and international standards on employment in central and south-eastern Europe will ring hollow.

Klara Schirova, Bankwatch’s International EBRD Coordinator said: “In the case of Kaufland Poland, the EBRD claims to have evaluated compliance with labour laws and standards by reviewing annual environmental reports submitted by the company. Something obviously went badly wrong and it’s scandalous that this new loan even reached a board vote. If it intends to save face, the EBRD should be open about what improvements in its monitoring system it will put in place in Romania. As a minimum, Romanian trade unions should be allowed access to the annual environmental reports conducted by Kaufland and to form advisory groups monitoring the management’s compliance with local labour standards.”

Ionut Apostol, Bankwatch’s Romanian National Coordinator, said: “We have this new Kaufland deal and coming soon the EBRD is eyeing a soft loan for US pig manure giant Smithfield to wade into Romania. Exactly what else lies in store for Romania via the EBRD’s corporate charity? Exxon perhaps, to come in and build some more pipelines to supply western Europe?”

For more information

Klara Schirova
Bankwatch International EBRD coordinator
Tel: +420-775 117 141
Email: klara.schirova at bankwatch.org

Ionut Apostol
Bankwatch’s Romanian National Coordinator
Tel: +40 726 155 022
Email: ionut at bankwatch.org

Notes for editors

[1] Polish Kaufland became a beneficiary of an EBRD EUR 110 million loan in 2005, a few weeks prior to the discovery of over 1200 cases of labour and safety law violations in the German company’s operations across Poland.

A further sixteen Polish regional inspections into Kaufland stores in 2005 and 2006 revealed excessive overtime work, little compensation, inadequate breaks and working hours exceeded for pregnant women. The EBRD’s approval of the new loan effectively denies that these general violations took place in Kaufland’s Polish stores.

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