East European Bank Moves Nearer to Reality : Economics: Global policy-makers settle disputes on Soviet borrowing and on which currencies would be used.

Officials of the United States and 41 other countries ironed out their last major differences over the proposed East European development bank Monday, clearing the way for final approval of the new institution as early as next month.

At a daylong meeting here, the delegates reached compromises on two key disputes that Washington had said might keep the United States out of the new bank: how to restrict borrowing by the Soviet Union and which currencies to use in calculating each member country’s share.

They also approved the articles that will form the basic charter of the institution.

Treasury Secretary Nicholas F. Brady had warned that the United States might pull out if those issues could not be resolved. Until Monday, the United States and Western European countries had been at an impasse on both.

Jacques Attali, the French economic official who is serving as chairman of the group, said the delegates plan to meet again in Paris on May 30 to choose a location and a president for the new bank and, it is hoped, to complete an international accord establishing the institution.

If the May session goes as planned, the bank--to be known as the European Bank for Reconstruction and Development--could be making loans by early next year. The bank is intended to help the emerging democracies in Eastern Europe finance their shift to market economies.

The dispute over lending to the Soviet Union was resolved when Moscow agreed to limit itself to borrowing no more than the actual amount of hard cash that it is expected to contribute to the institution--about $238 million--at least for the bank’s first three years.

After that, the matter will be reviewed, but the rules can be changed only by a majority that amounts to 85% of the new bank’s total weighted voting--meaning that the United States and Japan, for example, together could veto any plan they do not like.

In addition, any money lent to Moscow must be used solely to finance projects in the private sector, to provide technical assistance or to help state-owned enterprises that either are converting to private businesses or are operating as competitive corporations.

The United States had feared that unless the new bank placed some restrictions on its lending to the Soviet Union, Moscow’s huge demands would drain off too much of the institution’s resources and leave too little for the emerging Eastern European democracies.

With the Western Europeans pressing for looser limits on lending to the Soviets, the Bush Administration appealed to Moscow to agree to tighter restrictions on its own. The ploy worked, and Attali said Monday that the Soviets had already submitted a letter requesting the new restraints.

On the question of how to denominate members’ contributions, the Western Europeans wanted to calculate membership shares in terms of the new European Currency Units, or ECUs. But Washington objected, arguing that the ECUs’ wide fluctuation against the dollar would pose problems with appropriations.

Under the compromise approved Monday, countries that join the new development bank will be able to denominate their shares in dollars, ECUs or Japanese yen--a Solomon-like approach designed to please each of the bank’s major shareholders.

David C. Mulford, undersecretary of the Treasury for international affairs, said after the session that the terms of both proposals were “fully acceptable” to the United States. “All of our important objectives were accomplished,” he said in an interview.

The new institution will begin operations with capital of about $12 billion. Western European countries will hold 51% of the shares and voting power in the bank, the United States will hold 10% and Japan 8.5%. The Soviet Union, both a shareholder and a borrower, will have a 6% share.

Also at U.S. insistence, the new institution will earmark at least 60% of its loans to help bolster the private sector in the Soviet Union and Eastern European countries. The remaining amount, up to 40%, will go to finance infrastructure, environmental cleanup or competitive state-owned firms.

Officials said Monday that the decision about where to locate the new institution would rest almost entirely with the Western Europeans. London, Paris and Vienna top the list of possible headquarters sites. The Europeans are expected to agree on a choice by May.

Two Europeans--Attali and Onno Ruding, former finance minister of the Netherlands, are the front-runners to become the bank’s first president. To help spread the benefits, Attali is expected to get the job only if the bank is not located in Paris.

The bank was proposed early last fall by French President Francois Mitterrand, partly to spur French leadership in the effort to help the emerging East European democracies. Attali has been Mitterrand’s chief economic adviser since 1981.

The United States was at first lukewarm to the idea but decided to participate largely to maintain a U.S. presence in Eastern Europe’s shift to free-market economic systems. Washington pressed for a larger share than most countries for symbolic reasons.