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Secondary school students from 15 European countries participate in an exchange program, funded by Erste. (Photo courtesy of the Erste Foundation) 

It sounds like a Hans Christian Andersen fairy tale, recast for modern capitalism: In 1819, a Catholic priest founds a savings bank in Vienna to help poor people who have moved to the Austrian capital manage their money through a common fund supported by wealthy citizens. Johann Baptist Weber, the priest turned banker, made history by launching Austria’s first savings bank and strengthening egalitarian ideas. Today, that bank remains historically significant as one of the largest financial service providers in southeastern and central Europe. The Erste Group, as the bank is now called, not only provides banking services to citizens of the countries formerly behind the Iron Curtain, but also through its largest shareholder—the Erste Foundation—fosters civic engagement in the region.

Recent history in southeastern and central Europe is anything but fairy tale-like. Following the collapse of Communism in 1991, war shattered the former Yugoslav Republic, and ethnic tensions are still high in the Balkan region. These problems are large and complex, and as a result the Erste Foundation supports 820 programs in 17 different countries throughout central and southeastern Europe. Total expenditure for foundation projects between 2005 and 2011 was $67.8 million.

Erste has evolved with the European banking and foundation sectors. In 1993, a change in an Austrian banking law allowed it to go public and raise capital. The business operations (the Erste Group) were then split off from the holding company, and the latter became the Erste Foundation in 2003. The past decade saw a period of rapid growth for the Erste Group. It absorbed smaller banks in Hungary, the Czech Republic, Croatia, Romania, and other countries in the region. Today the bank has more than 17 million customers in eight countries, employs about 50,000 people, and as of October 2012 posted net profits of $597.3 million euros.

Although the Erste Group has profited from its growth, the foundation’s mission of serving civil society has not changed, say Erste leaders. “Erste is obliged to invest dividends in projects that benefit the common good,” says Maribel Koeniger, head of communications at the Erste Foundation. This is not just talk. Erste Foundation’s structure is different from most philanthropic organizations’. “Erste Foundation was put into place out of social motivations, not business motivations,” says Boris Marte, the foundation’s departing managing director. “On one hand, we’re a foundation working for a civil society; on the other hand, we’re a foundation that’s a shareholder of one of the biggest banks in the region. Normally it’s the other way around—banks start some kind of foundation to do social responsibility stuff.”

Marte says Erste’s structure allows it to be more independent than typical foundations in its mission and in the execution of its program decisions. Instead of a wealthy benefactor setting up a 501(c)(3) to advance a cause, or a corporation funding social causes as “a means of soul-cleansing for American businesses,” to quote a 2010 Los Angeles Times article, the Erste Foundation is an engine behind the for-profit Erste Group. With 20 percent ownership of Erste Group, the foundation is the bank’s largest single shareholder. Erste Bank profits fuel the Erste Foundation’s programs, so in effect the bank’s profits are directly reinvested in the region where it operates. Reductively speaking, the tail wags the dog, though it’s very much a symbiotic relationship.

Although the foundation and the bank function as independent entities, they do collaborate occasionally on projects. One such project is Die Zweite Sparkasse (Second Savings Bank), for people who would not qualify for a regular bank account. The two entities work together to grant anyone an account, no matter his credit status, along with free advice on how to manage finances intelligently.

CREATING CULTURAL UNIFICATION

Erste Foundation divides its projects into three programs: Social Development, Culture, and Europe, although many of its projects do not sit neatly in one category. Marte says that a main goal of the Europe program is to break down barriers and overcome prejudices. The Balkan region is noted for having a large number of different spoken languages in a small geographic area. “We reach out to young people, giving them programs and platforms, so they can meet across borders and experience people from other nations—to see that other people are not so different from their own compatriots.”

Beka Vuco, the western Balkans regional director for the Open Society Foundations, which work regularly with Erste, cautions that it can be difficult to assess the efficacy of programs that often take a generation or two to show results. Yet Vuco says, “Erste is among the five top donors in the Balkan region. It has established itself as a reliable partner and as a foundation that covers issues that are of importance in that part of the world.” “What I think is unique about Erste,” says Caroline Hornstein-Tomic, a fellow of the Institute of Social Sciences Ivo Pilar in Zagreb, Croatia, and a member of the Erste board, “is that it has a very pronounced interest in supporting local stakeholders, like artists, activists, and scientists. Other foundations tend to have a clear project or do sponsorship-type work, whereas Erste is really in cooperation with local partners. And by doing so it has become, in a few years, one of the major players in the Balkans, especially in arts and culture.”

One of Erste’s most high-profile programs is the Academy of Central European Schools (ACES). ACES is a student exchange program of sorts, operating in 15 countries. Teachers find a “partner” teacher in another country through the ACES website, and together they submit an application. An international jury selects 100 or so teacher partners from about 300 applications. Each teacher then selects a student between the ages of 12 and 17, and the group travels to a conference for a few days of socializing and workshops around a theme. The 2012 theme was media literacy; 2011’s was building bridges in societies. The actual student exchange takes place later in the year: students stay with host families and, presumably, soak up the culture of the foreign country and bring it back home, becoming cultural ambassadors.

Erste is one of three institutions behind ACES, The foundation covers much of the program’s costs, including travel and accommodations. Yet individual schools are required to raise funds—a deliberate move, says ACES Project Manager Robin Gosejohann. “We like to see schools open up to their communities” to raise the necessary funds, as it helps them be more invested in the project. This philosophy is very much in keeping with Erste’s method of helping others to help themselves. But at the end of the day, it’s not all about work. “Kids have fun, fall in love, cry when they go home,” he says.

The issue of ethnic tension remains a problem, says Gosejohann, even in a controlled academic setting. “The last wars were only 10 years ago, and there are still prejudices,” he says. “Some teachers won’t speak with teachers from certain nationalities, so that is something we still need to overcome.” But for every story of xenophobia, there’s one of cooperation. One such story involves a high school in Kosovo, which applied for funding with a Slovenian school. International troops in Kosovo, still in place following the wars of the late 1990s, heard about the collaboration and offered the Kosovan school the use of their military bus, so that the Kosovan students were able to travel free to Slovenia and Slovenians to Kosovo. “It helped the troops there be seen as humans, and it provided the Slovenes with a solid piece of information on Kosovo,” says Gosejohann.

Another Erste project is the Return to Europe documentary series—ten one-hour films on ten different countries in the Balkans. Gerald Knaus, who founded the European Stability Initiative (ESI), a Berlin-based NGO, headed the project, which was the brainchild of an Erste staff member. “The idea was to show to a wide European audience how the Balkans had changed in the last ten years,” says Knaus. The films, shown on TV throughout Europe, were seen by more than five million people, including some EU commissioners. One theme of the films was visa liberalization—many young people in countries like Serbia and Montenegro were trapped in their respective nations, because it was difficult or impossible to secure visas. A year and a half after the films were shown, visa restrictions were lifted for most of the Balkan countries.

“The series addressed a lot of issues that were not tackled before,” says Vuco. “Visa liberalization is of the utmost importance, and I’m sure the films helped. … With advocacy and also provoking questions … they ended up bringing down real boundaries.”

Given the foundation’s successes over the past decade, it would seem that Erste is poised for growth. But with much of Europe embroiled in financial crises, budgets for social and cultural issues are being slashed in the countries where Erste is active, and the Erste Foundation’s budget is likewise stunted. “We have to focus on projects that have real impact,” says Koeniger, “and this means that we will disappoint more people by denying their project ideas or applications.”

Yet two more installments of the Return to Europe documentary series, on Croatia and Moldova, recently have been released, the ACES program is attracting record applications, and 2011 saw the launch of more programs than any other year to date. “We want to remain a big player in the region,” says Marte, “and give people the feeling that there is one Europe to which we all belong.”

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