Decisions are taken "on sound banking and investment principles" by directors from the 26 member countries.It does not provide the same kind of "soft loans" made by other development banks, such as the World Bank and the International Bank for Reconstruction and Development, but lends at competitive market rates that vary according to the project.However, the bank is inclined to step in to support business deals the commercial banks will not touch.Soon after the bank was set up it courted controversy for spending millions more on decorating its City offices than the projects it was supporting.More than £200m was spent on furnishings, decoration and travel by Jacques Attali, its first president, who was forced to quit with a £250,000 pay-off. About £750,000 went on imported Italian marble for the building's entrance hall, even though the bank spent only £101m on projects in Eastern Europe.It was subject to more ridicule when a number of staff had to be taken to hospital after eating a chargrilled tuna steak in the canteen. The bank claimed diplomatic immunity in the face of attempts by health officials to launch an inquiry.. When John Kerby, Britain's old-Etonian director of the European Bank for Reconstruction and Development, received a document in October from Whitehall asking him to support a loan for the purchase of Romania's steel industry, he thought it no more than routine. Little did he know that the "routine" instruction from officials working for Clare Short, the Secretary of State for International Development, would embroil him in a scandal involving the relationship between a Labour Party donor and the Prime Minister.At the meeting where Mr Mittal's loan was agreed, Mr Kerby joined other national representatives in discussing the need to privatise Romania's ailing steel company and to sell it to a buyer who would inject the funds needed to guarantee its future.Mr Mittal, an Indian steel billionaire with homes throughout the world, was already known to the bank after it granted him a $150m (£105m) loan to buy Kazakhstan's steel works in 1996. The bank was told Mr Mittal was meeting his schedule of repayments on the loan and was investing according to the deal's terms in the Kazakhstan plant.The Romanian deal was said to be similar in aim and structure, although the bank was told that Mr Mittal did not yet have the cash or backing from commercial banks to pay the full $400m (£280m) required in the contract over time.He needed the EBRD loan to pay a $50m (£35m) deposit to the Romanian government and begin pumping money into the outdated plant.

The contract said he would have to pay a further $351m (£245m) over the next five years and ensure that staff levels were not reduced below those at privatisation.In the hour-long debate, America formally registered its objection to the loan, while directors from other nations expressed reservations about an overcapacity of steel production that could lead to a loss of jobs in other steel-producing countries. Officials at the European Bank, in London, had already rigorously checked Mr Mittal's financial record to ensure that he could repay the money.What the EBRD would have been aware of was that Mr Mittal's London-based company, ISPAT International, had seen its credit rating slip steadily over the years to below investment grade. The company, registered in the Dutch Antilles, had seen its official credit rating by Standard & Poors slip from BB to BB- to B+ at the time the loan was approved.But this did not turn the bank against Mr Mittal. And with the Department of International Development's instructions on his desk, Mr Kerby, a former director the department's Eastern Europe and Western Hemisphere division, knew which way he should vote.The cash helped Mr Mittal win control of Sidex, which was also being coveted by a French competitor, just months after he had paid £125,000 to Labour Party funds. Yesterday, Downing Street was dragged into the debate about the loan and forced to deny that it had been involved in recommending that the Department of International Development back the deal.Ms Short's department said no ministers had been involved in writing the letter of approval or the assessment of whether to back the EBRD loan. But officials at the Treasury and Department of Trade and Industry were consulted by the Department of International Development about whether to recommend the loan.

The Government could not say last night whether the British embassy in Bucharest had also been asked for its opinion.The Department of International Development's assessment was made on the basis of whether the sale of the steel works was worthwhile, and whether a loan should be granted to ensure the privatisation went through. A spokeswoman said: "What was recommended was that the project was a good project It was routine. We always send a note to the EBRD on these things."Tony Blair's official spokesman said: "Clare Short is particularly livid that the integrity of her people is being called into question over this.". One of Labour's biggest business supporters, Clive Hollick, the media tycoon, is to be made chairman of Britain's biggest arts complex. The Labour peer and fund-raiser's primary role will be raising the millions necessary to finance the latest plans.But the choice of a close friend to Labour may hand the Conservatives the opportunity to make fresh claims of government cronyism.Lord Hollick, the former owner of Express newspapers, has been a major fund-raiser for Labour for years and was made a special adviser at the Department of Trade and Industry after the 1997 general election.His wife, Sue, chairs London Arts, the grant-giving wing of the Arts Council in the capital and a funder of the South Bank Centre. Lakshmi Mittal has not yet raised the cash to complete the £300m purchase, backed by Tony Blair, of the Romanian steelworks at the heart of the Labour Party funding scandal. Downing Street tried to head off suggestions that it was "angered" or "rattled" by the affair.Iain Duncan Smith, the Conservative Party leader, renewed calls for an inquiry and said he was "amazed" that British funds were used to back the deal, even though it was not a British company.

"British taxpayers have now apparently subsidised this man, as well letters from the Prime Minister's office going to support his purchase of a Romanian steel company," he said on GMTV.The EBRD loan was crucial to Mr Mittal's deal to buy the Sidex works and covered the cost of a £35m initial payment to the Romanian government when the deal was finalised last year. The Sidex sale to the Indian tycoon was until now thought to be completed. But Mr Mittal's office confirmed that the tycoon had paid only a proportion of the cash so far and had to invest hundreds of millions of dollars over the next five years as part of the contract.A spokesman for Mr Mittal said: "The cash payment was about $50m [£35m)]and the amount that we committed to the steelworks was $351m [£245m] over the first five years."An EBRD spokesman said yesterday: "It was made clear at that time [of the first loan] that this was the beginning of a longer-term investment project and that more money was required from us by the Mittal side – far more money from us."Mr Mittal has spent $600,000 (£419,000) backing a group campaigning for 40 per cent tariffs on steel imports into America, including from Britain.. Carjackers ambushed an elderly woman driver yesterday and forced her to lie face down in the road while they stole her luxury Mercedes. Police said yesterday the attackers had started to trail the woman as she drove home after visiting friends in central London.They overtook her two-seater convertible near Epsom Downs and suddenly stopped. Two men jumped out and raced back towards her car.She locked the doors but as she cowered in her seat the two men smashed the windows of the car and dragged her into the road.