by Steve Schifferes BBC News Online economics reporter

The head of the European Bank for Reconstruction and Development has issued a stark warning to European leaders fighting an immigration backlash in Europe.

Speaking on the eve of its annual meeting, EBRD President Jean Lemierre told BBC News Online that only by promoting the development of Eastern Europe could EU leaders tackle the growing fear of immigration that has led to the strong electoral showing of Mr Le Pen in France and Pim Fortuyn's party in the Netherlands.

And he said that if the EU delayed further in admitting East European countries to membership it could lead to a serious setback in the reform process.

When asked what could be done to tackle the growth of the Far Right in European politics, Mr Lemierre responded vigorously .

'Promote growth'

The process of reform is certainly driven by the European cause - the moment it is postponed there will be a lot of questions

Jean Lemierre, President, EBRD

"There are fears today. The best way to make them increase is by not acting.

"If we do invest in the Central European countries, if we do encourage their aspirations [for membership], the situation will be easier.

"It is by promoting growth that we will address these fears."

Mr Lemierre said that Europeans should look towards the lessons of history.

Twenty years ago, when Spain and Portugal joined the EU, there were fears of mass immigration to France and Germany - but now those countries were attracting immigrants of their own.

Membership fears

The EBRD's job is to aid the countries of Eastern Europe and the former Soviet Union with the transition to a market economy by encouraging private investment.

It has been closely involved with preparations for membership by the five most developed Eastern European countries - Poland, Czech Republic, Slovakia, Hungary, and Slovenia - and the three Baltic nations of Estonia, Latvia and Lithuania, who are all expected to join the EU in 2004.

Mr Lemierre warned that any further delay in the process - which has been underway since 1998 - could undermine the impetus for economic reform in Eastern Europe.

"The process of reform is certainly driven by the European cause.

"The moment it is postponed there will be a lot of questions."

In its transition report, the EBRD said that economic growth was steady in the region - but warned that reforms like privatisation and budget restraint were under threat in Hungary, Poland and Slovakia.

Mr Lemierre also believes that the backlash against immigration could affect the amount of EU aid that is promised to Eastern Europe.

Difficult negotiations still lie ahead on the amount of agricultural and regional aid to be received by the new members, which could be at the expense of existing aid to EU members like Greece, Spain, and Ireland.

Russian reform

Mr Lemierre was full of praise for the economic reforms promoted by the new President of Russia, Vladimir Putin.

But he warned that Russian companies needed to do more to encourage good corporate governance.

The EBRD has refused to invest in Russia's largest energy company, Gazprom, because of worries over the treatment of minority shareholders.

Mr Lemierre said that "most major Russian companies could attract private investors providing their corporate governance was better.

"There is an understanding that this is key to their future because they need to raise money."

The EBRD said that the rapid growth of Russia, fed by higher oil prices, was now slowing, and that a deeper commitment to reform was needed.

And it warned that, unlike central Europe, foreign direct investment was unlikely to play as major a role in the reform process.

Poor countries focus

Mr Lemierre also welcomed a new focus on the region's poorest countries, including Albania, Moldova, and some of the central Asian republics.

He praised the UK international development secretary, Clare Short, for her imitative in focusing on these countries which "had previously been neglected," and said that there could be no growth where there was so much poverty and gross inequality.

He said the EBRD stood ready to help by reducing its requirement for loan guarantees from the government budgets, and hoped that both official creditors - the Paris Club - and private bank lenders - the London Club - would move to relieve the debt burden on these countries.

In total, the EBRD lent a record 3.3bn euros in 2001.

Mr Lemierre says that in its decade of existence, the bank has generated 67bn euros of private investment in Eastern Europe, more than three times its own capital investment.