EU Heroes and Villains: Which countries are living up to their promises on aid, trade and debt? | Heavily Indebted Poor Countries

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2005 is already an extraordinary year. The tsunami in the Indian Ocean on 26 December 2004 caused widespread devastation, killed hundreds of thousands of people, left millions homeless, and plunged already poor countries into even deeper poverty. While the disaster has caused great devastation, the global wave of solidarity and public generosity that followed it offers grounds for hope. The outpouring of aid to those affected showed just what the international community is capable of when it acts in unison. The destruction caused by the tsunami was more than a ‘natural disaster‘: the impact was made far worse by the prevalence of extreme poverty and marginalisation in the region, and it is generally recognised that the affected countries will need significant support for many years if they are to recover. But it should also be recognised that the lack of international action to reform debt, aid, and trade policies has a similarly devastating impact on poor countries and requires the same level of solidarity and determination by the world community. Every week, poverty kills more people than the Asian tsunami. The question is: was the reaction to the tsunami a one-off event, or will the concerns of the poor be a continuing priority for the rich world? In this paper we consider the heroes and villains in the EU’s 25-member bloc. We ask: are they collectively doing enough to make sure that the EU seizes the opportunity to make poverty history?
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  EURODAD European Network on Debt and Development Joint NGO Briefing Paper EMBARGOED UNTIL 10:00 HRS GMT MONDAY 14 FEBRUARY 2005 EU Heroes and Villains Which countries are living up to their promises on aid, trade, and debt?  Published in association with Nagle Community, Presentation Justice Network (Ireland) Missionary Sisters of the Holy Rosary Wingspread International Columban Sisters, Ireland Children in Crossfire International Federation Terre des Hommes Trocaire  Austrian National Platform of Development NGOs BOND (UK National Platform of Development NGOs) Ibis  Summary 2005 is already an extraordinary year. The tsunami in the Indian Ocean on 26 December 2004 caused widespread devastation, killed hundreds of thousands of people, left millions homeless, and plunged already poor countries into even deeper poverty. While the disaster has caused great devastation, the global wave of solidarity and public generosity that followed it offers grounds for hope. The outpouring of aid to those affected showed just what the international community is capable of when it acts in unison. The destruction caused by the tsunami was more than a ‘natural disaster‘: the impact was made far worse by the prevalence of extreme poverty and marginalisation in the region, and it is generally recognised that the affected countries will need significant support for many years if they are to recover. But it should also be recognised that the lack of international action to reform debt, aid, and trade policies has a similarly devastating impact on poor countries and requires the same level of solidarity and determination by the world community. Every week, poverty kills more people than the Asian tsunami. The question is: was the reaction to the tsunami a one-off event, or will the concerns of the poor be a continuing priority for the rich world? 2005 could be the year when we make poverty history. The European Union will start to discuss how it can help the poorest countries to meet the Millennium Development Goals (MDGs) when Development Ministers meet on 15th February. The G8 Summit, scheduled to take place in the UK in July, will focus on the particular problems of  Africa. In September in New York, UN members will review progress towards achieving the MDGs, which include fighting hunger, reducing infant deaths, and expanding access to primary education. To conclude the year, the World Trade Organisation will meet in Hong Kong to discuss reform of world trade rules that should benefit the poorest communities. It won’t be easy. Rich countries are way off-track in terms of meeting their commitments to support poor country efforts to meet the MDGs: today they give half as much aid, as a proportion of their income, as they did in the 1960s; poor countries are still labouring under the burden of massive debts; and the world trade system is in crisis – characterised by mistrust, a lack of transparency, and rules which are rigged against the poor. Co-operation and a concerted effort are essential if 2005 is to ‘inaugurate a decade of bold action‘, as urged by Jeffrey Sachs, economic adviser to the UN Secretary General, in a recent report. The EU will be absolutely key to the success or failure of this venture. In this paper we consider the heroes and villains in the EU’s 25-member bloc. We ask: are they collectively doing enough to make sure that the EU seizes the opportunity to make poverty history? The EU must take positive action on three key issues: improving the quantity and quality of international aid; easing the burden of unsustainable debt; and making the rules of world trade more fair. On aid, the EU could play a pivotal role in helping to achieve the increases that are necessary in order to meet the MDGs by the year 2015. In the past, EU commitments have acted as a catalyst to stimulate action by other major aid donors, such as the USA. The EU should achieve an average level of 0.7 per cent of GNI allocated to overseas aid by 2010. Sadly, the EU has a mixed record. Rich countries all agreed in 1970 to reach 0.7 per cent of GNI as foreign aid, at the latest by 1980. Twenty five years after this deadline, only five countries have reached this target. Four are EU member states. Luxembourg and Sweden deserve gold stars for their efforts. So does the Netherlands, which is giving more than 0.8 per cent of its GNI as aid – but their 1    gold star is at risk as they are keen to change the rules to allow security-related expenditure to be counted as aid. Denmark is also a leading aid champion, giving the highest percentage of GNI as aid in the EU. However, from 2001 to 2004 Danish aid as a proportion of GNI declined from 1.03 per cent to 0.84 per cent, and Denmark could soon be knocked off the top spot. The other 21 EU member states are still a long way off track in terms of their promise to reach 0.7 per cent; this is inexcusable. Italy is one of the world’s wealthiest nations, yet gives only a miserly 0.17 per cent of its GNI in aid. Hardly a laudable record for a G8 member. Chancellor Gerhard Schroeder, speaking at the 2005 World Economic Forum in Davos, committed Germany to reaching the 0.7 per cent target in the ‘medium term’. On current trends, Germany will not reach 0.7 per cent until 2087, which is a long way from being in the ‘medium term’. If the German government is serious about creating a greater role for itself on the world stage, or securing a permanent place on the UN Security Council, it must now set an ambitious and binding timetable to reach 0.7 per cent. Ireland deserves a special black mark for abandoning its plans to reach the target of 0.7 per cent by 2007, a change of policy which illustrates the fragility of these commitments. Relying on average EU aid levels is deceptive in that some member states are seriously under-performing. In a dramatic contrast, the Czech Republic increased its aid contribution by 300 per cent between 2000 and 2003, while Greece and Portugal continue to contribute a mere 0.2 per cent of their GNI. There is some support among member states in Europe for the proposed International Financing Facility (IFF), which would use aid pledges as collateral for issuing bonds on international markets in order to release money that could be spent now. There are some positive features in the IFF and the UK, Italy, France, and now Germany support the proposed facility. However, the IFF should in no way substitute for member states adopting binding timetables to reach 0.7 per cent of GNI as aid as soon as possible. In addition, all countries supporting the IFF must publicly guarantee that repayments to the IFF will not be taken from aid budgets. Longer-term innovative financing mechanisms, such as a tax on international currency transactions and air travel supported by the French and Spanish governments, should be supported, but again should not be seen as a substitute for reaching 0.7 per cent, and staying there. On the question of unsustainable debt, the majority of EU member states have committed themselves to cancel the bilateral debts of the world’s poorest countries. The record of Italy shows, however, just how slow member states can be in delivering on their promises. In 2000, Italy pledged to cancel €4 billion. Three years later, only half of this amount had been delivered. Member states know, however, that multilateral debts need to be cancelled too since the majority of poor countries owe most of their debts to multilateral institutions, such as the International Monetary Fund and World Bank. This type of debt is not being cancelled systematically and even when limited cancellation has been granted, countries have often had to implement harmful economic reforms for very little gain. Ireland deserves a special mention for being the first member state to support full cancellation of multilateral debts, and the UK, which has consistently driven forward the debate on debt relief in international forums, recently announced proposals for deeper and broader debt relief for initially 21 countries and up to 65 countries in the future. These efforts are welcome, although they could go further, for example by challenging World Bank- and IMF-imposed conditionality and providing genuinely new money rather than diverting resources from existing aid budgets. Many other member states, including the Netherlands and France, remain opposed to a policy of 100% cancellation of multilateral debts, even though evidence demonstrates that this measure is essential if countries are to have any hope of reaching the MDGs by 2015. On the question of unfair terms of trade, the EU has the potential to make a huge difference to the economic prospects of poor countries. Europe accounts for 20 per 2  
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