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European ministers' conclusions on financing for development: where is the ambition?

Added 12 Dec 2013

In 13 short paragraphs, the EU’s foreign affairs council – composed of foreign ministers from EU member states – picked up important themes such as the fight against tax havens and the need for responsible financing standards, but said almost nothing new, a worrying sign of low European commitment levels going into critical financing for development negotiations in the next two years.

The ministers committed themselves to “the fight against corruption, tax havens and illicit financial flows” but provided no further detail on any plans they have for ending Europe’s central role in creating this problem. The accompanying conclusions on ‘policy coherence for development’ were similarly silent. The first key test will be next week’s heads of state Council. The signs do not indicate that the stubborn resistance of Austria and Luxembourg against passing the long delayed update to the savings tax directive will be overcome. Eurodad has previously highlighted that this is the key to unlocking greater exchange of information between European tax authorities. Further key tests will be whether the EU can adopt a new anti-money laundering directive with a strong requirement for public registries of the real or ‘beneficial’ owners of companies and other corporate structures, and make good on its promises to expand the country-by-country reporting required of banks to cover all other sectors. Negotiations are ongoing on both directives between the European Parliament and the Council, and Eurodad and members continue to push hard for strong action on these key transparency measures that will help curb the billions lost by developing countries to tax dodging every year.

The Ministers said they will “continue to promote responsible lending and borrowing and lending practices” but there has, so far, been no detail on what they actually mean by this. 2014 will be a key year to push for some real meat to be put on the bones of this commitment, and to promote sensible standards, such as those set out in Eurodad’s Responsible Finance Charter. On debt issues, which a recent Eurodad report has warned continue to be a major global and European issue, the Council had little to say beyond supporting “existing debt relief initiatives” – of which there are none of any significance – and continuing to highlight the creditor group of the Paris Club, rather than promoting fair and independent mechanisms for sovereign debt workout needed in Europe as well as developing countries.

On Official Development Assistance (ODA, or ‘aid’), there was the usual reaffirmation “to respect the EU’s formal undertaking to collectively commit 0.7% of GNI to official development assistance by 2015”, even though there are no credible plans to do this, and European aid fell last year rather than rose, according to the latest figures. When discounting poor quality “inflated aid” the European CONCORD Aidwatch coalition estimates that the EU is only halfway to that target, with less than two years to go. The EU’s own accountability report also predicts that the EU will fail to meet the target by a considerable margin.

There was also a reference to “external development finance measurement” – code for attempts by some donors to change, or water down, the way ODA is measured, to artificially boost levels by, for example, counting more loans as aid, as Eurodad has warned.

The support for the European Commission’s efforts to use aid money to subsidise or ‘blend’ with private investment which was apparent in the Commission’s communication, to which these conclusions respond, was there. However, the affirmation that the EU “will continue to use grants … for leveraging public and private resources” was tempered by the recognition of some of the risks highlighted by Eurodad’s recent report on blending including, according to the Council, “debt sustainability and accountability and avoiding market disturbances and budgetary risks.”

We will have to wait until the planned European Commission communication on financing for development early next year to see if Europe can up its game and bring credible new commitments to the UN negotiating table, as financing takes centre stage in negotiations on the UN’s post 2015 development objectives.