EUROPEAN DIARY:There are doubts over whether the EU's aid package is existing cash already pledged, writes Jamie Smyth
WITH BRUSSELS primarily focused on the fate of the EU economy these days it is easy to forget that the global economic downturn will be felt most severely in the developing world.
The World Bank warned last month the number of malnourished people worldwide will increase by 44 million people in 2008 to a staggering 967 million - almost one-sixth of the world's population. Its report, Rising food and fuel prices: addressing the risks to future generations, concluded rising food and fuel prices this year are pushing poor families to the brink of survival and causing irreparable damage to the health of millions of children.
"While people in the developed world are focused on the financial crisis, many forget that a human crisis is rapidly unfolding in developing countries. It is pushing poor people to the brink of survival," said World Bank president Robert Zoellick, who recommended that development aid programmes should be made more generous - a tough ask given that donors in Europe and abroad are running budget deficits. But after hours of tough negotiations last Friday the European Commission, member states and the European Parliament signed off on a €1 billion aid package, which will be used to help poor developing countries address the food crisis.
European Commission president José Manuel Barroso, who proposed the extra financial aid package in July when food prices jumped sharply, welcomed the inter-institutional agreement, noting that the money would help farmers in the world's poorest countries to feed themselves and others. "As we tackle the financial and economic crisis we cannot forget the poorest people in the planet," he added.
"Barroso's billion", as the aid package has been nicknamed, should provide much needed funds to help poor farmers in Africa, Asia and Latin America buy new seeds and fertilizers for the 2009 growing season. But as with many big financial announcements there are lingering doubts over whether the full aid package constitutes brand new money or is simply existing cash already pledged by the EU or member states repackaged.
Oxfam said yesterday it welcomed the deal but noted just two-thirds of the money represents new cash for developing states. Lise Ford, acting head of Oxfam's EU office, also criticised the five months it took to agree the deal, which was prompted by bitter wrangling between member states and EU institutions over who should foot the bill. One, the Campaign to Make Poverty History, which is supported by Irish rock star Bono, estimates that €760 million of the €1 billion is additional money at EU level. Oliver Buston, European director of One, welcomed the deal and applauded all those who championed the cause for the world's poorest farmers. "However, we know that the real test on additionality is yet to come - when national treasuries write the cheque they must not take this funding from their bilateral aid programmes," he warned.
Fine Gael MEP Gay Mitchell, who was the European Parliament's rapporteur on the "Barroso billion" proposal and attended the crunch talks on Friday, says the deal involved compromise on all sides between the parliament, commission and member states.
"Initially Barroso had proposed diverting some of the €3.4 billion in unused EU agricultural funds to fund the financial package but this was strongly opposed by net contributors," says Mitchell, who notes that the cash had to be found from other parts of the EU budget and national budgets when it became clear the parliament and EU member states opposed using Common Agricultural Policy (Cap) funds.
"From my point of view the final deal agreed was my absolute bottom line," he added.
Net contributors to the EU budget such as Germany and the Netherlands opposed diverting unused Cap funds to aid because under EU rules this cash flows back to member states if it goes unused. The parliament's budget committee also opposed setting a precedent of diverting Cap funds, leaving the commission scrambling to come up with enough money from the smaller budget envelope it has to support European external policy.
Under the compromise deal the EU will pay the €1 billion over three years rather than the two years initially intended under Barroso's proposal.
About €240 million will be diverted from the EU's stability programme budget, which provides crisis response aid to support peace-building efforts. A further €420 million will be supplied from the EU's flexibility instrument to meet unexpected crisis, a further €100 million from unused aid reserves while EU states will supply an extra €240 million from their national budgets.
Many aid agencies fear EU states will simply divert this "new" money from their existing national development aid budgets because of the pressure on their own national finances. Such creative accounting would do little to help poor farmers in the developing world. But with finance ministers facing huge challenges, the real test for "Barroso's billion" will come when national budgets are decided next year.