Ecofin meeting: Not the end of Robin Hood Tax debate

The recent meeting of the EU ministers for economy and finance (Ecofin) could not find an agreement on the implementation of the Financial Transaction Tax (FTT) also known as Robin Hood Tax. But according to Peter Wahl of weed Germany, “this is not yet the end of the discussion”. The official communiqué says: “Ministers will further discuss the issue at an informal meeting in Brussels on 30 September and 1 October." This is confirmed by a statement of the German finance minister Schäuble who said (according to the German edition of the Financial Times) that the implementation of the tax was not for sure but there would be a chance for which one must fight. The British finance minister Osborn said instead: "This has been discussed since decades and will continue to be discussed for decades."

Unofficial sources said that Greece would have joined the camp of the proponents which by now consists of Austria, Belgium, France, and Germany.

The president of the EU Commission (the executive of the Union) Barroso said in a speech at the European Parliament yesterday: "I am also defending taxes on financial activities and we will come with proposals this autumn." It is unclear what he means by "financial activities". It could be the "Financial Activities Tax" as proposed by the IMF, but it could also be something else. Probably the opacity is by intention in order not to occur partisan between the big shots Germany and France on the one hand and the UK at the other.

France announced to raise the issue of the FTT again in the G20, although the Toronto summit had refused the FFT.

As the Germans had announced that in case that an implementation at EU level would not be possible - and the statement of Osborn points very much in that direction - an implementation in the Euro Zone should be considered. The finance minister of Luxembourg, Luc Frieden, opposed this and said the FTT "in the Euro zone only is not acceptable."

Despite the political differences on the subject Peter Wahl still sees a window of opportunity for the FTT:

“The differences between the elites are obvious. They are not capable to come to an agreement in either direction. Pressure from civil society should therefore continue. This is also important in those countries, where the government is in favour of the FTT, in order to prevent a retreat. There are some major countries such as Italy and Spain where the government is silent. There, pressure should try to reach a positive attitude.
The option of the implementation in the Euro zone should be looked at more in detail. The Europeans should prepare for the October Ecofin and the proposal announced by the Commission. At global level, the UN conference on the MDGs and the General Assembly and the G20 summit in Seoul could be further landmarks for campaigning.”

Stand-Up Against Poverty

Fiscal holes and black holes threaten MDGs

A just published report for Oxfam by Development Finance International, The Impact of the Global Financial Crisis on the Budgets of Low-Income Countries, examines the impact of the global financial crisis on the budgets of low-income countries, especially their spending to reach the Millennium Development Goals (MDG). The crisis created a huge budget revenue hole of $65bn, of which aid has filled only one-third. As a result, after some fiscal stimulus to combat the crisis in 2009, most Low income Countries (LIC) (including those with IMF programs) are cutting MDG spending, especially on education and social protection. They have also had to borrow expensive domestic loans, and increase anti-poor sales taxes. Almost all LICs could absorb much more aid without negative economic consequences (whereas they have much less space to borrow or to raise taxes).

The report therefore urges the international community to make strong new aid commitments at the Millennium Summit in September 2010, funded by financial transaction taxes or other innovative financing:

* the IMF to encourage LICs to spend more on MDG goals and on combating climate change and to report regularly on such spending;
* and LIC governments to increase spending on social protection and education; taxation of income; property and foreign investors; and efforts to fight tax avoidance.

The authors of the report, Katerina Kyrili and Matthew Martin from Development Finance International warn: “If these changes are not made, the fiscal hole caused by the crisis risks becoming a ‘black hole’ into which the MDGs, and the lives and education of many of the world’s poorest citizens, will disappear.“

UN Summit should endorse financial transactions tax

The International Trade Union Federation (ITUC) is calling on governments to commit to introducing a financial transactions tax (FTT) at September’s United Nations Development Summit to help tackle global poverty and accelerate action on jobs and climate change. The UN Summit, to review progress on the Millennium Development Goals (MDGs), will take place against a background of growing global unemployment and inequality and major set-backs on economic development in countries across the globe. An FTT could raise between US$200bn and US$900bn depending on the way it is structured and the level at which it is set, according to the ITUC submission which is being sent by its national affiliates to governments in preparation for the Summit. Even a small percentage of the funds raised by an FTT would help put in place a social protection floor, which would give a major boost to tackling poverty. The submission sets out the case for putting an FTT at the centre of an overall package of measures which would also tackle corporate tax evasion and ensure effective regulation of banks and finance.

According to the trade union body, instead of simply focusing on spending cuts, governments need to increase revenues to ensure employment, public services and development aid. Parts of the finance sector are awash with money, just two years after taxpayers had to bail out poorly regulated banks. An FTT would not solve all the world’s problems, but it would certainly be a good starting point by moving capital from speculative profiteering to kick-starting the real economy and helping avoid a double-dip recession which would have horrendous consequences for the poorest countries in particular, trade unionists say.

HIV and AIDS: Trade unions press for rights-based approach to combat pandemic

International trade union movement is calling for governments to push ahead with a rights-based approach to tackling the HIV and AIDS pandemic, following the 18th International AIDS Conference in Vienna at the end of July. “While there are some positive signs concerning HIV and AIDS prevalence in some countries, millions of HIV-positive people have no access to treatment, millions more are at high risk of infection and there are disturbing signs of increasing incidence in several countries. We have to overcome the stigma and discrimination which are still common around the globe, and allocate sufficient resources to stop the spread of the virus and ensure that treatment is available to all those affected. We are especially concerned that the global economic crisis, and cuts to public expenditure on health in particular could undermine the progress which has been made,” said ITUC General Secretary Sharan Burrow.

Stressing the importance of action at the workplace in fighting the pandemic, the trade union delegation at the Vienna Conference highlighted the adoption of a Recommendation on HIV-AIDS and the World of Work by the ILO at its June Conference this year. The ILO Recommendation, the first ever international human rights instrument to focus explicitly on HIV and AIDS and the world of work, was adopted by an overwhelming majority of ILO delegates. It clearly establishes the importance of action at the workplace, including voluntary testing and counselling protection against discrimination, and focuses on the need for engagement with those most vulnerable and at risk.

Trade union participants from the ITUC, Global Union Federations and national representatives from across the world, including Argentina, Cameroon, Canada, Cote d’Ivoire, Ghana, Guyana, Kenya, Nigeria, the Philippines, Tanzania, Uganda, the UK, Ukraine and Zimbabwe joined the ITUC’s Austrian affiliate the OeGB which hosted the trade union delegation to the Vienna Conference, which was attended by more than 20,000 participants in total.

For further information:
* Global Unions AIDS Programme (GUAP), Statement to the Vienna AIDS Conference

Oxfam: G8’s summit of shame fails poor people

As the G8 Summit comes to a close, international agency Oxfam criticized the leaders for their failure to deliver on their promises and for trying to divert attention by cobbling together a small initiative for maternal and child health. “No maple leaf is big enough to hide the shame of Canada’s summit of broken promises,” said Mark Fried, spokesperson for Oxfam. “The G8’s failure will leave a sad legacy of kids out of school, denied medicines for the sick, and no food for the hungry.”

With total G8 aid frozen, their five billion dollar commitment to maternal health will likely be taken from vital areas such as education and food, cautioned Oxfam. “This year the headline is maternal health, last year it was food. With overall aid frozen, the G8 are just shuffling the same money around to different pots,” said Fried. “The only promise that counts is the Gleneagles one to increase aid by $50 billion by 2010 and that is the one they have abandoned today.”

At the last G8 Summit, donors pledges $22 billion over three years to support agriculture in developing countries, but Oxfam calculates that at most $6 billion of this is new money and they are double counting it to pay for other initiatives, such as helping poor countries cope with climate change. “There are a billion hungry people in the world but it seems the G8 are out to lunch. Instead of new money for old promises, we got old money, re-pledged, recycled and renamed,” said Fried. “Oxfam asks France, as next year’s G8 host, to offer real accountability and resuscitate the G8’s flagging commitment to the world’s poor.”

As focus now shifts to the G20, Oxfam is encouraged by the place development issues have garnered on the agenda, and called on leaders to give poor countries a seat at the table. “The G20 mustn’t repeat the G8’s mistake of only inviting Africa for the photo ops,” said Fried. Oxfam also urged the G20 to adopt a financial transaction tax to raise the funds necessary to fight poverty and climate change. "After the scandal of the G8's broken promises, the G20 now has the chance to stand up and deliver for the world's poor,” said actor and Oxfam Global Ambassador Bill Nighy in Toronto. "A Robin Hood Tax on banks is a simple but brilliant idea to raise hundreds of billions of dollars to help millions of poor people who have been hit hardest by global economic downturn, hunger and climate change."

EU aid own goals pushing MDGs out of reach

EU Member States are missing their official development aid targets and jeopardising global efforts to reach the Millennium Development Goals, reveals a new report published today by CONCORD, the European confederation of development NGOs. The report, Penalty against Poverty: More and Better EU aid can score Millennium Development Goals, is being released as EU leaders are set to meet in Brussels next week to agree their common position for the United Nations’ MDG Summit in New York this September.

‘Penalty against Poverty’ finds that EU development aid in 2009 amounted to €49bn or 0.42% of national income – €1bn less than 2008 levels. Official estimates for 2010 put total EU aid at 0.46% of national income, far short of the 0.56% target for 2010 agreed by member states back in 2005. In real terms, this represents a shortfall of €11bn in funding with some of the EU’s biggest economies – Italy (€4.5bn), Germany (€2.6bn) and France (€800m) – amongst the worst offenders.

“EU aid efforts are being crippled by a crisis of commitment. In 2005 EU leaders committed to allocating 0.7% of their national income to fight global poverty but 5 years later they are well off-track on aid and abandoning their international commitments on aid effectiveness”, said Hussaini Abdu, Country Director of ActionAid Nigeria. “We are not asking them to get more ambitious about fighting poverty, just keep their existing promises on aid quality and quantity”, he said

The annual AidWatch report notes that although inflated aid figures continued to decline compared to 2008 levels, a staggering €3.8bn of inflated aid – or 8% of the total EU amount – was reported in 2009. This includes €1.4bn for debt cancellation, €1.5bn in student costs and €0.9bn spent on refugees in donor countries – making real EU development aid only 0.38% of European GNI.

“EU aid is €19bn short of what was promised to developing countries by 2010 to help them meet the MDGs – more than half the estimated extra €32bn required per year globally to meet the hunger goal alone”, said Justin Kilcullen, President of CONCORD. “This is very disappointing from a bloc that calls itself a leader on global development”, added Eduardo Sánchez, President of the Spanish NGO platform. “Europe’s credibility as a global leader on development is at stake. If EU leaders are serious about regaining the trust of poor countries, they must come up with an ambitious MDG action plan next week”, said Elise Ford, head of Oxfam International’s EU office.

Representing over 1,600 European NGOs, CONCORD calls on EU governments to keep their promises to deliver more and better EU development aid. EU leaders must commit to legally-binding yearly timetables stating how aid targets will be met and find new ways to raise money for development such as a financial transaction tax which would bring estimated yearly revenue of €215bn - €1tr at no extra cost to the tax payer. Europe must put an end to the inflation of aid figures and place developing countries and their citizens at the centre of efforts to meet the MDGs.

Trade unions warn G20 finance ministers against inaction

As G20 finance ministers and central bankers meet in Busan, Korea, on 4-5 June 2010, with proposals to introduce new taxes on banks and other financial institutions high on their agenda, trade unions are calling for a firm and comprehensive G20 agreement to re-regulate global finance, including the introduction of a financial transaction tax. “Current proposals to introduce new bank taxation and new limits on bank loans in a strengthened Basel II agreement fall far short of the bold and ambitious action that is needed to deliver the necessary changes and quell the rising tide of public anger caused by speculative pressure on countries like Greece and Portugal,” said ITUC General Secretary Guy Ryder. “We need a real hands-on approach to banking supervision and to excessive bankers’ pay, and to shielding commercial and retail banking from irresponsible shadow banking and speculation.”

“Concerns about preciously guarded national sovereignty or disrupting the slow economic recovery are misplaced,” stated TUAC General Secretary John Evans. “On the contrary, regulation is key to attaining recovery. Such concerns can be addressed by well-designed and coordinated international cooperation, and G20 Finance Ministers should instruct the Financial Stability Board to undertake comprehensive modelling to pave the way for the creation of a financial transaction tax at global or regional level.”

“The reports by the Financial Stability Board and its members released in the past year reveal the extent to which governments and supervisory authorities have lost control over global finance,” UNI General Secretary Philip Jennings emphasised. “It is essential that all derivatives and alternative investments, including hedge funds and private equity, should be brought under the scrutiny of proper regulation and public authorities. Moreover, worker representation in bank and insurance risk management systems needs to be enhanced.”

See trade union statement to the Financial Stability Board >>> http://www.ituc-csi.org/trade-union-statement-to-the-4th.html

G20 must seize this moment to make the world a fairer place

A global bank tax to help poor countries survive the economic crisis must be urgently agreed, Oxfam said ahead of the G20 meeting of finance ministers in Busan, South Korea. International development agency Oxfam is pressing for a bank tax that will raise a minimum of $200 billion per year globally to help pay for the impact of the crisis on the poorest and for the costs of climate change, and which will raise the same amount for rich countries to spend on domestic priorities.

Oxfam spokesperson Mark Fried said: “This is a once-in-a generation opportunity for the G20 to reshape the global economy in favor of poor people. We can never return to a situation where the greed of the richest takes precedence over the needs of billions. However the G20 chooses to structure the tax, it should bail out not banks, but the world's poorest people. A financial sector tax is the best option to deliver the scale of resources needed to recover from the financial crisis. The G20 must now seize the moment and deliver a tax that will to raise resources to tackle poverty and climate change. Finance ministers meeting this week must agree a roadmap for taxing the financial sector, and close the deal at their upcoming Canada summit.”

The International Monetary Fund (IMF) gave its preliminary report on a financial sector tax to G20 finance ministers in April. The IMF proposal is two taxes to repay the costs of the global economic crisis and to pay crises to come: a levy payable by all financial institutions, and a tax on their profits and pay. The G8 has broken its promise of $50 billion in aid to poor countries by 2010, and 50,000 more children in Sub-Saharan African countries died last year because of the financial crisis.

Climate cash must not increase developing countries' debt

Oxfam has warned that the $100bn a year pledged by rich nations to help fight climate change could fail the poorest people, if recent moves to deliver climate cash as loans continue. A new report, Climate Finance Post-Copenhagen: The $100 billion questions, comes up as UN climate negotiations re-open for the first time since last year’s summit in Copenhagen. Whilst recognizing the need for some limited cut-rate loans to help poor countries develop in a low carbon way, the international agency strongly opposes the use of loans to help communities adapt to climate impacts.

Oxfam’s concerns come at a time when it is becoming clear that a significant proportion of the first installments of climate cash, to be delivered between 2010 and 2012 will be loans not grants. “At a time of economic emergency, when several poor countries are slashing critical health and education budgets to avoid a debt crisis, rich countries are considering saddling them with climate debt for a situation they did not cause and are worst affected by,” said Oxfam’s Senior Policy Advisor Antonio Hill. “It’s like crashing your neighbor's car and then offering a loan to cover the damages,” he added.

The report lays out a clear road map for how rich countries can not only meet their $100bn a year promise, but also double it by 2020 in line with actual needs. It suggests new and innovative sources from which to raise the cash, to ensure that governments do not raid it from existing and future aid budgets. These include:
* $100bn a year from a global Financial Transactions or ‘Robin Hood’ tax on banks – a small tax of 0.05% that could raise $400bn a year for health, education and climate change.
* $20-$30bn a year through the creation of emissions trading programs for international aviation and shipping; this would cap the amount of carbon emissions that could be produced by these industries, then charge them for each unit of carbon used.
* $75bn a year in fixed contributions from rich countries according to their historic responsibility for carbon emissions and ability to pay; this could be raised through the money from domestic emissions trading (or cap-and-trade) programs or taken from budgets currently used for subsidizing fossil fuels and carbon-heavy industry.
* $16bn a year by 2012 from the IMF in the form of low-interest loans for low-carbon development - using $120bn of rich country Special Drawing rights (SDRs) as capital, ‘green bonds’ could be issued, raising $40bn per year that can be made available as low-cost loans for clean energy investments in developing countries. Of the $40bn loaned every year, the net transfer (or savings) benefiting developing countries is $16bn.

The report also highlights the need for public sources of climate cash, to ensure the world’s poorest are not excluded from investments in their future. Whilst huge sums are needed from big business to create a global green economy, it is unlikely that companies will invest in small-scale projects with little or no financial return, designed to help poor people adapt to climate change, such as planting mangroves and developing irrigation systems. As 80% of food produced in poor countries is grown by women farmers, relying on market forces to deal with climate impacts could pose grave threats to world hunger.
Oxfam is calling on negotiators in Bonn to deliver and report openly on climate cash in 2010. A clear framework for raising and doubling the $100bn pledge in public money must be agreed by the Mexico summit in December this year.

Download the report >>> here.

Commissioner Barnier’s bank levy proposal

The EU commissioner for Internal Market, Michel Barnier, also responsible for the EU package on financial reforms, issued an official communication last week on a European project of a bank levy with some relevance for the debate on the FTT. Peter Wahl has analyzed the proposal:

Very interesting is that Barnier makes clear, that he considers the bank levy not as a tactical manoeuvre to kick the FTT off the agenda. Speaking of "levies or taxes whose purpose is to recoup the public funds committed during the current crisis to stabilise the banking system or to tackle excessive risk- taking or speculation," he declares: "The examination of such measures should continue in parallel as a useful complement to the preventive funds that are considered in this Communication."

This corresponds to the position of France (Barnier is French) to consider both a bank levy and the FTT. Barnier had spoken out before a commission of the European Parliament in favour of the FTT.

There is some more quite progressive language in the Communication. For instance: "Political support is growing for applying the so-called "polluter pays" principle, known from environmental policy, also in the financial sector so that those responsible for causing it will pay for the costs of any possible future financial crisis."

The communication also takes on board the critique, that the bank levy would increase moral hazard: "The Commission recognises that this is a major concern which needs to be addressed by making it clear and unambiguous that shareholders (up to the value of their investment) and creditors (excluding depositors which are guaranteed by deposit guarantee schemes) must be the first to face the consequences of a bank failure and that resolution funds must not be used as an insurance against failure or to bail out failing banks, but rather to facilitate an orderly failure."

Barnier also is aware of the risk that a bank levy would be passed on to the clients: "It should also be avoided that increased costs are passed on to bank customers in the form of higher charges." Furthermore, the bank levy should be part of a broader framework of regulation which is able to "mitigate the implicit guarantees associated with institutions deemed ‘too big to fail’.

The communication makes already some proposals on the size of the revenues (2%-4% of GDP) and other details.

A detailed draft will be presented in October and the legislation process should start in 2011. The communication is also meant as an input to the G20 finance ministers meeting in Seoul in June.

Of course, it is by now only an official declaration of political will, and during the further process attempts will come up to water it down. Nevertheless, its general tone reflects the deep shock of the Euro crisis and an increasing awareness of European political elites, that they have to do more than they did by now.

Trade Unions’ Message to OECD Ministers: Beat the Jobs Crisis First!

In a statement to the OECD Ministerial Meeting 27-28 May 2010, trade unions urge governments to put jobs, social cohesion, progressive taxation and green growth at the heart of recovery strategies. Global unemployment has risen by 34 million since the crisis began and many millions more workers who cannot find regular employment are not recorded as unemployed. We cannot afford a lost decade of stagnant labour markets and with it a lost generation of youth shut out from productive activity.

Union leaders including Richard Trumka, President of the AFL-CIO United States, Sharan Burrow, President of the International Trade Union Confederation and the Australian Council of Trade Unions and John Evans, General Secretary of TUAC will be taking part in the OECD Ministerial Council as members of the Trade Union Advisory Committee to the OECD. This is the first time that unions and employers have been invited to the full Ministers’ meeting. Union leaders will be taking part in the OECD Forum running on 26-27 May.

The union leaders will argue that rising public deficits across OECD countries must be addressed by growth-expanding demand that leads to an increase in output and jobs. Financing fiscal consolidation through cuts in public services, in social security and pensions would only prolong the jobs crisis and risk a social crisis. OECD governments must change the policies of the past two decades that led to the crisis – financial deregulation, rising income inequality and global imbalances. They must muster the same level of political will that was used to save the global banking system to beat the global jobs crisis.

“Working people need the right skills for tomorrow’s global economy, they need a socially ‘just transition’ to the green economy, and robust labour market institutions, including collective bargaining, to produce fairer income distribution”, says John Evans of the TUAC. “They need progressive tax reforms and stepping up work on tax evasion to protect public finances”. The TUAC Statement also calls for a global financial transactions tax to help pay for the cost of the crisis and to finance the Millennium Development Goals and climate change policies.

EU report on climate change fast-track financing

The European Union is failing to give full details about its €7.2bn pledge for immediate climate finance needs in developing countries. This is the EU’s contribution to the $30bn committed by rich countries in Copenhagen to help poor countries curb their emissions and adapt to a changing climate over the next three years. EU finance ministers meeting on 18 May in Brussels were expected to endorse a progress report on whether and how this money is being delivered.

Oxfam warned the EU is not being transparent enough. The report does not provide clarity on how much each EU member state will pay, on how much it will cover mitigation or adaptation projects, and critically, if this money will come on top of existing commitments to provide 0.7% of national income for overseas aid. Neither is the EU revealing the degree to which funds will be disbursed bilaterally instead of through multilateral channels such as the United Nations, nor how the world’s poorest and most vulnerable people will benefit.

Leaders in Copenhagen agreed ‘fast-start’ finance would be “new and additional”. Oxfam says this means money for climate action in poor countries must come on top of rich countries’ commitment to provide 0.7% of their national income as overseas aid. However, the EU is still divided on how to interpret “additionality”, and it is not alone. The US claims that President Obama’s budget request for climate change finance in 2011 is $1.9bn, but from all appearances that includes double-counting of cash from commitments on food security made at last year's G8 summit in L'Aquila, Italy.

Tim Gore, Oxfam International’s EU Climate Change Policy Advisor, said: “By not being fully transparent about its financing pledges, the EU is undermining trust with developing countries at a very delicate stage of the game. We need an open dialogue about how to guarantee that climate cash comes on top of money already committed for schools and hospitals. There’s no point trying to cover that up. The most important thing is to be honest about the challenges. If there are difficulties, it is better to be open. We expect the EU to address the current shortcomings in a full report later this year, which details how the money will be spent. In a global climate deal, annual reporting is a must”.

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Découvrez Regards croisés sur les frères Van Velde au musée des Beaux-Arts sur Culturebox !

Spain contributes €45m to the Adaptation Fund

Spain has become the first country to make a significant contribution of €45m (ca US$60m) to the United Nations Adaptation Fund. This contribution will help the ground-breaking facility set up under the Kyoto Protocol to finance climate change adaptation projects and programs in developing countries. “I am truly delighted by the Spanish contribution. The adaptation needs of developing countries are immense and require substantial financial resources. Every contribution will help strengthen the efforts and work of the Adaptation Fund, which is now fully operational and ready to finance concrete adaptation projects in developing countries. Spain has sent a strong message to the developing countries that it is serious about its commitment to help them adapt to climate change”, says Farrukh Iqbal Khan, Chairman of the Adaptation Fund Board. “I hope other developed countries would now follow suit by making contributions and thereby helping Adaptation Fund to fulfil its mandate.

Apart from its size, the contribution is noteworthy in that, in accordance with the rules of the Adaptation Fund, the money will be disbursed at the sole discretion of the Adaptation Fund Board to meet the most pressing funding needs of developing countries, without any conditions superimposed by the donor.

The Adaptation Fund is a self-standing fund established under the Kyoto Protocol of the UN Climate Change Convention, which gets its funding from a two percent share of proceeds of all Certified Emission Reductions issued under the Protocol’s Clean Development Mechanism projects and other sources of funding. The Fund is designed to finance concrete climate change adaptation projects and programs based on the needs and priorities of developing countries.

“Rich countries must follow the example of the Spanish government and channel cash for immediate adaptation needs through the UN Adaptation Fund. That’s the best way to ensure developing country ownership over adaptation planning, and will help regain much needed trust in the UN climate talks,” said Oxfam International. "We expect all governments to guarantee that longer-term climate financing will be additional to their overseas aid commitments. With such an announcement, as current holder of the rotating EU Presidency, Spain could demonstrate that the EU is serious about increasing financial support which rises to the challenge of growing climate impacts in poor countries.”

EEAS proposal is contrary to Lisbon Treaty

A recently obtained legal opinion of a UK-based law firm states that High Representative Catherine Ashton’s proposal for the set-up of the European External Action Service (EEAS) is inconsistent with the EU treaties’ provisions concerning development co-operation. A coalition of European development organisations, including Eurostep, CDSE, CONCORD and others, is urging EU member states, the European Commission and the European Parliament to reject the proposal and ask for a legal review.

The EU Treaties clearly state that “Union development cooperation policy shall have as its primary objective the reduction and, in the long term, the eradication of poverty” (Article 208, TFEU). NGOs are concerned that allowing the EEAS, under the command of the High Representative for Foreign and Security Policy, to take over some of the Commission’s responsibility for development puts this primary objective in jeopardy.

“Lawyers confirm that the proposed set-up of the EEAS, which mixes intergovernmental policy areas like foreign and security policy and common policy areas of the European Community such as development policy contradicts the EU treaties,” said Bernd Nilles, Secretary General of NGO network CIDSE. “The EEAS supports intergovernmental policy and we are deeply concerned that the common EU development budget might be used to pursue national, economic and security interests. The HR’s proposal fails to recognise this imperative as there is no indication that safeguards will be put in place to ensure that development objectives will be protected. In so doing, the proposal goes against the spirit of the Treaties.” Simon Stocker, Director of Eurostep, commented: “The EU is the largest donor in the world. The politicisation of EU aid would undermine the achievement of the Millennium Development Goals.”

The revised proposal has been discussed and approved by EU foreign ministers in Luxemburg on Monday 26 April. However, the European Parliament, which has expressed concerns over the proposal, must give its approval before it can come into effect.

IMF must help keep poor countries keep up spending

Poor countries are being forced to cut back on their economic crisis-response spending too soon, international agency Oxfam said on the eve of the Spring Meetings of IFIs, calling on the International Monetary Fund (IMF) to take steps to reverse this trend. These countries need to massively increase social spending, as the economic crisis pushes millions of people further into poverty and the Millennium Development Goals deadline approaches. Instead, budget data from 56 poor countries surveyed by Oxfam - including detailed breakdowns of social spending in just over half of these countries - shows that poor countries have had to slash education, health, agriculture and social protection spending:

* Budgets in 2010 are being cut on average by 0.2% of GDP.
* Two thirds of the countries for which social spending details are available (18 out of 24) are cutting budget allocations on one or more of the priority social sectors of education, health, agriculture and social protection.
* Education and social protection are particularly badly affected, with average spending levels in 2010 lower even than those in 2008.

Rich countries are failing to provide the support needed to prevent these cuts. Oxfam has found that the economic crisis has left 56 poor countries with a combined ‘fiscal hole’ (that is, a shortfall in budgetary revenue) of $65bn in 2009 and 2010. Despite promises by the G20 and donor countries to help poor nations survive the crisis, just 13% of this revenue gap has been filled by grants. Given this failure by the international community, poor countries were forced to resort to expensive domestic borrowing to finance spending in 2009; now they are cutting spending prematurely to avoid a new debt crisis. This comes on the heels of the OECD’s report that development aid fell $3.5bn in 2009, and World Bank calculations that 50,000 more children in Sub-Saharan African countries may have died last year because of the financial crisis.

Oxfam also called for a change in IMF rules so that it can give grants, funded by gold sales, to finance a massive increase in poor countries’ health and education spending. At present, the IMF’s Articles of Agreement only permit it to give loans. “The IMF and G20 also need to endorse Financial Transaction Tax which, at rates of around 0.05% per currency transaction, would raise hundreds of billions of dollars annually. Otherwise, this poor country fiscal gap risks becoming a black hole into which the education, health and future prospects of the world’s poorest will disappear,” said Oxfam in Washington DC.

IMF: Swinging back to capital controls

In response to the IMF's recent recognition of the positive potential for capital controls, the Center for Economic and Policy Research (CEPR) on the eve of the Spring Meetings in Washington released a paper that indicates that capital controls can play an important role in developing countries by helping to insulate them from some of the harmful effects of volatile and short-term capital flows. In a February paper, the IMF concluded that "there may be circumstances in which capital controls are a legitimate component of the policy response to surges in capital inflows." The Fund's Global Financial Stability Report released last week was less sanguine about capital controls, but the net result is that the IMF appears more open to supporting capital controls than in the past.

The CEPR paper, Capital Controls and Monetary Policy in Developing Countries, written by CEPR economist Jose Antonio Cordero and Juan Antonio Montecino, looks at both the theoretical and empirical literature on capital controls. Short-term capital flows may be very volatile; they react quickly to sudden changes in investors' moods, external events, and to perceptions of governments' macroeconomic policy decisions. In 2007 net debt flows to the developing world were more than 6.5 times as large as they were in 2003; yet, in 2008 these flows were at less than half their 2007 level. Short-term debt flows, which almost quadrupled between 2003 and 2007, turned negative in 2008.

A surge of capital inflows, especially short-term and/or speculative inflows, can cause the domestic currency to appreciate. This can reduce competitiveness in the country's tradable goods sector, slow economic growth, and harm economic development by increasing the volatility and hence uncertainty of international prices. Capital flows can also cause enormous damage when they are reversed, with large capital outflows leading to a financial crisis. This was a major cause of the Asian financial crisis of 1997-1999, and also harmed many countries in 2008-2009.

The paper concludes that capital controls can provide an alternative to an inflation-targeting with floating exchange rate regime, or a "hard peg" fixed exchange rate regime (which has been shown to have other severe disadvantages, as in Argentina, Brazil, and Russia in the 1990s). With capital controls, it may be possible for the government to maintain a more stable and competitive exchange rate while keeping inflation in check. The authors look at controls on capital inflows in Malaysia (1989-1995), Colombia (1993-1998), Chile (1989-1998), and Brazil (1992-1998). They also consider the case of Malaysia's controls on outflows in 1998-2001.

Trade union statement to G20 Labour Ministers

As forecasts warn of a continuing rise in unemployment on top of the additional 34 million people worldwide who have become unemployed due to the economic crisis, trade union leaders from the G20 countries will urge for more action on jobs when they meet with G20 Labour and Employment Ministers on 19 April in Washington DC. The union delegation will present Ministers with a Global Unions statement, Beating the Jobs Crisis, setting out the steps which G20 governments need to take. The Statement calls for measures across six main areas, to:

* Maintain fiscal stimulus and focus on job creation: there must be no exit from fiscal stimulus until adequate growth levels have been attained, the danger of a further slump averted and there is self-sustaining recovery in jobs. The size, duration, coordination and targeting of stimulus packages must maximise creation of decent jobs including ‘green’ jobs;

* Strengthen social protection: existing social protection measures must be increased, including extending the level and period of unemployment benefits and supporting youth through determined government action. Globally, a social protection floor for all needs to be ensured;

* Provide support for the UN Millennium Development Goals (MDGs): G20 governments should agree on an Action Plan to implement the G20 Pittsburgh commitment to achieving the MDGs. Decent work needs to be placed at the heart of development assistance, and in low income countries, strategies for the creation of quality employment based on policies of sustainable industrialisation have to be put in place;

* Support a just transition towards a low carbon economy: proposals need to be developed to ensure that the job creation potential of mitigating climate change is maximised;

* Help build a sustainable labour market model: measures are required to combat labour market, income and gender inequalities, and these need to be at the centre of the post-crisis policy framework; and,

* Re-skill and upgrade the global workforce: the G20 skills strategy must build quality skills and employment, through a new surge in vocational education and training that engages the trade unions and employers, makes lifelong learning a reality for all and focuses, in particular, on prioritising skills for ‘green’ jobs.

The Labour and Employment Ministers conference is being held as follow up action to the Pittsburgh G20 leaders’ meeting in September 2009, and is due to make recommendations to the G20 leaders’ meeting in Toronto in June. “In Pittsburgh G20 leaders said that they would put quality employment at the heart of the recovery but we don’t see this happening yet – the signs are that workers will have to pay for bailing out the bankers through public expenditure cuts, job insecurity and wage reductions. Governments have to urgently refocus their action to create decent jobs. If they don’t, the risk of a social explosion is likely to become a reality,” said ITUC General Secretary Guy Ryder.

The union delegation will also be calling on the G20 to continue focusing on employment issues beyond the Washington meeting, for example through a task force which would include trade union involvement. Through the ITUC Regional Organisation for the Americas, TUCA, the trade union movement is also putting its case to G20 member-countries Brazil, China, India and Russia, whose leaders are meeting in Brasilia on 16 April.

How to get a climate deal back on track?

As UN climate negotiators head back to Bonn to find a way forward after the controversial December 2009 UN Climate Change Conference in Copenhagen, the International Forum on Globalization (IFG) is releasing a report to call attention to some of the more notable results of the summit, to reinforce the reasons why a UN climate process is so critical, and to point to some possible ways forward to success at Cancun in November 2010. IFG's new report, Safe Passage to Cancun - Getting a UN Climate Deal Back on Track, summarizes the main messages from a recent public event in Washington DC providing analysis and perspectives on the outcomes of Copenhagen.

The Copenhagen Accord’s emission cuts amount to maybe only half of what science says is needed to avoid climate catastrophe. Cancun must achieve more than “climate anarchy,” where each country does only what it desires, free from any comprehensive framework of agreed rights and responsibilities. Any agreements allowing such high temperature increases are irresponsible, non-governance of our global commons; we need better. New, bold and cooperative measures will be needed to drive complex global solutions. Fortunately, the opportunities to re-imagine and re-create our collective trajectory are truly rich. Such perspectives are especially urgent for informing the United States climate policy community, general public, and politicians alike, if we are to bridge the North-South gap in search of global climate solutions.

The main messages emerging from the report include:
* Nations must set a science-based global carbon budget, then fairly share the remaining atmospheric space.
* Climate finance governed by climate authorities is a litmus test for North-South trust building.
* Technology cooperation needs intensified engagement to drive smart innovation farther and faster.
* Indigenous peoples’ issues are gaining ground but still need to consolidate protections for their rights.
* Leaving behind the US—until it gets its act together—could help the rest of the world move ahead.