This weekend’s G20 summit received a big thumbs down from ActionAid, because of its watered-down statements on most development issues.

But on tax dodging, there was actually something new and exciting! The G20 "encouraged the International Accounting Standards Board to further improve the involvement of stakeholders, including outreach to emerging market economies, within the framework of the independent accounting standard setting process."

Maybe they’d picked up a leaflet from the Outlandish Revenue Service at the IASB’s conference in London last week. “The IASB has a growing influence over the fortunes of businesses, markets, governments and citizens,” said our leaflets. “Care is needed to ensure that new measures benefit the public as well as investors and businesses.

”Arcane though it might sound, it’s high time the IASB – which decides how multinational companies have to present their financial statements – made more room for the views of everyone who uses financial statements. It could start by adopting the recommendations made by our colleagues in the Publish What You Pay coalition for its new standard for the mining industry.

In addition, the world leaders in Toronto made their habitual reference to the crack down on tax havens, welcoming progress by the OECD’s snappily-titled Global Forum on Transparency and Exchange of Information for Tax Purposes on “their peer review process, and the development of a multilateral mechanism for information exchange which will be open to all interested countries.”

The G20 were also keen that the Forum report back to them in time for their next big jamboree in France in November 2011 – something that summit’s host Nikolas Sarkozy had been keen to ensure.

This blog was originally published by Eurodad member ActionAid at http://www.actionaid.org.uk/102019/blog.html?article=1977

No, this is not just another analysis of Hayek’s opera prima. The title came to my mind two days ago as I was sitting in a room with a lot of (too many) dark suited economists from the IMF, multilateral development banks and private banks to discuss the mandate review of the Fund. It didn’t take long for me to see that for them, the global crisis had been in vain. They have learnt no lessons- they don’t even pretend to have done so. The same subservient serfdom to markets persists in their mentalities.

I am not unbending in my views about the markets; in fact, I am convinced that they are quite a good thing. My concern is just one of efficiency: when unregulated, markets are not fit for the purpose of serving the real economy and efficiently allocating resources to economic actors and, ultimately, to the people (or am I being too naive mixing people with the dry topic of macroeconomics here?). The IMF and other key institutions in global and European economic and financial governance are trying to wriggle out of facing reality and saying out loud: “yes, we were wrong.” Some attempts have been made, but the institution dynamics are stubborn, and most of the institutions’ staff are still anchored in a deep subservience to markets.

I had high hopes about institutional change, and how this would manifest positively in the current IMF mandate review. But unfortunately, these hopes are starting to wane after a multitude of events in the last weeks:

• Firstly: in a staff working paper published this month, In Search of Lost Revenue: Why Restoring Fiscal Soundness after a Crisis is harder than it looks, the Fund suggests raising non-tax revenues as much as possible by selling “government-owned assets, including state-owned enterprises,” and by raising “charges to public services.” In a nutshell, by privatising state owned assets and by increasing user fees. Is the IMF going back to the same old economic policies that civil society fought throughout the 1990s and 2000s and naively believed had been (to at least a great extent) phased out?

• Secondly: in the abovementioned discussion with economists from the public and private sector on the IMF mandate review, questions such as: “why hasn’t the new financial facility that the Fund set up after the crisis, the Flexible Credit Line (FCL), had much demand? Why are (some) countries still insisting on accumulating excessive reserves, adding to the worldwide problem of global imbalances?” went unanswered. However, for all outside the room, in developing countries (and developed ones), it is clear that this lack of success is down to one thing: “conditionality”. While the FCL might have no ex post conditionality, to be eligible you have to be a “high performer” and the IMF is the one who judges what high macroeconomic performance means.

• Thirdly: even more disconcerting were complaints in the room that the one trillion euro bailout agreed in May by the EU leaders did not appease markets because it was perceived as “too political”. That’s why, the reasoning continued, the IMF or, even better, truly and genuinely independent Central Banks are superior – because they are technocratic, not political. Superior for whom? For the markets or for the people? I could not find out.

• Fourthly: a staff member from a multilateral development bank explained that the reason why the EU bailout package is not working to appease market fears regarding Spain’s solvency is not only that it’s too political, but also that the real problem for Spain is a “socialist government which has not shown commitment to courageous fiscal policies” (meaning harsh austerity and fiscal adjustment). I found this statement quite political, particularly for someone who the minute before expressed support for apolitical institutional arrangements.

I’ve been gathering this evidence in recent papers and events. But two days ago the scattered pieces of the puzzle finally fitted and they came back to me as a wake up call: despite flowery rhetoric from the French at the IMF (DSK and Olivier Blanchard), there is a deeply ingrained faith that unregulated markets are superior. That struck me as incredibly stubborn shortsightedness.

However, what hurt the most – I have to confess – was the statement about Spain: after some recent visits to my home country and experiencing first hand how people are starting to suffer, the assertion by this multilateral bank’s economist (German, by the way), that the left wing uncommitted government is not doing enough after cutting public expenditure by €23 billion in a matter of months, hurts. The two of us agree that the government is not doing enough. However, I’d probably support Mark Weisbrot’s views that the depth of the eurozone crisis is due to self-inflicted pain – as Weisbrot says, “it’s a shame the world's largest economies are reluctant to adopt the practical policies that can restore growth and employment. ” A pain inflicted to developing countries for decades, which is now knocking at Europe’s door.

On Thursday 27 May, officials in the World Bank (WB) Brussels office were caught unaware by the sudden appearance of multiple WB president Robert Zoellick impersonators, who shook sooty hands with passersby and handed out lumps of coal to office workers on their doorstep in protest against the Bank's dirty dealings funding fossil fuel projects.

Friends of the Earth, CRBM and Urgewald- NGOs closely following the evolution of the World Bank‘s energy strategy, decided to shake up the Bank's strategy consultation taking place that afternoon, by drawing the attention of the general public, the media and World Bank officials (in case they themselves were ignorant to the issue), to the detrimental developmental and environmental impacts of World Bank lending. The message from campaigners was heard loud and clear: financing dirty energy is a major climate shame.

The impostor bankers handed out contracts for dirty coal and waved a giant cheque for USD 3.75 billion, the amount granted to contractors to construct the Eskom power plant in South Africa in April- a record loan to finance fossil fuels. This loan comes at a time when the World Bank is trying to present itself to donors and the public as an environmentally responsible lender.

The WB had perhaps wrongly assumed that simply by organising a consultation, it had ticked the necessary “CSO voices heard” box.

But important voices have not been heard; who will consult the South Africans, who will suffer the environmental impacts of the Eskom plant, yet will not access a kilowatt of the energy that is produced as it will be exported abroad? Had Bank officials touting their green badges consulted these people, they would have heard that the plant is actually not needed.

Unfortunately the Bank has somehow managed to convince many donors that its energy lending is somehow environmentally responsible. And that’s why, despite the “generous concessions” of an open consultation where views can be expressed on both sides, these consultations rarely produce any results, and remain simply a box ticking exercise. People want clean energy, which will ensure them access to power, but not destroy their futures. Is a consultation really necessary to understand an equation as simple as that?

This afternoon the UK passed landmark legislation to stop vulture funds profiteering off the debts of the poorest countries in the world.

We thought the Bill had already been killed several weeks ago, when a single Member of Parliament objected and, because of very limited time, prevented it going through to its next stage.

But on Monday we learnt that the Bill had been selected as one of only a handful to be debated and passed quickly before Parliament dissolves (on Monday) for the General Election. This is extremely unusual – Private Members’ Bills almost never get selected in this way, and proves the strength of feeling that had built up in the country at large, and amongst British Parliamentarians on this issue.

When explaining why she’d chosen the Bill, Harriet Harman, Leader of the House of Commons, said the Bill had “considerable support in the country”.

This is an amazing victory for the campaign. It means that never again should we have to see a country as poor as Liberia or Zambia sued in a UK court on the basis of a debt which dates back to the 1970s and has been bought by a vulture fund for pennies in the pound.

What will the law actually mean? Any company, including an original creditor, seeking to litigate against a HIPC country on the basis of defaulted historical debt in the UK will be forced to accept a ‘HIPC style’ write down. This may well be up to 90% of the face value of the debt (the exact write down will be based on the HIPC ‘common reduction factor’). 

This should render vulture activity – which depends on extortionate rates of profit (vultures buy debt very cheap) – unprofitable. It will also mean creditors don’t have an incentive to ‘hold out’ against negotiations to write down HIPC debts. The Government has estimated that the legislation could potentially save £145 million for HIPC countries.

Opponents of the bill have frequently brought up the issue that this might disrupt the secondary debt market; by making debts harder to sell, you drive up the price of borrowing. But, even if that concern does apply more widely, the amount of debt we’re talking about here is so small, it won’t possibly make any difference.

What doesn’t the bill do? It doesn’t tackle vulture activity more widely. Argentina, Ecuador and Peru – all targets of vultures – get nothing from the Act. It doesn’t have any transparency provision – so we still can’t find out information about who these shady characters are. And it only applies to historical debt – not future borrowing. Also, in order to get the Bill through, the compromise that was made was a sunset clause – giving the Government the power to review (and get rid of) the bill in 12 months time.

So it’s a small step – but an important one. The UK and US were the two most popular jurisdictions for vultures. We hope this move puts pressure on the US Administration to pass legislation. The Bill is also important because, as was raised in Parliamentary debate, the law applies certain aspects of ‘insolvency procedure’ to countries for the first time, accepting countries cannot be held to ransom by a handful of greedy creditors. 

The sad fate of Mongolia these days makes me think of the late Mexican President Porfirio Díaz’s famously cited lamentation:

“Poor Mexico, so far from God and so close to the United States!”

Hit hard by the financial crisis due to the sharp decline in the price of copper, Mongolia’s main export, the country is now facing a new crisis – in the form of the zud – a disease which threatens to kill millions of animals in a country where livestock outnumber people by 16 to one. A dry summer followed by a harsh winter has compounded the deadly phenomenon, and the resulting toll on Mongolians is a bitter one.

Once again, the Mongolian drama shows that a permanent state of vulnerability hits the world’s poorest countries as a continuum of several interlinked crises. This vulnerability is not a natural inevitability, though. The swift liberalisation and privatisation of Mongolia’s once Soviet-style economy at the beginning of the 1990s led to a rapid decline of the country’s industry and the return of many of its citizens to their ancient herding activities. Moreover, a recent article in the Economist – which is not known for its Communist allegiances – reports that the post-Communist era also witnessed a “dismantling of large collectives, and herders now find themselves missing some of the underappreciated benefits of scale – not to mention access to technical and management expertise of the kind that helped sustain operations through harsh winters.”

However, the “new” IMF seems to have little mercy for the country’s misfortunes. According to forthcoming Eurodad research on IMF crisis loans for low-income countries to be published on 20^th April, spending targets by the Mongolian governmet are already expected to be cut in 2010 since the economic recovery is expected to start. Public investment is programmed to decline, jeopardising prospects for long-term growth and development. In particular, capital investment is set to shrink from 10.4% of GDP in 2007 to 6.7% in 2010. The Memorandum of Economic Policies between Mongolia and the IMF released in February 2010 confirms the above: the IMF is requiring Mongolia to increase its level of international reserves by mid-2010; to decrease the government’s deficit; and is banning the government to contract any new nonconcessional external debt.

With regards to social protection spending, the IMF has also been putting pressure on Mongolia to reform its social welfare system. While this is being done on the grounds of making social spending more effective and enhancing pro-poor targeting, the reality of the reform agenda is that it will include a consolidation and reduction of the number of social welfare benefits, a discontinuation of selected social welfare benefits not essential for the poor (although it is difficult to imagine that the poor in Mongolia are being spoilt by an excess of unnecessary benefits), and a total amount of $81 million “savings” on welfare from 2008 to 2010.

These are very short-sighted savings for a country with more than one third of its population living under the poverty line and which desperately needs to undo what years of unfettered privatisation and liberalisation have done to dramatically increase the country’s vulnerabilities to external shocks.

Although I’m not quite sure what God could do for Mongolia, by now it is slightly clearer what the IMF is not willing to do. 

Last Friday, the IMF  announced for the second time in a week that they were letting go of some of their long-held beliefs. The staff position paper “Capital inflows: the role of controls” says that capital controls should be seriously considered as part of a well-measured policy mix to manage capital inflow surges.

After many years of irrational aversion against anything that looks remotely like regulation, and after no less than four “ifs” in the introductory sentence, the IMF has finally admitted that capital controls might not be such a bad idea: “if the economy is operating near potential, if the level of reserves is adequate, if the exchange rate is not undervalued, and if the flows are likely to be transitory, then use of capital controls – in addition to both prudential and macroeconomic policy – is justified as part of the policy toolkit to manage inflows.” They go on to say that too rapid an increase in private investment may lead to a boom and then a bust, and that countries that had controls in place before the global recession were much less likely to have suffered a sharp economic downturn. This is in sharp contrast with Rodrigo Rato’s (former IMF Managing Director) declarations before the crisis, when he said that capital controls were “rapidly becoming ineffective.” It’s a real shame that this comes a bit too late; but, as some would say, better late than never.

But this is not all: this bold statement came out only two days after the IMF chief economist Olivier Blanchard said that the IMF was wrong in their overly stringent advice on monetary policy and their fixation with very low inflation. Of course, the IMF has not – yet – become a revolutionary, and their understanding of loosening monetary policy only goes as far as acknowledging that the world economy would probably not collapse if countries had an inflation of around 4% (instead of the “magic bullet” 2%).

This is “part of a laudable institutional journey of reflection, prompted by the financial meltdown”, says Duncan Green from Oxfam in his blog “From poverty to power.” He says that “the U turn more pronounced than in the paper on inflation. That’s partly because this is a journey that began over a decade ago. On the eve of the Asian financial crisis of 1997/8, the Fund was on the verge of amending its Articles of Association to enshrine capital account liberalization as one of its explicit aims. The Asia crisis started a rethink, which has continued with the latest trauma. But I’ll only believe that the Fund has really changed when we see its staff out there advising developing countries on the best ways to introduce capital controls.”

I personally doubt that the IMF will go the whole way any time soon by dropping their old orthodoxies completely, but given their former stringencies, these announcements are at the very least surprising – and may well open the way to more relaxed policy stances.

Meanwhile, the Economic and Financial Affairs Council of the European Union (Ecofin) seems to have taken over the role of guardian of macroeconomic stringency. When Latvia was on the verge of bankruptcy in 2009 and the IMF mission flew to Riga, it reportedly advised Latvia to pull out of the Euro peg and devaluate to try to regain competitiveness in their exports. Then Swedish banks, which held a large amount of Latvian external debt, “persuaded” the Ecofin to tell the IMF that they didn’t think devaluation was an option.

The European fight to defend its stance on fiscal and monetary stringency is back in full strength as the Ecofin battles with the Greek tragedy. Reportedly, a senior official from the central bank of an EU member state declared in private conversations that the deal the Ecofin is imposing on Greece will sink the country for the next decade.

If Europe is ready to impose this anguish onto their own citizens, regardless of the European Union’s commitments on social policy, social and economic rights or even the European Charter of fundamental rights, what would they be ready to impose on developing countries through their vote on the IMF Board?

As Duncan says in his blog, there is still a long way to go to make capital markets work for development…

After a year of campaigning against vulture funds – investment companies that buy-up defaulted developing country debts for bargain prices and then sue the country in question for full immediate repayment – the British government has said it supports legislation to stop this appalling behaviour. 

Yesterday the British Government published its response to a consultation on vulture funds which it launched in July 2009. Despite a number of submissions from the financial services industry opposing legislation, the Government has come out clearly supporting a new law.

Campaigners have been arguing for legislation which attacks the vulture model across all developing world countries, by limiting the amount a vulture can claim through litigation and thus putting an end to the extortionate profits which make vulture activity a viable business model.

The Government hasn’t gone that far, but it would support legislation which would ensure that any creditor litigating against a Heavily Indebted Poor Country (HIPC) would be forced to accept a HIPC-style write down on its claim. This would often wipe 90% off the claim and make it much more unlikely that vultures will bother to buy-up the debts in the first place.

Moreover, the bill will have a retroactive element – it will apply to awards which have already been made but not enforced. This is good news for Liberia which had an award of $20 million made against it in the High Court in London last November, and is now preparing to fight off enforcement cases. Moreover, the law will apply to foreign cases seeking claims in UK courts and will discourage the enforcement of cases brought under UK law in foreign courts.

The British Government estimates that legislation could potentially save £145 million for some of the poorest countries in the world and, just as important they believe, would stop particularly unscrupulous investors from free-riding on debt cancellation schemes provided by other creditors.

Even more exciting, these principles have been incorporated into a Private Member’s Bill tabled by Greater Manchester MP Andrew Gwynne. The bill will receive its second reading in Parliament this Friday and, if successful, could become law within the next 2 months. This would be a great step forward in stopping vulture funds preying on the poverty of developing world countries.

This morning, campaigners from Jubilee Debt Campaign went along to multinational law firm Dechert – well known for representing vulture funds – and held a ‘cake sale’ outside their offices. We figured that if the company was so hard up they had to take cases which preyed on people’s poverty, we’d better help them out. On the same day that Dechert was holding a ‘global ethics’ conference in New York, we hope the action will make law firms realise that you can’t call yourself a ‘socially responsible’ company while also making money from these awful cases. 

Much more information, photos and actions at the JDC website.

There’s a new EU tax type in town

Algirdas Semeta may not be a household name to many people in the EU. Nor might his title of ‘Commissioner Designate for Taxation and Customs Union, Audit and Anti-Fraud’ ring a bell. You might even struggle to place him when I tell you that he used to be Director General of the  Department of Statistics of the Government of Lithuania .

But for the next five years, he is (pending confirmation by the European Parliament) going to be the man-who-can when it comes to tax in Brussels. Last week he was grilled by MEPs to find out what he planned to do with his five year tenure at the European Commission, and he had something interesting to say.

Mr Semeta said he’s a big fan of the beautifully-named Common Consolidated Corporate Tax Base (CCCTB). This beast of an acronym is actually a major revolution in the way multinational companies are taxed in Europe.

At the moment, companies get to decide themselves, subject to a set of rules, how they distribute their profits between the countries in which they operate, for tax purposes: different parts of the company trade with each other, and while there are masses of rules to govern this, in practice they can often shift part of their profits to wherever gives them the best tax deal. This has a massive impact on developing countries as well as European ones.

Under the CCCTB, the distribution of profits between participating countries would be decided by a formula that the governments set, which is much harder for companies to get round, and much simpler than the current arrangement. That means, if the EU can make it work, maybe one day it could help developing countries cut down on tax avoidance and evasion too.

Watch this space…

The crisis seems to be reversing a lot of the hard-won achievements in the area of conditionality. I’m not normally a pessimist by nature, but I’m turning into one after two vicious blows from the US and EU governments in the last few days.

Official rhetoric says that conditionality from the Washington-based financial institutions – the World Bank and the IMF – has all but disappeared. The World Bank and the IMF have, in recent years, put quite a lot of PR effort into making sure that they are no longer portrayed as the Structural Adjustment advocates for poor countries, and they have to a great extent succeeded. The EU and the US, main shareholders of the Bank and the Fund, have bought this rhetoric, and they’ve been telling NGOs to stop complaining about a problem that is now in the past.

It is striking, though, how a problem of the past can raise so much interest in the present. In the wake of the global economic and financial crisis, when the IMF was chosen by the G20 as the crisis saviour, the IMF Managing Director, Dominique Strauss-Khan, made every effort to ensure that everyone knew that now the IMF was supporting fiscal stimuli and public spending. Despite the disgruntled reactions that this may have provoked internally within the institution, the IMF has even gone as far as using NGO speak, claiming that they are creating “policy space” for low-income countries to respond to the flurry of NGO criticism on IMF conditionality attached to crisis loans (See Eurodad, TWN, CEPR).

The US Government Accountability Office, an institution with a reputation for being balanced and independent, just released a report which found that “lending programs allow for negotiations and are consistent with economic literature.” Not having had the chance to go through the methodology of the report in detail, there are some obvious problems: the literature review conducted by the researchers included mostly literature produced by the IMF, and virtually ignored other stances on macroeconomic policy that are in circulation.  Cross-checking empirical evidence of IMF programmes with the IMF’s own macroeconomic policies is an exercise which has obvious inherent problems of circularity.

The blow by European governments has been even more candid. According to Bloomberg, at a meeting of European Union foreign ministers in Brussels on November 17^th, the Europeans announced that they want “strict conditionality on the next instalment of IMF loans to Ukraine.” The IMF decided earlier this month, seemingly under EU pressure, to delay disbursement of the next $3.4 billion portion of the loan after the Ukrainian government failed to rein in social spending. The long shadow of the EU ministers, and their influence exercised via the IMF, will hit pensioners hard, as well as other sectors of the population heavily reliant on social protection schemes.

During initial negotiations of this loan, and in light of the social unrest unleashed by announced social spending cuts, the Ukrainian government sought advice by the International Labour Organisation (ILO) in a desperate attempt to outweigh the IMF’s pressure to cut social protection spending. This makes me wonder to what extent the IMF lending programmes “allow for negotiations” as the GAO report said. The ILO came into the negotiations bringing alternatives to the IMF’s orthodoxy in fiscal austerity and spending cuts: it actually proposed to change the tax system to increase government revenues through more progressive arrangements (actually reversing the flat tax that had been introduced as the fiscal panacea in many Eastern European countries some years ago).

Rather than making conditions stricter, EU governments should support efforts to explore alternatives to the IMF orthodoxy which is making the poor pay for the crisis created by the rich.

The German development community has been through uncertain times since the federal elections took place in late September. The Social Democrats (SPD) lost, and the SPD development minister Heidemarie Wieczorek-Zeul had to step down from her post - after shaping Germany’s development policy for eleven years. The Liberals (FDP), the main winner of the elections and newcomer to the coalition government replacing the SPD, had put forward the demand of doing away with an independent development ministry in its election campaign.

However, uncertainty over whether development will still exist as an independent field of policy is now partly over. Last week the parties signed the new coalition agreement. The good news: the Ministry of Economic Cooperation and Development (BMZ) still exists as an independent body. But now the bad news: It went to the FDP.  

For many observers and especially the development community, this choice is seen as a provocation.  The FDP’s former General Secretary, Dirk Niebel, has been appointed as the new development minister.  Even thorough investigators found no sign that he has ever shown any interest in development cooperation throughout his career. Moreover, since the FDP has the reputation to be Germany’s most business-friendly party, the new leadership poses a substantial menace to the poverty eradication focus of German development policy.

Put business first - The new coalition agreement

Probably the most shocking innovation of the new coalition agreement is the dominance of external economic promotion over poverty eradication.  The chapter on development cooperation is still largely phrased in the diplomatic language of the current development discourse. But hidden in the chapter on foreign trade, the agreement reads (in loose translation): “Decision-making in development policy has to adequately consider the interests of the German economy …  When the aid agencies commission contracts, the German chambers of foreign trade shall be informed in a timely manner …  The decision making process for export credit guarantees, investments, and untied loans will be accelerated and primarily aligned to the aim of securing the business location of Germany, of promoting the economy and employment in Germany.”

If development cooperation is understood that way, then it could even be seen as desirable that the scaling-up of ODA is postponed to an undetermined point in the future. The target of 0.7% is still in and the agreement refers vaguely to international agreements, but the EU agreed timeline including the explicit 2015 deadline are out. And anyway, scaling-up ODA is seen to be dependent on the fiscal situation. There won’t be much fiscal space since the new government plans to cut taxes, consolidate the budget and promote the economy, all at the same time.  

Aid effectiveness made simple

Those who always thought that the aid effectiveness reform agenda had become too complex, too multi-faceted and thus itself unmanageable, have found a new ally. The coalition parties have successfully managed to reduce the Paris agenda to a single issue plan: division of labour. There is no reference in the new coalition agreement to mutual accountability, or harmonization, or streamlining conditionalities, or untying, or alignment to developing countries’ own systems and strategies.

And while good people might understand  the aid effectiveness buzzword “ownership” in the sense of transfer of control, or acknowledging developing countries’ right to determine their own development path, it had already been adulterated to the German “Eigenverantwortung” by the previous administration, (a term which would be close to “individual responsibility” when translated back into English).  Some observers fear that now it might become even worse, for example Rainer Falk, the editor of the development journal Weltwirtschaft & Entwicklung, who commented that the FDP interprets ownership in a neoliberal way – everyone fends for himself.

International insolvency regime on the agenda

But not everything in the new coalition agreement is bad. On the upside is that the parties have agreed to advocate for the implementation of an international insolvency regime, clearly a success for the German anti-debt campaign erlassjahr.de which has advocated for this issue during the election campaign. Now let’s hope that the new German government will make an effort in the international arena to get this job done quickly. With Germany planning to go back to irresponsible development financing and bad aid, its debtors might soon find themselves stuck in a situation where they badly need a new debt work-out mechanism.

EURODAD’s nomination for the coveted Bretton Woods Project ‘Bankspeak of the year’ award goes to the Economic Policy and Debt Department for a recent article on ‘odious debt as a principal-agent problem’. The article appears in a new World Bank book on debt launched at this year’s Annual Meetings of the Bank and Fund in Istanbul.

The book devotes three (out of sixteen) articles to the issue of odious debt. This is positive and a significant step forward for an institution which just two years earlier refused to acknowledge the problem even existed. It is also a testament to the efforts of civil society organisations around the world to raise policymakers’ awareness of the issue. But as the article reveals, convincing the World Bank to take-on the issue in a genuinely serious manner is still some way off.

In brief (and simple terms), the article uses a game theoretical framework and econometric analyses to consider which out of three options – ex ante loan sanctions, ex ante responsible lending standards or ex post debt-audits – represents the most promising approach to tackle the problem of odious and illegitimate debt. It concludes that out of the three possibilities, debt-audits are the least hopeful avenue and the merits of both the loan sanctions and responsible borrowing standards are ambiguous. How the author arrives at these dubious conclusions can at best be described as ridiculous.

The unrealistic scenario models an economy with just two goods: guns and butter. The government contracts a loan and must decide whether to remain in power through repression (that is, buy guns) or through the provision of public goods (i.e. invest in butter production). It cannot do both. Then the econometric fun starts! To give you an idea of the dense and opaque set of equations that follow, the conclusions on debt audits reads:

Not exactly accessible. In fact, the words of Andrew Lo, a professor of finance at the Massachusetts Institute of Technology spring to mind. He once quipped: “Economists suffer from a deep psychological disorder that I call ‘physics envy'. We wish that 99 percent of economic behaviour could be captured by three simple laws of nature. In fact, economists have 99 laws that capture 3 percent of behaviour."

The reality is that behind the confident and bewildering set of equations, what lies beneath are all sorts of hugely simplified and wonderful imaginative assumptions that are then formulated mathematically. These have little, if anything at all, to do with the real world. No wonder these fancy mathematical models frequently break down and cause chaos: they are models, or toys, which are not literally true. The author even admits as much. An article I read by Emanuel Derman says we should “beware of economists bearing Greek symbols”. He says: “economists seem to have embraced formality and physics envy without the corresponding benefits of accuracy or predictability.”

The article suggests wrongly that loan sanctions, responsible lending standards and debt audits should be taken as entirely separate and mutually exclusive strategies to deal with illegitimate debt. Why can’t they be pursued in parallel? In my experience as a member of Ecuador’s debt audit commission, this is precisely what happened. The audit exposed particular loans which should be questioned on the basis of clear and comprehensible criteria, as well as identified examples of practices which should never be repeated again. This, in turn, prompted improved domestic legislation on borrowing practices for the future. Many of the proposals for reform drew on Eurodad’s Charter for Responsible Finance. An audit has multiple objectives and benefits. To dismiss their usefulness is just plain wrong.

On loan sanctions, the article proposes that an “appropriate institution such as the UN Security Council or the International Monetary Fund would declare a regime odious”. Loans to that regime would then become unenforceable. This would be a disaster. The political dynamics of the UN Security Council still revolve around the bias of the governments of the permanent five members, and most saliently, the foreign policies of the US. The IMF’s governance structure means that the institution is predominantly controlled by many of these same powers and current reform proposals will not change these imbalances very much.

The Centre for Global Development has convened a Working Group on the Prevention of Odious Debt which is exploring how options such as loan sanctions can be added to the foreign policy toolkit. UNCTAD has also initiated a three year project which looks into issues related to tackling odious debt and fostering responsible lending and borrowing standards at the international level. Hopefully, these efforts will make a more meaningful contribution to this critical debate.

As the saying goes, “if you can’t beat them, join them,” so I have entered into the spirit of things and come up with my own ludicrous mathematical formula for assessing the seriousness of this article in tackling the odious debt issue. My speedy back of the envelope calculations reveal that:

                        (ED+VP) WBP
                                                           =  0
               (PREM+StAR) + (ESSD-LEGAL)

Where ED represents the Executive Directors, VP is the Vice-President and WBP is the Bank President, PREM is the Economic Policy and Debt Department, StAR is the Stolen Asset Recovery Programme, ESSD is the corporate and social responsibility programme and LEGAL is the legal department. In plain English, it says we are not too optimistic about the World Bank’s willingness to seriously tackle the issue of odious and illegitimate debt.

Of course, if Bretton Woods Project feels this silly construct deserves their coveted 2009 ‘Bankspeak’ of the year award, just to let you know I would be very happy to share the prize with the Bank.

If you are reading this in Stockholm you may already be feeling panel beaten. There are hours of presentations lined up at the European Development Days there, and you can watch some of them live. But a careful look at the programme reveals that there will be little or no discussion on capital flight and tax justice.

I thought of suggesting that someone dress up as an elephant to walk around the conference centre handing out our ‘European Agenda to Fight Capital Flight’ two pagers, and our updates on the G20/OECD tax haven clampdown process. This would show that aid transfers from Europe to developing countries are a mere fraction of the capital lost by developing countries through tax evasion, facilitated by tax havens (many European).

Tackling this is urgently needed, as European governments have already agreed at both the UN Financing for Development summit and also at the G20 summits in London and Pittsburgh. Thus it is strange that the EU’s policy coherence for development process omits it (see accompanying article), and the European Development Days are also largely silent on the matter. 

(An honourable exception goes to Counter-Balance which will be circulating the report Eurodad wrote with them on European Investment Bank support for companies operating in tax havens. And for Jonathan Glennie who is speaking on a panel and will – if he follows the arguments in his book The Trouble With Aid; Why Less Could Mean More for Africa – certainly shine a light on tax justice. If there are other exceptions please add them as comments.)

But as I’m in my lame duck period at Eurodad (about to leave) I dared not propose that a colleague walk round Stockholm in an elephant suit. For fun, though, I mentioned the idea in a recent speech to students from across Europe at an OBESSU conference two weeks ago. They liked it, and brainstormed some action suggestions of their own. One was to produce an upside down animated map of the world. This would have Africa at the top and Europe at the bottom, and coins and banknotes would be raining down from Africa to Europe, via tax havens. Another visual idea they suggested was a giant see-saw with a businessman on one end and an African woman on the other, with some kind of tax haven mechanism in the middle which kept money moving uphill to the rich.

To summarise: the lame duck didn't manage to pull off the elephant parade.

But I hope some politicians, officials and commentators in Stockholm will at least pay attention to the wolf on the cuckoo.

Columnist Martin Wolf has a piece in today's Financial Times entitled ‘cuckoo in the nest’. This spells out that currently taxpayers are providing "open-ended insurance of weakly regulated institutions that take complex gambles", a situation he describes as "intolerable". The reason why so little is happenning? "Many in the [finance] industry are fighting regulation as hard as they can. As I wrote earlier the European Union's Policy Coherence for Development process "counts for very little by comparison with well-resourced and vocal European special interest groups". If the Stockholm event is to advance the development agenda it needs to focus on the most pressing issues (including serious measure on tax havens and introducing a financial transactions tax. This will require confronting regressive lobbies.

On Friday, at a Friends of Europe high-level roundtable, I asked European Commission President José Manuel Barroso what European Union governments were going to do about their over-representation in the G20, World Bank and IMF. Part of his (surprising, and long) response was that “the G20 looks increasingly like the European Council”.

He meant that G20 procedures are similar to the Council’s and it is proceeding to find consensus in a business-like way. Not that there are as many Europeans round the table.

I pointed out that the April 2010 deadline set in Istanbul to rejig the IMF’s governance seemed quite serious and that Europeans are on the line to come up with proposals to reduce their representation. I quoted Simon Johnson who wrote on Baseline Scenario “the G20 has 19 or perhaps up to 25 [leaders], depending on how many Europeans manage to gate crash on a continuing basis”. (This in his interesting piece “Did anything happen in Istanbul?”. Another great point in there was “the IMF appears to be increasingly under the auspices of the G20 – despite the fact that this is extremely awkward from a formal governance point of view.”)

Barroso’s reply on European global financial governance contained some predictable points, but some surprising ones. The obvious: he is a big fan of the fact that the European Commission is a full member of the process (i.e. he attends the summits and can stand next to world leaders). But he went much further, claiming that the G20 was an example of “European leadership”. He emphasised that he and president Sarkozy flying to Camp David last October was what had got the forum off the ground.

He said that a close comparison of the 17th September European pre-Pittsburgh summit outcome (PDF) with that of last month's final G20 communiqué would show Europe’s language and intellectual input. Riccardo Perissich, former Director General of DG Internal Market, commented that this is because Europe still “has the right of proposal”, as none of the new countries at the top global policy-making table are ready to put forward an intellectual framework. However, he warned, this right would not be present for much longer.

Mr Barroso said he disagreed with my point that European governments are over-represented. But he did share my view that there is sometimes “a lack of coherence” in European voices at the World Bank and IMF. Therefore he would encourage, if possible, unified representation as this might be more influential than having eight or nine European speakers one after the other making similar points. Kalypso Nicolaïdis, Director of the European Studies Centre at Oxford University, had a different view. She agreed that regions could and should be building blocks for global multilateralism, but said that sometimes  a “constructive cacophony” of different voices is better than single representation.

Last Friday I didn't get a chance to intervene again in that session to point out the different scenarios for the future of European representation in the IFIs that we set out in our 2006 study: A Question of Harmony, European Governance of the World Bank and IMF.

In another session of the roundtable event on Friday I raised concerns about the strength of private finance lobbyists, and said the European "policy coherence for development" process is extremely weak in comparison, for example in tackling tax havens and capital flight. While there I picked up the report of another Friends of Europe event in May where I also raised these concerns. I said then that “there is a lot of anger bubbling up as the impacts of budget deficits pass through the system” and that this is worsened by the “zero public interest or citizen representation” in bodies such as the de Larosiere Group which are deciding on European Union financial regulation. Joaquin Almunia, Economic and Monetary Affairs Commissioner responded then: “the Commission represents the public interest”. All readers will know why this statement is embarassingly simplistic, but for more detailed analysis watch out for a forthcoming Corporate Europe Observatory special report ‘A captive Commission – the role of the financial industry in shaping industry regulation’, due out in early November.

Men in grey suits (and a handful of women) have taken over Istanbul for the Annual Meetings of the World Bank and the International Monetary Fund (IMF). The IMF is more than ever the new star in town, after the huge resurgence in its resources and lending volumes in the aftermath of what has already been labelled as the greatest crisis since the Great Depression.

IMF staff is still the target of strong civil society criticism as the controversy on whether the conditions that it is attaching to its programmes for poor countries are right (as the IMF claims) or wrong (as CSOs - including Eurodad - say). But there is something new in IMF staff: they are more confident than ever (as if staff had received top PR training knowing that the increase of its power will come hand in hand with closer CSO scrutiny).

But is the wisely crafted smooth attitude towards external criticism a genuine commitment to institutional change, or is it just the best PR offensive of the IMF's history? It seems that (at least some) men (and few women) and grey suits may be listening - but not half as much as they should:

- On IMF conditionality: last week the IMF published the paper "Creating Policy Space - Responsive Design and Streamlines Conditionality in Recent Low-Income Country Programmes (PDF)" partially in response to Eurodad and Third World Network criticisms in research published this year*. We are glad that the IMF is listening (see our work cited on page 7 of the IMF report). But, I am still concerned that they have been pushed to allow higher deficits in poor countries hit by the crisis rather than having chosen to actively advise developing countries to implement expansionary policies. 

- On additional resources for low-income countries through transferring Special Drawing Rights from richer to poorer: on Saturday, the UK and French governments announced that they would transfer some of the Special Drawing Rights that they received on the special allocation agreed by the G20 leaders and implemented at the end of August. CSOs including Eurodad have been asking rich countries to make such move; however, we had called for these transfers to been done directly to low-income countries so they could benefit from additional liquidity without conditionality. The French and British decision to channel the SDR transfer through the Fund means that these resources are going to be lent to low-income countries through the usual IMF programmes which come with conditionality attached. 

As I sit in the event organised by Eurodad, members, and Southern allies, "Change you can believe in? Critical perspectives on whether and how IMF programmes have changed and need to change", with Joseph Stiglitz and IMF representatives featuring, I'm still wondering whether the IMF has learned some lessons out of this crisis or still thinks that the best the world could witness in 2011 is returning "to the healthy growth of the last decade." But didn't we agree that such growth was based on rotten foundations?

See: Bail-out or blow-out? IMF policy advice and conditions for low-income countries at a time of crisis, Eurodad, June 2009.  

by Antonio Tricarico (director of Eurodad member CRBM)

The G20 asserted itself in Pittsburgh a week ago as the new global economic and financial governance forum, de facto replacing the G7/8 finance ministers meeting. Despite this a few minutes ago journalists - mainly Asian - started running as in the "good old times" to grasp a copy of the G7 finance communiqué in the press room of the Annual Meetings.

Since the morning nice posters of the "G8 from La Maddanella to L'Aquila Summit" could be seen in many spots in the International conference centre of Istanbul. As an Italian I got confused at first, thinking of some emergency G8 summit for the catastrophe which yesterday happened in Sicily - we are getting used to summits related to earthquakes and catastrophes indeed. But I was wrong, it was just another G7 finance meeting.
I rushed to the press room and checked if I got it right. Yes, but googling I found the hilarious debate with several officials quoted about whether or not this G7 finance summit had to issue a final communique.

At the end a final quote from a French reassured the global audience: there will a text.

One page, five paragraphs, the third with 4 bullet points, several praising the G20 commitments on some issues and the commitments of G7 countries to implement the G20 commitments. Given that the Italian Presidency of the G8 was ending right here, there is a reference to the fundamental norms of the Lecce framework (it was one and half page) on finance and integrity and also the Charter for Sustainable Economic Activity of Chanceller Merkel (it was one page). In its old age the G7 became very sustainable with short statements to save paper and forests.
At that point I waited and finally the monitor showed a joint G7 finance press conference chaired by Italy and Canada (two countries trying to resist the G8 enlargement so as not to be forgotten forever in the new global governance of the G20). I relaxed, NGOs should not do anything more, just watch. What a nice epitaph for the G7 finance process that has been running continuously since 1985.

Here and elsewhere civil society groups and low-income country governments have bemoaned the prominence of the G20, World Bank and IMF at the expense of the United Nations. As we pointed out in May this summer’s UN conference was consistently undermined by richer countries, most of which did not send their leaders to the UN summit.

So what of the follow-up in Pittsburgh? More of the same. G20 leaders mentioned the IMF 21 times, the World Bank: 17 times, and the United Nations just 5 times. The G20 has fobbed off the UN with the task of establishing a new “Global Impact Vulnerability Alert System [to] help our efforts to monitor the impact of the crisis on the most vulnerable”.

Details of this system – exactly 6 months after the London summit – are few and far between. GIVAS itself says it is “a work-in-progress” and today that is extremely clear - the GIVAS website is down. By contrast decisions to do with the IMF, World Bank and other institutions have moved forward fairly rapidly since April.

I don’t expect the UN will get sufficient resources or recognition to carry out this real time vulnerability reporting function in the way they and we would like. And GIVAS appears to be relying heavily on existing World Bank databases. This is because donors still prefer funding the World Bank and IMF, and their statistics get cited on a very regular basis, much more than those in UNCTAD’s Trade and Development report, for example. When the World Bank launched its Global Monitoring Report series in 2004 I wrote:”In theory there is an agreed division of labour. The UN is the scorekeeper on MDG outcome statistics, ie the numbers of children in primary schools. The World Bank is concentrating on the policy and institutional framework to achieve the MDGs. But the World Bank and key donor governments are aware that the most important ground to occupy is the commanding heights of interpretation and blame allocation on why the goals are not being fulfilled.” 

2010 will see us at the two thirds mark between when the MDGs were launched in 2000 and the target date of 2015. And the financial and economic crisis gives a clear excuse for non-performing governments. So the GIVAS mission “to show impact (i.e. what's happening right now) and raise alarm bells as to potentially dramatically worsening vulnerabilities (i.e. what could happen if we don't act)” will certainly be controversial.

I would love to be corrected (in comments below) but the incomplete announcements of this new alert system give me no confidence that the situation has really changed.

Our story earlier this week gave an overview of the outcomes and implications of the agreements from Pittsburgh. Here are some more interesting views from India, China and Australia, plus some more satirical comments.

Many Indian commentators are pleased with the stronger role for the G20. P Vaidyanathan Iyer in the Indian Express revels in the fact that “with the G20 emerging as the next big platform, India now finds itself on the high table with an opportunity to influence decision-making on global issues”. He continues that India can now expect an almost doubling of its quota at the International Monetary Fund by 2011 and an increase in its World Bank shareholding. Developing countries only got a 5% reallocation, not 7% as demanded. Iyer quotes Indian premier Manmohan Singh saying “that’s a compromise”, but concludes that “India is happy to live with it”. 

In the Australian Paul Kelly lays down his views in forthright Antipodean style. “Insulting China by relegating it to secondary status in the corridors of the G8 was no longer a tenable position. The fact that developing nations now constitute more than 50 per cent of global GDP was a further irresistible claim for reform. Suspicions held by Europe and Japan against the radical shift to the G20 were unable to stem the tide”.

As a party paper the China Daily reads less well but the message is equally strong. “Firstly, the financial system of the western world led by the U.S. has become ineffective, causing the virus of the financial crisis to ferment and spread rapidly. Secondly, in an age of emerging economies continuously growing, it is impossible to effectively control the operation of the global economy by solely depending on developed countries, not to mention coping with the attack of the financial crisis. This determines that the rise of G20 on the world stage is a historical necessity”.

Stephen Harper, the Canadian prime minister, acknowledges (more directly than most European leaders do) that his government’s influence is waning:  "Will Canada's voice and Canada's role be diluted (in the G20)? I think it would be crazy for me to deny that, to some degree," he said (Toronto Star).

Not for the first time, Harper’s UK counterpart Gordon Brown seemed to misjudge his soundbite. He compared the G20 to a major conflict! According to the FT he described the new body as offering "more chance of delivering results than anything since the second world war." Let’s hope that getting clear decisions on finance and regulation will be done with the loss of many fewer people lose their home and lives than occurred between 1939 and 1945. 
 

Finally a very jaded but witty view from Matt Gurney on the National Post blog in Canada. He headlined his piece “G8 becomes G20; Earth blossoms into paradise for all”. His point? “what was really holding us back was not having quite enough functionaries drafting press releases”.

French campaigners are not celebrating Monaco's promotion from the OECD's tax haven greylist to its whitelist. The principality is cock-a-hoop that it has already fulfilled the OECD's criteria, talking about Monaco's "new image in tax cooperation". But, as we have pointed out on several occasions, these are far too weak. A country just needs to find another dirty dozen tax havens to sign agreements with and it can escape any sanctions. Why just twelve, leaving out over 90 per cent of countries? No good reason.

Oxfam France - Agir Ici, one of our members, has listed the jurisdictions with which Monaco has signed tax information exchange agreements. Among them are Andorra, Austria, the Bahamas, Liechtenstein, Luxembourg, Qatar, Samoa, Saint Marin and Saint Kitts. The announcement has left Oxfam France "all the more perplexed" and disappointed about the way that the G20 and the international community is handling the tax evasion issue since their grand announcements in April.

Oxfam France has a new report on the issue. Paradis fiscaux : à quand la fin des petits arrangements entre amis? (PDF) and has worked with others to launch a petition. The story has been picked up by Le Monde, among others, quoting Maylis Labusquière of Oxfam France. I can't think of a way to translate her soundbite condemnation of the G20/OECD tax haven scheme, which she says are "comptes apothicaires", but I'd guess it means something like magical accounts, or alchemy. But the message is clear, and we hope that they reach the G20 leaders in Pittsburgh loud and clear. Eurodad's G20 assessment, released last week, also covers World Bank, IMF and other related issues.   

I looked for a link to the Monaco government, but strangely it's official news website is blank at the moment. Perhaps they need to raise more taxes, then they can afford to fix it.

Imitation is the best form of flattery, they say. So we’re happy that UK official development agency DFID is using our title for their recent assessment of aid effectiveness in Rwanda. And even happier that there seems to be some progress in the government holding donors to account there. But what about the funny numbers on DFID's blog?

Eighteen months ago we published an analysis of aid effectiveness implementation in seven countries. We called it “Turning the Tables: aid and accountability under the Paris framework”. Now DFID (who partly financed our aid effectiveness work) have an interesting piece on their blog “Turning the tables on the donors in Rwanda”. The title and the content are very complementary to ours.

In our report we argued: “the country case studies show that some welcome steps are being taken by donor and recipient governments, but this progress is patchy and partial. Donors are not doing enough to respect or support recipient country ownership over the development process. Donors still find ways to fund their priorities, selecting their favoured issues from national strategies or attaching conditions that push their policy priorities”. We went further, arguing that initiatives such as Cambodian and Mozambican government reports on donor performance were as yet rare positive examples of recipient governments taking accountability into their own hands. “Mutual accountability” as outlined in the Paris Declaration was “still aspirational” as “donors remain reluctant to make pledges which limit the control they enjoy through holding the purse-strings of aid payments”.

Now Martin Leach, who heads DFID’s work in Rwanda and Burundi, writes “this year it felt like the tables were turned on the donors”. How? Well at the Development Partners meeting (aidspeak for a donor/government roundtable negotiating session) “all donors were held to account by the Ministry of Finance for the promises they had made”. The ministry took a list of 18 commitments that donors had signed up to – such as delivering the money we had pledged, recording our aid in the Government budget, and giving clear indications of our future financial plans. Leach records that “Every donor’s score was put up on the screen for everyone to see, and there were some red faces round the room - the lowest score was 2/18. The UK was near the top, I’m pleased to say, but we still need to improve, as we only scored 12/18”.

The DFID blog also contains part of the Rwandan government's donor performance assessment framework. The chart breaks down DFID’s score but in fact gives just DFID a score of 10 out of 18, not 12. A slip of the keyboard by DFID's representative? But we welcome DFID posting that data.

The general importance of active information dissemination is also emphasised in the DFID blog. The presentation on a Rwandan government website which sets out the scores of all donors (PDF) is certainly something which needs to be followed up and imitated by other governments. At the moment, though, you need a high tolerance for aid management acronyms to understand it. Work needs to be done to interpret such stats for the average parliamentarian, journalist or activist who wants to help monitor public spending. (Some of the current challenges in aid transparency in Rwanda are outlined in a presentation they made to the donor meeting described by DFID).  

Publishing, disseminating, discussing and of course acting on such data is going to be one key part of making aid more effective and getting beyond the “golden rule - 'He who owns the Gold, makes the Rules'" syndrome, cited by Martin Leach in his piece. There are now several initiatives aiming to make breakthroughs in aid transparency, notably the Publish What You Fund campaign and the official International Aid Transparency Initiative.

An area we're keen to shine a light on in our ongoing aid effectiveness analysis is the question of procurement, including of technical assistance. Eurodad will be publishing case studies on this (Ghana, Namibia) before the end of 2009.

There was much excitement (including on this blog) when the World Bank announced this April that it was changing how it scored countries in its controversial Doing Business publication. But the Bank’s 2010 edition of this report shows how hard it is for a leopard to change its spots.

Trade unionists, tax justice activists and others – including the influential chair of the House Financial Services Committee in Washington – had long complained that the Bank praised governments which cut taxes and allowed companies to reduce worker protection. In response to these concerns, and the threat of reduced US government funding the Bank appeared to have eaten humble pie, altered its approach and even asked the leading light behind the report to have resigned.

Six months later the new Bank report shows that in fact very little has changed. Singapore is again top of the Bank's rankings, and other countries such as Georgia are praised and given a better ranking for abolishing their social taxes. Belarus gets a good score for making it easier to fire people. Conversely, as the International Trades Union Congress points out, Cambodia said to be “making it more difficult to do business” because it introduced a social security contribution.

Everyone is said to be concerned about tax systems these days, with World Bank Managing Director (and former Nigerian finance minister) Ngozi Ikonjo-Iweala telling a conference in DC this week “we must hit financial centres very hard … we need to hit Dubai and Jersey and Switzerland hard - this is the future of development”, according to Richard Murphy’s blog report. Why is her World Bank then still endorsing these jurisdictions by placing them at 33, 21 and 5 (the UK) respectively in the Doing Business ranking?

Martin Hearson, one of ActionAid’s team working on tax evasion and capital flight, looked into the methodology of the Bank's 2010 report (PDF). In an e-mail last week he concluded that the Bank’s “Paying Taxes index still includes the total tax rate - rumours of its death were maybe a little exaggerated!” In other words the less tax business pays the better, as far as the Bank’s concerned.

The World Bank has prided itself over the last decade or so in becoming seen as a “knowledge bank”. Many newspapers and officials cheerful cite the Bank’s work as if it is the gospel truth. But that’s not the view of many researchers, such as Christian von Drachenfels of the German Development Institute. He and colleagues last year published Seven Theses on Doing Business (PDF), none of them complementary. In sum they argue: “the reports basically advocate for minimum regulation. This perspective largely neglects the economic and social benefits of regulation”.

At a time when every world leader is preaching the virtues of regulation the Bank risks being seen as dangerously out of step. And next year’s IDA funding round for the Bank is not likely to be easy post-crisis and with competition to stump up on climate change. Perhaps the Bank was calculating that Barney Frank and other legislators are now too worried about their own national financial regulation debates to bother about this report again. We’ll see.

If your views on business taxation differ from those of the Bank why not broadcast them on the interactive Outlandish Revenue Service website created by ActionAid.

Arnaud Zacharie has an interview in today's La Libre Belgique (en francais) assessing the global economy one year on from the Lehmann collapse. Arnaud is Secretary General of Eurodad member group CNCD, and also treasurer on our board. So we take his analysis very seriously. He has been proposing a financial transactions tax for many years, an idea who's political time may finally be coming, according to recent announcements from the UK and Germany.

The headline of the interview with Arnaud is clear (and most commentators this week seem to share the pessimism): "End of the Crisis, no. New Bubble". We're not out of the crisis, and in fact a new speculative wave is occurring. The slight upturn in economic growth numbers is caused by households and companies restocking, and bank's balance sheets are artificially supported by the temporary injection of public finance. A social crisis is now kicking in and a growth in the numbers of unemployed will mean that consumption does not continue to rise. The question is whether we will have a 'W' shaped double-dip recession or a 'VL' one. At the international level Arnaud fears a speculative bubble is already occurring in the bond markets and we're seeing competitive devaluations (which make external debt payments more expensive).

In an accompanying piece Arnaud explains why free competition does not work in finance (en francais). He explains how momentum investing makes a nonsense of supply and demand, and that therefore a functional free market in finance is a dangerous utopia. An excellent analysis in English of this phenomenon appeared in UK magazine Prospect: A greedy giant out of control.  

Details of how the European Union is grappling with the financial regulation agenda are provided in a third piece by CNCD on their website (en francais). CNCD is calling for proper public regulation and for a financial transactions tax. The latter is shooting up the agenda, with an endorsement in recent days from German Chancellor Angela Merkel. This follows thick on the heels of a mention by UK financial regulation chief Adair Turner. The paper which seems to have persuaded the German government to take this seriously was produced late last year by Stephan Schulmeister and others at the Vienna Institute for Economic Research. 

Oxfam calculates in a paper released last week that such a financial transactions tax could yield at least $33 billion per year. France and Belgium have already taken initial parliamentary steps towards introducing such a tax.

Still don't hold your breath for such a tax to be instituted. Martin Wolf, one of the world's most influential journalist on finance matters, wrote last week in the FT that "obviously, it would have to operate in all significant financial centres. So the chance of its happening is zero". But Wolf's views on regulation have been changing dramatically in the last two years and perhaps he'll come round to the idea soon. However one of our members in Germany told us that the Merkel announcement "has to be seen in the context of the German election".

If the economy does fail to pick up, as Arnaud Zacharie and others predict, European citizens will certainly mobilise (both at and between elections) to demand a second wave of more ambitious financial reforms.  

I quoted this Eddie Cochran song (also covered by The Who and many others) to start my guest blog for Tax Justice Network on last week’s Amsterdam meeting of the UN tax committee. This body, the focus of much advocacy in the Financing for Development process last year, has the potential to be a more inclusive counter-weight to the OECD, which currently makes most of the running on international tax cooperation. At present it is allowing many countries off its blacklist scot-free, just as soon as they sign half-hearted information exchange agreements with another dirty dozen countries such as themselves.

As I explained on the TJN blog (more links there):
“The idea of the meeting was to orient the committee members on current issues and debates and to ensure that members understand the slightly arcane workings of the committee itself. This will ensure that they can hit the ground running at their official meeting from 19-23 October in Geneva. 

Participants discussed many aspects of current tax debates, aiming to think through how they can be most effective in fulfilling their mandate and contributing to produce an updated model UN tax treaty and other outputs. Possible new items on their agenda include developing a practical manual and checklist for developing countries on corporate transfer pricing and further work on corporate tax competition and on taxing services.

We civil society groups were invited to attend and speak at one session (following another where international business representatives made their case). My colleagues (from SOMO, Oxfam-NOVIB, ActionAid, Both ENDS, Christian Aid and Tax Justice Network Netherlands) and I informed the officials about the rapid increase in the number of organisations taking up tax and related financial regulation questions and encouraged them to move boldly and fast.

The main points we raised were automatic information exchange, country by country reporting by transnationals, tax competition and environmental taxation. Another issue tabled was the roles of International Financial Institutions such as the European Investment Bank (which has just this week issued a new policy on offshore financial centres). The officials - a much livelier bunch than several similar groupings I've had the pleasure to address - responded with interest”.

Am I right to be optimistic that this UN body has potential? We’ll see. But on the evidence of last week it’s for sure worth civil society groups and others continuing to feed into it.

A year ago banks in Iceland were falling off a financial cliff and bringing the rest of the economy with them. Panic broke out in the UK and other countries which were significant creditors to the Icelandic banks. As the country clearly cannot repay debts which amounted to over 6 times the country's GDP external creditors have to accept an offer that will move forward the principle that dramatic changes in a country’s circumstances should mean a slower debt repayment schedule. This principle, incidentally, is one that Eurodad has been advocating in its Responsible Finance Charter. 

Nick Dearden of Jubilee Debt Campaign, a Eurodad member group in the UK writes: “the Icelandic Parliament’s offer to the UK and Dutch governments earlier this week that it will pay back its debts but only at a level it can afford, could provide an invaluable model for how indebted nations can start putting the needs of their people ahead of the desires of the global financial markets”. Details of the deal are sketchy, but the Financial Times summarised last week that "Iceland would pay £2.3bn (€2.7bn) to the UK and €1.2bn to the Netherlands over 15 years, with an initial grace period of seven years".

Dearden explains that ordinary citizens plus dignitaries such as French judge Eva Joly "have pushed members of the ruling coalition and opposition parties into opposing the enormous repayments being demanded by the British and Dutch governments. That is the background to the decision earlier in the week of the Icelandic Parliament – the Althing –that it would repay its debts, but only at a rate it could afford. That is defined as spending no more than 4% growth in GDP to repay UK debts (and 2% for Dutch debts). If the economy doesn’t grow (because of inappropriate conditions forced on the country by creditors for example) Iceland pays nothing”. 

This decision, if implemented, is historical. The nearest equivalent may be the decisions in the 1920s to allow Germany longer to repay its onerous First World War reparations. Iceland’s Social Affairs minister Árni Páll said in this case “It would naturally be the right thing to do to write off debts that exceed payment ability and what the collateral of assets allows. The value of assets collapsed, while debts increased significantly. Debts in society exceed assets by far and it is not for the good of anyone to maintain that situation. It reduces the ability of the economy to recreate value,” Árnason told Fréttabladid.

Dearden says “Iceland is correct to assert that states in debt have rights that trump the rights of creditors to bleed their economies dry. When companies and municipalities become insolvent, they are protected by work-out laws – but no such work-out mechanism exists when it comes to countries”.

Yes, which is exactly why the principles in Eurodad's Responsible Finance Charter must apply to all new lending: including the flood of lending that may accompany the financial crisis. One important provision in our Charter is that “the loan contract must recognise that there will be cases where a dramatic change in circumstances – beyond the will of either borrower or lender – means that the borrower is no longer able to meet its financial obligations on the loan. The contract should state clearly what happens in such circumstances and should allow for a modification of the terms of the agreement”.

Writing in the Financial Times recently US academic Michael Hudson comments “Iceland promises to lead the pendulum swing away from the ideology that debt repayments are sacred”. Such pendulum swings do not happen without resistance, though. Most of the international banks which were (foolishly) so involved in Iceland this time last year are proposing legal action against hte Icelandic government, according to law firm Norton Rose.  

As a citizen of one of the world's countries contributing money to the IMF these days, you may want to know where your money is going.

So the question is: do you think that your taxpayer money which your government put into the IMF as a result of the G20 agreement in London in April would go to save the world’s poor from hunger and starvation?
 
And the answer is…no, no, and probably no.
 
The first NO goes to the IMF policy advice to poor countries in times of crisis: although the IMF says that it is allowing for expansionary and counter-cyclical policies in borrowing countries, recent NGO research disputes IMF’s claims – see Eurodad’s June report “Bail out or blow out?”.
 
News from the media on one of the latest IMF loans for poor countries, the Exogenous Shocks Facility for Kenya approved on May, are not encouraging either. John Lipsky from the IMF told the Chinese press agency Xinhua that in this loan “economic policies for 2009/10 will focus on reducing inflation, rebuilding foreign exchange reserves and strengthening the basis for a return to a robust sustainable growth.” This is all laudable, but may not foster the type of growth, and equitable growth, needed by the Kenyan poor. Rather, these days, it risks freezing down (as opposed to cooling down) the Kenyan economy.
 
The second NO goes to   the amount of resources that the IMF is planning to channel to poor countries. A joint analysis published today by EURODAD, Bretton Woods Project, Third World Network and ActionAid on the packages for low-income countries that the IMF approved on 29 ^th July points that out of the $17 billion announced by the IMF for low-income countries until 2014, actually only $2.3 billion is secured. And anything else on top of this may probably not be fresh money, but just recycled from donor ODA budgets.
 
The third NO goes to who will get the resources if not the world’s poor countries.  And the answer is “possibly, European banks.” In a very interesting piece from June, “The next big taxpayer bailout?”, Mark Weisbrot points how the IMF could get hundreds of billions for European banks:
 
“Europe's banks have gotten into a mess in their own neighborhood that is comparable to the "troubled assets" that our financial institutions accumulated in the course of the housing bubble -- which they also shared. These banks had a fit of irrational exuberance in Central and Eastern Europe in recent years, with the result that they now have at least $1.4 trillion -- and that is a conservative estimate -- in exposure there to loans that are certain to have a very high default rate. (…)The exposure of European banks to the region is astoundingly large relative to their economies. Austria is off the charts with about 64 percent of GDP lent in Eastern Europe; Belgium and Sweden both have more than 20 percent, and Switzerland and the Netherlands are in double digits. (…)European banks are facing potential losses in the hundreds of billions of dollars. Some, like France's Societe Generale, have already gotten billions of dollars from the TARP bailout. If the purpose of adding these vast sums to the IMF's coffers is to bail out these banks, then the taxpayers of the United States (and other countries who are being asked to contribute) ought to know about it.”
 
What the European Union and the IMF are doing in EU countries to protect European banks is another story. But some say that Hungarians or Latvians shouldn’t be less concerned that poor people in poor countries.

Confronted with the parallel G20 process, and under the threat to fall into irrelevance, the G8 has quickly come up with a declaration at their L’Aquila Summit, agreed on even before the summit was over. Some observers argued this shows that the G8 is still a functional body of global governance, capable to make swift and bold decisions. But it could also be argued that the declaration primarily shows that G8 leaders are more and more disconnected from reality. The following reflections on selected paragraphs central for development finance state why. They complement the many verdicts and comments by Eurodad member organizations and other CSOs.

Eurodad’s focal topic foreign debt has just been touched softly by the G8. The final declaration reads "we will … explore enhanced approaches to sovereign debt restructuring based on existing frameworks and principles." (§101). Eurodad’s monitoring of international processes on debt-related issues could not find any signs that any suitable organization has been mandated by G8 or other governments to actually do this work. Since the UN’s Financing for Development conference has reset enhanced debt work-out mechanisms on the international agenda in December 2008, the vague commitment stated above is copied and pasted from one international declaration to the other, but no one makes the next step. Repeated rhetorical reaffirmations will not lead to the concrete institutional innovations which are more desperately needed than ever since the financial crisis pushes debt levels to new heights in many developing countries. It is time for governments to come up with a concrete outline on the main principles and criteria for an enhanced debt work-out mechanism, to allocate the work to qualified international organizations, and to draft a timeline that clearly states by when the new mechanisms will be implemented.

In the meantime, creditors should accept a debt moratorium for poor and crisis-hit countries. Just continuing „to provide debt relief according to the Enhanced HIPC initiative, the Multilateral Debt Relief Initiative and the Paris Club’s Evian Approach" (§100) will not be sufficient to prevent new debt crises since the number of countries and debt categories eligible for these initiatives is too small.

Official Development Assistance

The G8 reaffirms their Gleneagles commitments to double official development assistance (ODA) for Africa by 2010, i.e. to increase it by USD 25bn compared to 2004, and to increase global ODA by USD 50bn. One year before the deadline is due, it is questionable where the missing billions shall come from. The G8 make their statement at the same time when they are drafting their national development budgets for 2010, and the additional funding needs are not reflected in these budgets. Germany, for example, is planning to increase its development budget by a mere 23 million Euros in 2010, by far insufficient to fill its share of the gap. The British government has recently announced to keep its promise on scaling-up aid to 0.7% of GNI by 2013, but it is arguable if actual delivery on this pledge is more likely than prime minister Brown’s reelection. Italy has recently cut its aid budget by half, might disburse little more than one-fifth of its ODA obligations of 0.51% of GDP in 2010, and there is no sign that this trend will be reversed.

More, and more effective aid is crucial to ensure that the numerous sectoral commitments which the G8 has made in recent years in fields such as health, education, water supply and nutrition can be implemented and the corresponding development goals can be met. The G8 say „we are firmly committed to implement the Paris Declaration and the Accra Agenda for Action (AAA)" (§102). Progress in implementation can currently hardly be monitored by external watchdogs, exactly because governments so far did not implement their commitments on more aid transparency. The next official Paris Monitoring Survey is due in 2010, and will most likely be a retrospective on failure.

What can be monitored externally is if donors break down vague international commitments to country-level actions and adapt country-level action plans with time-bound and clear measures to reform the way they deliver aid. Ten months after the High-Level Forum in Accra took place, the 23-strong DAC is just able to publish one plan on its member’s plans on its website. The DAC’s Working Party on Aid Effectiveness needed the same timespan to relaunch its activities post-Accra, discuss its workplan, and agree on next steps and relevant deliverables.

ODA does not flow in sufficient quantities, donor and recipient governments alike lack any sense of urgency to making aid more effective, and this combination is exactly the reason why none of the internationally agreed development goals dependent on external development financing will be met.

Food and agriculture

The L’Aquila summit’s most tangible outcome concerns food and agriculture: The G8 donors commit to disburse USD 20bn for tackling the food crisis in the coming three years. However, it is unclear how much is additional and how much is just media-compatible recycled by G8 leaders.

The upside of this commitment: ODA to agriculture and rural development had been reduced dramatically since the 1970s, a fact that contributed to stagnating productivity in Africa and thus to the current food crisis, so it is welcome that this trend is finally reversed

The downside: Three years commitments are not development finance’s state of the art anymore. In fact they are nonsense. It takes time to scale up development programs, and they need to be phased out gradually and carefully to ensure sustainability of results. It is therefore unlikely that a three-years-big-push earmarked for a specific sector such as agriculture can ensure efficient and effective spending of aid monies. Therefore, it might be more adequate to disburse additional funds as budget support, to allow for some flexibility, and spending decisions based on the recipient’s own needs assessment – targeted on achieving gradual and constant progress.

Under the conditions of stagnating total ODA it could even be harmful to scale up funding for one sector what necessarily needs to diminishing funds for other sectors. G8 governments and donors in general should not change their priority sector every other year, this poses a substantial challenge to recipient countries and aid practitioners who actually have to implement development programs and are forced to reallocate staff and resources on short notice, reacting to political fashion cycles. The G8’s aid experts know that, this is why the L’Aquila Joint Statement on Food Security reads: "Sustained and predictable funding and increased targeted investments are urgently required to enhance world food production capacity. Commitments to increase ODA must be fulfilled." So why don’t they translate their knowledge into practice?

During the public event, For a Democratic, Responsible and Sovereign Finance held in Rome, on the 11th June 2009 organised by our Italian member CRBM and co-organised by Eurodad, we collected opinions from some of the participants and put together several short (but intense) interviews.

The format is easy; the same questions to different people: the result is interesting and shows the many different ways in which the crises have affected peoples’ lives according to their geographical location.

The interviews have been recorded and edited by Arcoiris an on-line television channel.

Here are some examples: Vinod Raina from Jubilee South Asia/ Pacific, said “the link between the economic and political world and the lives of the people” got him involved in economic justice issues.

Maria Jose’ Romero from Instituto del Tercer Mundo, gave us some specific examples of the impacts of the crisis she has seen. She described the multiple aspects of the crisis that need to be considered; the food crisis and the climate crisis for example, besides the financial and economical; therefore impacts can be seen on a wide range of people especially workers and common people.

Neil Watkins from Jubilee USA told us his opinion on whether the governments have done enough to address the causes and symptoms of the crisis.

Rezaul Chouwdhry, from Equity and Justice Working Group Bangladesh, commented on his confidence in the EU and other international bodies to restore proper public control over private finance. He compared Bangladeshi citizens’ current situation with that of Jewish people in the 1930s and 1940s in Europe, arguing vehemently that “Dakar, is the second most populated city in the world, with 2500 people per km2 and by the year 2050 it will be 5000 per km2, it will become like a gas chamber, a holocaust situation.”

Bhumika Muchhala, from Third World Network, also interviewed, said she had seen the impacts of the 1990s crisis in Indonesia. Now, she felt “What is different about this crisis from previous crises is that first; it a truly global crisis and second it originated in the US, so it’s different in terms of where the responsibility lies. I think the developed and western countries have a majority share of the responsibility to address and resolve the crisis.

These are only some of the opinions and comments we collected. You can also see and hear the views of Eliana Franco from Jubileo Ecuador, Katharina Muhr from WEED, Lidy Nacpil from Jubilee South Asia/ Pacific, Njoki Njoroge Njehû from Africa Jubilee South and Beverly Keene from Jubilee South. 

Heard of the Shadow GN or Gsotto? You should. They are not getting as much air time as the G8 but are important counter-weights to that anachronistic forum. The GN is an experts group with Jean-Paul Fitoussi and Joseph Stiglitz. The Gsotto is a special meeting co-organised by Eurodad member CRBM that is taking place down a mine in Sardinia starting tomorrow. This innovative gathering – which you can see streamed live on the internet now - has activists from across the world discussing extractive industries, climate change and the economic crisis.

Friday’s programme down that beautiful looking mine shaft by the Sardinian coast will tackle the vital topic of “phasing out the oil economy”  as well as measures to prevent local economic development being undermined by multinational oil, mining and gas companies. Saturday’s interactions – all visible on-line – will cover food sovereignty, purchasing power and distribution of wealth.

If you have thoughts on what you see via the web stream, and like me you use Twitter, you can share them there from tomorrow, using the #gsotto tag to identify them so they can appear on a screen in Sardinia and be raised directly to those present in the mine there.

The shadow GN report The Ways Out of the Crisis and the Building of a More Cohesive World (PDF) tackles many of the same themes, although in a much more traditional format. It has excellent recommendations on tackling the structural causes of the crisis, on fiscal stimulus, on monetary policy, bailouts, regulation and global economic governance.  They include measures on tax havens, the World Bank and IMF. The shadow GN challenges Mr Berlusconi and the other G8 leaders saying “this year the G's are meeting at a critical moment in history. They could act in such a way that would allow us to get out of this situation, creating a future where growth is more sustainable, friendlier to the environment, and where its fruits would be distributed in a more equitable way, both within and among countries. Otherwise, they will bear an enormous responsibility before history”.

Last month I was at a meeting in Rome with an Italian foreign affairs minister and several senior officials organised by the Global Call to Action Against Poverty. Sadly I did not get any sense that we would see any kind of historic announcements at this summit. In the development area at least it seems like small amounts of money and minor special sectoral initiatives will again be the order of the day. Will they be enough to generate good media coverage and distract from the many voices calling for the G8 to accept that it has far outlived its usefulness and legitimacy? I hope not, but journalists are often far too uncritical of this forum, and perhaps seduced by the hospitality and facilities provided for them.

It is quite obvious that the MDGs are off track, particularly in Africa. The financial crisis makes it still harder to meet them, since poor countries suffer from severe financing shortfalls and rich countries prioritize spending their money on bank bail-outs and corporate subsidies rather than on poverty eradication. The UN Millennium Campaign calculates that "the amount of total aid over the past 49 years represents just eleven percent of the money found for financial institutions in one year".

However, is now the right time to discuss what will be the next paradigm after the MDGs – six years before their 2015 deadline is due? This is what was discussed at the policy forum "After 2015: Promoting Pro-poor Policy after the MDGs" primarily financed by DFID and jointly organised by EADI, IDS, DSA, The Broker and ActionAid.

For many participants at the meeting in Brussels this week, the MDGs seem to be history. This becomes very clear when people speak in past tense on a set of development goals which was hegemonic for almost a decade. But let’s get back to present tense. The MDGs are a small extract of the United Nation’s development agenda, just a small selection of the internationally agreed development goals. Their advantages are the simplicity, the clear deadline and the measurable indicators - excellent for public campaigning, and for holding governments to account. Some of their many disadvantages are a lack of binding targets for the "North"- under MDG 8 - their narrowness and remarkable omissions in particular with regard to social and economic equality and environmental sustainability. This might be part of the reason why it was so easy to find a global consensus on and for the MDGs.

Some good points were raised at the Policy Forum, for example Claire Melamed’s (ActionAid) plea for replacing the current development cooperation model based on aid and charity by a global welfare state model, in which each of the world’s citizens has an enforceable right to the basic goods and services needed for a decent life. But in general the participants’ ideas for a "new" post-MDG paradigm were not so new at all. Social and gender equity, rights-based approaches, environmental sustainability – we have heard that before, for example at the United Nations’ conferences in Rio, Copenhagen and Beijing in the 1990s. The problem is that these conference outcomes fell into oblivion, while the simple set of MDGs stayed alive, supported by persistent and professional campaigns such as the UN’s own Millennium Campaign or the CSOs’ Global Call to Action against Poverty.

It is definitely not wrong to recall the full UN development agenda and add equity and sustainability in an MDG plus approach, especially because it is very unlikely that poverty reduction targets can be met in a world of limited resources without at the same time addressing excessive wealth concentration. But in the meantime we shouldn’t complicate things and continue to push governments to meet and exceed the MDGs. The policy prescriptions for Northern governments are known: Increase ODA and make it more effective. Immediately cancel all foreign debt for all countries which lack domestic finance for the MDGs, and make trade fair. What the financial crisis has shown is that we need a plus-approach for MDG 8 – so add "close all tax havens and regulate your financial sectors properly." The British government in particular should invest more energy and resources in immediately doing this rather than thinking of a post 2015-paradigm. UK tax havens and the City of London have extracted more wealth from poorer countries than UK aid has ever contributed.

Published in: Economisch Statistische Berichten (Economic and Statistical Bulletin) 94 (4562)
12 June 2009: p.381 as ‘Meer schuld geen antwoord op crisis ontwikkelingslanden’.

The crisis caused in the west does not only impact the rich Western world. New estimates of among others the World Bank indicate that the poverty of the more than 2.5 billion people who already live on less than two dollars per day, will deepen; that between 2009 and 2015 infant mortality will be between 1.4 million and 2.8 million higher than expected; that tens of millions of people more than expect will find themselves in extreme poverty and that the number of people in the world that suffer chronic hunger will increase in 2009 to more than a billion.

The governments of richer countries see the solution for increasing poverty in developing countries mainly in more IMF-loans and trade credits. According to calculations by Oxfam (2009), of the 1.1 trillion dollar in measures which the G20 recently has agreed, only fifty billion is expected to be available for Low Income Countries, and then mainly in the form of loans that lead to a heavier debt burden. More debt does not form a solution for the crisis in poor countries. On the contrary, it is rather part of the problem.Between 2000 and 2007 the governments of low and low-middle income countries have paid 1.228 billion dollar in debt service, of which 140 billion dollar to the IMF and World Bank. They will have to continue to do so in the coming crisis years. But with the current economic crisis these countries can not comply with their obligations to creditors without compromising basic provisions for their own populations. This has to an important degree to do with negative export shocks (Cohen et al., 2008). After many years of increasing exports, the export of poorer countries now falls negative as a result of the crisis (IMF, 2009). Moreover, developing countries are now being hit hard by withdrawing investors, a fall of more than seven hundred billion dollar compared to 2007 (World Bank and IMF, 2009), and decreasing bilateral development aid. The IMF and the World Bank may be proud of their plan to make their borrowing conditions more flexible, but this does not prevent that during the current crisis capital in the form of principal and interest payments flows out of developing countries, where it is most needed.

IMF-loans and other sources of debt, as the G20 propose, are no solution to the problems of low and low-middle incomes countries. In fact an immediate moratorium on debt service, a freeze on interest and principal payments, and debt cancelation are desirable and justified for poor countries which have insufficient resources of their own to protect their population against the crisis. The measures proposed by the President of the General Assembly of the UN on 8 May 2009, have more eye for a sustainable solution and form a more appropriate response to the crisis. This Draft outcome document of the UN (2009) was to form the basis of negotiations during the UN Conference on the world financial and economic crisis and its impact on development on 1, 2 and 3 June, which now takes place 24, 25 and 26 June. It proposes that the funds agreed in April by the G20 to be channeled through the IMF, do not come in the form of more debt but rather be allocated as grants so as to prevent a further increase in inequality. A moratorium on debt service and partial debt cancelation for countries whose debt burdens threaten to become unsustainable due to the crisis should be considered, according to the document. Other proposals include that international institutions that play a role in reforming the international economic system, must be accountable to democratic and representative institutions such as the UN. This includes supervision of the IMF and the World Bank.

Rich industrialized countries must refrain from protectionism and ensure that bailout and stimulation packages do not distort the economic playing field further and lead to a further increase in global inequality. According to the proposal large investments in environment, food, energy, health and education are necessary; not only to stimulate the world economy, but also to lay the foundation for a new durable economy, based on the needs of people and on human rights. It is estimated that for this an annual amount of three trillion dollar, five per cent of world-GDP, is necessary. An immediate abolition of agricultural subsidies in developed countries to effectively stimulate agriculture in developing countries, and independent supervision by the UN of all for the international system important institutions belong to the proposals put forward.

A proposal therefore, which helps fight the increased poverty in developing countries as a result of the crisis, and which can contribute to a less unequal, more democratic and more sustainable world economy. Unfortunately the Dutch government, which has the role of co-facilitator of the UN-congress, and other rich countries, have managed through enormous diplomatic pressure to change the pro poor and green proposals. This before they could be negotiated 1, 2 and 3 June during the UN conference; the conference itself has been rescheduled to later this month. A missed chance, or better said: a large danger for a more equitable and more sustainable world economy in which freedom from hunger and poverty is also enjoyed by those which now lack it.

* Translation by author.
Murat Kotan is coordinator for Jubilee Netherlands.
contact: info@jubileenederland.nl 

Literature

IMF (2009) World economic outlook update, January 2009.
D. Cohen, H. Djoufelkit-Cottenet, P. Jaquet en C. Valadier (2008) Lending to the poorest
countries: a new counter-cyclical debt instrument. OECD workingpaper nr 269.
Oxfam International (2009) What Happened at the G20? Initial analysis of the London
summit. Oxfam briefing paper.
UN (2009) United Nations Conference, World financial and economic crisis and its
impact on development; Draft outcome document 1.0, 8 May 2009.
World Bank/IMF (2009) Global monitoring report 2009: A development emergency
 

A quiz question: which is the only non-G20 country to have won the football world cup and when did they last win it? (Answer at the end). This query came to mind during a football match we played in the margins of our conference last week in Barcelona . Our hosts from ODG organised participants into two teams: G20 against the rest. The catch? The non-G20 players (with Democratic Republic of Congo etc on their chests) had their legs or arms tied together or other impediments to playing the beautiful game as it should be played. In fact the non-G20 goalkeeper was blindfolded, and two of the players had their ankles attached as in a three legged race. 

These were not the only ways that the playing field was tilted in favour of us G20 players (I got allocated the United Kingdom: a G20 country, though not in fact a football team). The International Monetary Fund was given the task of refereeing the match, which it did in a blatantly biased manner, repeatedly favouring the big powers. The United Nations was an assistant referee, but nobody took any notice of what they said. 

After some 15 minutes of playing this way (on a dusty African-style pitch that was nothing like the Camp Nou ) there was a sudden pitch invasion. Another 10 people charged onto the field with labels identifying them as social movement activists. They liberated the non-G20 countries from their shackles and then reinforced their numbers and played alongside them.

This numerical superiority (and some skill) unfortunately meant that we G20 players soon found ourselves several goals down, and ended up losing the match in the gathering darkness.

This kind of game is strongly recommended as a fun break from conferencing and a way of getting people to think about power block imbalances. Perhaps busy delegates and activists at the United Nations summit on the financial crisis and development can find a pitch near the UN building in New York to play on today or tomorrow. 

It will be great if the UN summit outcome is similar to the result of the Barcelona football game, but it is not that likely. More probable is that a fairly lowest common denominator compromise will be found on many points, with some small openings for the UN to play a stronger role in future rule setting on finance issues.

Quiz question answer: Uruguay, 1950.

Monks used to sit in this Italian church contemplating the bible and the after life. I am debating responsible and democratic finance standards to guard against a new wave of harmful lending to developing countries. Everyone is convinced that the current rules that govern sovereign lending are full of loopholes and flaws, and that the announcements of official moves to fix them are inadequate and not to be trusted. That extends to today's G8 finance ministers pledge to create a so-called Lecce Framework of Principles and Standards for Propriety, Integrity and Transparency.

Some think tanks and politicians are arguing that existing social, environmental and procurement standards should be suspended so that money can flow rapidly to stimulate struggling economies. Given the limited amount of money available for developing countries at this time it is vital that it is used well.

So the organisations and networks from all the world’s regions who are represented here are discussing principles, practices and measures that will ensure that lending is for useful public purposes, does not violate human rights and contains full accountability checks and balances. The Eurodad Responsible Finance Charter is a starting point, but this is being extended to cover the duties of the borrower and to cover some additional areas which were not so prominent when we drafted the charter in 2007.

The discussions are also covering strategies on the IMF (see Eurodad’s briefing released yesterday assessing the difficulties with the IMF’s low-income country lending at this time), the UN (next week’s international conference on the financial crisis impacts on development and the UNCTAD process on odious debt and responsible finance standards). Also the process that Angela Merkel and other G8 leaders have proposed to draft a charter on sustainable economic activity. This task was to be assigned to the OECD, which has conducted an “inventory of international policy tools” in collaboration with the World Bank, IMF, WTO and ILO.

From the point of view of the civil society representatives here it will be easier for a camel to pass through the eye of a needle than for the OECD - a rich countries club – to produce a legitimate and effective new global standard. Todays' finance ministers meeting seems to agree in that it says that existing standards by the OECD, World Bank etc "suffer from insufficient country participation and/or commitment". How they will achieve this remains unclear. The G8 finance ministers communique (PDF) states only "we are committed to working with our international partners to make progress with the Lecce Framework, with a view to reaching out to broader fora, including the G20 and beyond".

The G8 approach describes the coverage of their proposed 'Lecce Framework', as "to create a comprehensive framework, building on existing initiatives, to identify and fill regulatory gaps and foster the broad international consensus needed for rapid implementation".  It mentions its coverage as extending to "corporate governance, market integrity, financial regulation and supervision, tax cooperation, and transparency of macroeconomic policy and data".

Here in the NGO meeting on responsible finance organised by Eurodad and allies, more faith is being placed in the United Nations conference on the financial crisis and development. Unfortunately the European Union and others are blocking progress on key elements at this UN summit, but there is a concerted effort going on to find a breakthrough. Eurodad staff, several members, and other allies will be present at the summit in New York in 10 days time. Both the venue and the ambience will certainly be different from here in Collevechio.

Have you heard who's giving credibility and momentum to Christian Aid's campaign to stop transnational companies doding taxes? Only the top official at the UK tax authority! Congratulations to Christian Aid, one of our members, for their campaign which is clearly touching a nerve.

Christian Aid is encouraging its thousands of supporters to send an e-mail to pressure the big four accountancy firms to reform accountancy rules. Christian Aid says "accountancy isn’t boring any more. In fact it could be a great force for change". You can see a video explaining the action, and get more background on the serious effects on developing countries of TNC tax dodging.

I don't expect that Christian Aid thought that their campaign would already be generating long articles in the Financial Times, and getting Accountancy Age and others buzzing about it.

But that's the case. Why? Because Dave Hartnett, permanent secretary at the Inland Revenue, told a press conference in Paris that country by country reporting by transnationals is "an idea that is gathering momentum". He said: "There is a growing recognition that country-by-country reporting brings additional transparency, particularly in relation to how multinationals are operating in emerging and developing countries."

The Financial Times also approvingly quotes Trevor Manuel, then South Africa's finance minister who - like Eurodad and many of our members - points out the contradictions between providing development aid with one hand while facilitating illicit capital flight with the other.

Oh yes, and another lively contribution to this growing debate was made by the Alternative Tax Awards organised by Christian Aid in late May. They gave the main award to the Big Four accountancy firms – PriceWaterhouse Coopers, KPMG, Ernst & Young and Deloitte & Touche – together with the International Accounting Standards Board. The most surprising use of tax havens was scooped by the CDC Group plc and its sole owner, the Government’s Department for International Development. The Low Tax Rate Achievement Award went to P&O cruises’ owner Carnival "for its outstanding, dedicated and entirely legal use of tax avoidance". Full details of these awards can be consulted in the Christian Aid announcement (PDF).

Let's hope this campaign spreads and spreads. It looks like it might well do just that, especially at this time when faith in corporate regulation and ethics is extremely low.  

Yesterday Eurodad organised presentations in Brussels by members of the UN Commission of Experts on Reforms of the International Monetary and Financial System. The speeches by the members of the so-called ‘Stiglitz Commission’ – a senior official from India and a leading academic from China – were a breath of fresh air compared to many of the exchanges that we have heard in this city in recent weeks.

In my introduction I said that the contrast with the EU’s De Larosiere High Level Group could not be clearer. The EU included only people who have been part of the financial system that has now collapsed. The UN General Assembly president convened people with knowledge of the system but independent thinking about its problems.

Speaking yesterday at the Eurodad/Friedrich Ebert Stiftung meeting in Brussels Yaga Venugopal Reddy, Former Governor of the Reserve Bank of India, regretted that politicians are currently stressing the stimulus and “do not want any diversion from that”. He said there deliberations were not just on the short-term, however. Indeed: “the main challenge by the Stiglitz group is to fight for the nature, the fundamental aspects of the crisis response”.

The Commission’s diagnosis in their draft report says “the current crisis has exposed deficiencies in the policies of some national authorities and international institutions based on previously fashionable economic doctrines, which held that unfettered markets are, on their own, quickly self-correcting and efficient. Globalization too was constructed on these flawed hypotheses; and while it has brought benefits to many, it has also enabled defects in one economic system to spread quickly around the world, bringing recessions and impoverization even to developing countries”

Also speaking yesterday Yu Yongding, Director of the Institute of World Economics and Politics and former Member of Monetary Policy Committee, People’s Bank of said that governments were right to be worried about speculative attacks on their currencies. Experiences from the Asia crisis last decade, and more recently showed why reserves needed to be built up. But the large reserves and dramatic imbalances have been deflationary and caused instability. The increasing inequality in many countries also contributed to depressing demand and provoking the crisis.

The Commission’s draft conclusions say that regulatory reform cannot wait and must be accompanied by moves towards “deeper systemic reforms”. These include moves to introduce a new global reserve system, reforms of IFI governance, the introduction of a Global Economic Coordination Council under the United Nations.

Also, and more innovatively, they propose a new credit facility with a more balanced governance than the current World Bank and IMF.  Also a Financial Products Safety Commission, modelled on the Food and Drug Administration and similar agencies, to ensure that financial products are assessed before being put on the market. And, finally, they suggest mimicking the successful example of the Intergovernmental Panel on Climate Change (IPCC), a similar panel could be created to offer consultancy to the General Assembly and ECOSOC, but also to other international organizations to enhance their capacity for sound decision-making in these areas.

These institutional reform proposals go beyond what is currently acceptable to politicians, as our speakers repeatedly recognised yesterday. Francois Houtart, a third member of the UNGA/Stiglitz Commission panel also joined the meeting yesterday, though too late to make a full speech. His question, based on his years of work questioning the ethics of the current globalisation model, was “we need to repair the [economic and financial] machine, but what for?” He urged a much broader debate on the nature of development and the prevailing economic logic. 

We’ve today received a new version of the draft outcome document for the UN summit on the World Economic and Financial Crisis and its Impact on Development. This will take place from 1-3 June. Some of the proposals in the Stiglitz Commission do find their way in there. For example the one for a new credit facility to channel funds to low-income countries, and a new global reserve currency system based on the SDR. There are also proposals on tax havens and on IMF governance as well as a timetable for producing the “Charter for Sustainable Economic Activity” (see our previous post) no later than 15 April 2010. This is something that Eurodad and many allies from across the world will be discussing at a meeting in Italy from 12-14 June. We don’t just want to push for sustainable economic activity, but for sovereign, democratic and responsible finance.

As we reported last week, however, many of the outcome document’s points seem like copy and paste from other documents, and far too modest given the nature and scale of the crisis. It looks like this conference will certainly fall far behind the expectations raised by the Stiglitz Commission or by the UNCTAD preparatory conference this week in Geneva where my colleague Nuria Molina spoke.

European Development ministers are meeting today at the General Affairs and External Relations Council (GAERC) to discuss Europe’s response to the crisis that has hit poor countries hard. Development NGOs used this opportunity to blame European donors for their presumable failure of keeping their promise of increasing official development assistance to poor countries.

A crowd of NGO activists gathered this morning in front of the EU Council building for the “Eurovision aid contest”. The four-strong North-South jury evaluated the songs of four European heads of state. Sweden won the prize of best performer with 10 points. No other European donor gives more aid, but Sweden missed the top 12 points due to its habit of inflating aid numbers by counting climate financing and refugee costs as aid. Anyway, NGOs still applauded to Swedish minister Reinfeldt’s song “money, money, money” – because his competitors were a lot worse.

Spain’s president Zapatero was second best: he received 8 points for his song “no tengo dinero”, and for substantially increasing aid disbursements in 2008. Austria’s chancellor Faymann did poorly, the jury gave just four points for his performance of “Immer auf die Kleinen” – his government has cut ODA in 2008. Good for him that his colleague Silvio Berlusconi also took part in the competition. The talkative Italian president received 0 points, and catcalls from the audience, after he performed his usual “parole, parole”. Italy scored worst of all European donors in 2008, and has decided to cut aid spending further in 2009. NGOs think he should stop talking and start doing more for the poor.  

While the media stunt was great fun for everyone involved, the reality behind it is not. For many countries in the South, ODA is the only source of development finance left after the crisis has caused the collapse of other financial flows such as export revenues, private foreign investment and migrant remittances. The humanitarian catastrophe of not keeping promises on increasing European ODA to 0.56% of GNI by 2010 will be enormous, and at today’s GAERC meeting European development ministers should give a good explanation on how their governments are going to deliver what they have so often pledged to do.

The World Bank/International Monetary Fund Spring Meetings recently took place; Eurodad collected, among its members, some comments regarding the outcomes and conclusions of the Washington meetings.

ActionAid International announces “The fate of much the world’s poor was at stake during this year’s spring meetings of the World Bank and IMF” and in particular on the key theme of Haiti and Debt Reduction, Jean-Claude Fignolé, from ActionAid International, Haiti states:

"Haiti is the poorest country in the Americas. While on the surface, debt relief sounds promising, it doesn't come without strings, and that's what worries me. The conditions imposed by institutions like the IMF often come at the expense of the poor, and the poor of our country have nothing left to give." 

On the delicate topic of Education, ActionAid’s overview does not get more optimistic “The hopes of millions of parents and children rests on the results of meetings like this. Unfortunately, we haven't seen much progress at all on their behalf. Instead, hopes are once again delayed, far too many kids remain out of school, and desperation grows." says Victorine Kemonou Djitrinou, ActionAid International Education Advocacy Coordinator.

Oxfam’s senior policy advisor, Marita Hutjes draws a brief outline of the meetings in a blog post that finds that:  

“The Bank and IMF said all the right things, but the true test is whether their rich country shareholders will turn words into action”

“Contributions to the Bank and the IMF for the poorest countries are needed now. Bureaucratic delay and lack of political will on this will cost lives.”

Murat Kotan, coordinator of Jubilee Netherlands, signs an article posted on Eurodad’s blog, a few days before the meetings. Hopes and expectations are high, but a good dose of realism runs thought the article and explains why the IMF should not increase its powers.

“Of the 184 countries that are IMF members, four Western countries have almost one third of the total votes and ten Western countries together have almost half of the votes. There is international consensus on the deficit of legitimacy and the need to reform the governance structures of international non-representative organizations such as the IMF.”

Eurodad member CNCD published a press release, in French,  in which it challenges the Belgian government’s positions on IMF gold sales and IMF governance reform: "la Belgique s’est révélée le principal Etat membre en défaveur de la décision du G20 de Londres d’allouer 6 milliards de dollars issus de la vente d’or du FMI aux pays les plus pauvres touchés par la crise."

 
Not a Eurodad member but worth mentioning, is an article from the Freedom for Debt Coalition, a multi-sectoral coalition for economic development in the Philippines, which uses a colorful expression to comment on the event: living dead. “Nothing is closer to this than the current condition of the International Monetary Fund (IMF) and the World Bank (WB) as they conduct their Spring Meetings this April”, states the lively editorial on the topic.    

Last but not least, Eurodad’s policy officer, Nuria Molina attended the meetings and drew her conclusions in a recent article. Again the overall outcomes are not very optimistic:

“From the point of view of the millions of people in low-income countries suffering from inequitable economic policies compounded by the effects of the current crisis the meetings in the last two days made very little positive progress (...) The lack of progress at the Spring Meetings leaves a lot of homework to be done in the next few weeks”.

The ball is handed to the next international meeting on the Financial Crisis, the 2009 UN conference on the impacts of the financial crisis in low income countries, in June. We sincerely hope to collect different kind of comments about the outcomes of this event, but as we saw optimism is not in the air lately.            

The World Bank has just announced a major change of policy on investment. It produces every year an influential annual report and ranking exercise which emphasises minimising costs to business. That those costs fall on workers, ordinary citizens, the environment did not seem to bother the Bank until now. The importance of the Bank's analysis and details of the changes it has announced are outlined in my other article of today.

But why did the Bank make this change, and why now?

It follows a long-standing campaign by trade unionists. That was not enough, though. The real reason seems to be that the House Financial Services Committee weighed in with criticisms, and threatened to withold payments to the World Bank's IDA window if the Doing Business indicators and report was not changed. Now that the Democrats are in the ascendancy on Capitol Hill and in the administration, and the trade unions are seen as key allies, the Bank could no longer resist the pressure.

The House Financial Services Committee this week issued a release on the matter. It points out that the Committee "held a hearing to examine the approach to worker rights in the Doing Business Report, during which the Committee received strongly critical testimony of the report from representatives of the AFL-CIO, the International Trade Union Confederation, and the Carnegie Endowment for International Peace. In June, the Financial Services Committee approved legislation authorizing $3.7 billion for the World Bank Group that included a call for reforms to the labor and paying taxes aspects of the Doing Business Report".

Committee chair Barney Frank, a longstanding World Bank critic, did not stop there. "Frank also spoke directly to IMF Managing Director Dominique Strauss-Kahn and World Bank President Robert Zoellick about his concerns with the Report, particularly given its increasing global mandate and scope, and the many channels through which Doing Business is being given force".

A 2008 report by the Bank's Independent Evaluation Group Doing Business: An Independent Evaluation (PDF) added to the discomfort of Bank senior management. This report argued, undeniably, that "Since regulations generate social benefits as well as private costs, what is
good for an individual firm is not necessarily good for the economy or society as a whole. Therefore, policy implications are not always clear-cut, and the right level and type of regulation is a matter of policy choice in each country". As "data are provided by few informants,
with some data points for a country generated by just one or two firms" the analysis is badly skewed. The evaluation report concluded that it was "of particular concern [that] the paying taxes indicator relies exclusively on a single firm to provide both the underlying methodology and the data for 142 countries". That firm is PricewaterhouseCoopers.

Michael Klein, the smart German who is the mastermind behind Doing Business must be smarting indeed that this report he initiated and championed is now being questioned and unpicked.

I am digging for further insights into the back story of exactly how this step forward was achieved. I have hints that there were a tough set of discussions inside the Bank. Once I find out more and determine what can be published I'll post again, as it is always interesting to determine how change takes place in large institutions such as the World Bank. Meanwhile feel free to add your views and insights as comments here.

Note: Eurodad staffer Nuria Molina also gave evidence on the World Bank last year to Barney Frank's House Financial Services Committee. Her points were on economic policy conditionality, but Eurodad's concerns about one-sided, deleterious World Bank advice and pressure to reform overlap with those of the unions, even if the transmission mechanisms are slightly different.

The World Bank announced last week that Liberia reached an agreement with creditors to buy back outstanding debt with a face value of USD 1.2 billion at a price of USD 38 million. The discount rate of 97% is impressive, and the deal is an important step towards the completion of Liberia’s HIPC debt relief process. However, the deal has some peculiarities the World Bank’s press release forgot to mention:

1. How can a poor country end up with a debt to GDP ratio of 700 % in the first place? Because Liberia had stopped to service its debt more than two decades ago, when the civil war broke out. Eventually a mountain of phantom debt piled up, comprising primarily unpaid interest, and penalty interest. Liberia has already been bankrupt for many years. What was overdue was not Liberia’s debt repayment, but an international insolvency regime that is able to assess and acknowledge the solvency of states in a timely manner.

2. The deal finally clears Liberia’s books, but it does not widen its fiscal space to finance development and fight poverty. The commercial debts cancelled now have not been serviced before, their cancellation does not free up a single cent in Liberia’s public budget.

3. The debt claims concerned were originally commercial claims, owed to private creditors. These claims had been traded on the secondary market and ultimately sold to the still to be tamed vulture funds . Last week they have been bought back with public monies from the International Development Association’s Debt Reduction Facility, from Germany, Norway, the United Kingdom, and the United States. Liberia did not pay a thing, which is good (although Liberia might receive less aid in future as a result of this operation) But is using public money to buy back commercial debt at a discount really a good idea, while commercial lenders still refuse to participate in the HIPC-Initiative? Should hedge funds be bailed out with donor country’s official development assistance? This is not exactly what aid is supposed to be spent on. At least, such a "development goal" does not appear too often in UN declarations nor official donor’s country strategy papers.

It is good to see that Liberia’s overdue debt relief process finally makes some progress, but this new debt deal can only show that a fundamental reform of the international debt regime is overdue. A simple quote from the World Bank’s own press release clearly shows how bizarre the current regime is: "In December 2007, the World Bank [sic] financed Liberia’s clearance of its overdue debt service payments to the World Bank [sic]." Keep it simple in future, just cancel it!

On 25-26 April the IMF/World Bank spring meeting takes place. At the G20-summit in April it was decided to considerably reinforce the position of the IMF in the international economy. The Dutch government as other European governments is a proponent of this. There is however a need for more international democracy and an explicit mandate for development. Even if the IMF would be given $7,5 trillion instead of the planned $750 billion; the problems of the poorest countries will not be solved and no substantial improvement in reaching the Millennium Development Goals will result from this.

Democracy

Of the 184 countries that are IMF members, four Western countries have almost one third of the total votes and ten Western countries together have almost half of the votes. There is international consensus on the deficit of legitimacy and the need to reform the governance structures of international non-representative organizations such as the IMF. However, the changes that are in preparation are small. In April 2008 it has been promised to improve the representation of Low-income Countries and Emerging economies within the IMF. Although a positive step, all in all if these measures are carried out this would mean that the voting rights of 46 low-income-countries excluding India will increase only with 0.29 percentage points (0.7 including India). For the 51 African countries as a whole the increase is less than 0.24 percentage points.

IMF-money and IMF-policy

The share of the planned $750 billion IMF-money that is available for poor countries is modest and inadequate to help them withstand the crisis. According to calculations of Oxfam, of the $1,100 billion in measures which the G20 have agreed on $50 billion might become available for Low-income Countries, mainly in the form of loans that lead to a heavier debt burden.

Furthermore the IMF’s own Independent Evaluation Office has shown for 2007 that under the IMF-program for poor countries (PRGF), money goes into raising international reserves and debt servicing instead of into for example investments in healthcare and education. Of each $10 extra aid money $9,50 flows obliged to raising the international reserves for countries with low reserves. If the money does not go to building reserves, between $7,20 and $8,50 of each $10 goes into servicing debts. Thus only a fraction of the extra money can be actually spent by governments. (IEO 2007) Moreover Lower-income countries are in the coming time also obliged to service billions of dollar in debt, among others to the IMF and the World Bank.

The use of IMF-loans and the associated policy conditions have consequences for important development indicators in areas in which the IMF has nor a mandate nor any expertise. A recent study by American scientists Abouharb and Cingranelli for example finds that “a longer period under an IMF program increased government use of torture and extra judicial killing and also worsened the overall human rights conditions in developing countries.” Human rights, targeted poverty reduction and factors such as gender equality are matter on which the IMF has no expertise, but that are of overwhelming importance (also for economic growth).

Accountability

The IMF’s own evaluation office is extremely critical of the lack of accountability of the Fund and the lack of space for countries and civil society organizations to get their voice heard. “There are no agreed standards against which to assess the actions of the IMF and no adequate mechanisms for the organization and its governing bodies to be held accountable by the membership or by appropriate stakeholders.” (IEO 2008) Countries are at the mercy of bureaucrats who experience no consequences of their actions but who have much power. Especially delegates of Low-income Countries are intimidated: 56% of the authorities and 67% of the Directors from Low-income countries feel they can criticize IMF staff “rarely” or “only on some issues” without negative repercussions. (IEO 2008)

Whether the specific form of globalization of the previous decades has been positive or not, it has certainly been insufficient in social respect: more then 2.5 billion people still live on less than $2 per day and each day 30,000 children die due to poverty and preventable diseases. It is very implausible that multilateral institutions which so far controlled the international economic system are now all of a sudden prepared or have the ability and knowledge to make substantive changes in this. It is from this perspective therefore incomprehensible that EU governments support an institute that has performed so badly and carries absolutely no responsibility for the consequences of its actions. To what does the Fund owe this support? Especially now the Fund is receiving more resources, it is the moment to demand changes. Governments should make explicit in clear language what they expect from the IMF and how they think of keeping the IMF accountable to this.

A sustainable and legitimate solution for the challenges ahead requires more than reforms in the financial sector. For this it is necessary that a democratic international institute with an explicit task to fight poverty and to promote the millennium goals has more control over the world economy. The work of the Commission of Experts on reforms of the international monetary and financial system established by the UN and its recommendations (among which: spending of 1.0 percent of the national economic packages of industrialized countries in developing countries, liquidity support to regional financial initiatives and the prevention of an IMF/World Bank monopoly, an end to all forms of export subsidies by developed countries and the setting-up of tax-free and quota-free market access for economically less developed countries and a strengthening of international conventions such as the UN Convention against Corruption and the UN Commission on International Cooperation in Tax Matters) must have a much more important place in the discussions concerning reforms of the international economic and monetary system and must be supported more expressly by the Netherlands and other EU governments. Additionally, governments should insist that the IMF and the World Bank do not conduct policies that go against the recommendations of this UN commission.

Murat Kotan
Coordinator Jubilee Netherlands 

References

- Abouharb en Cingranelli. 2009. IMF programs and human rights, 1981-2003. Review of International Organizations 4: 47-72.

- IEO. 2007. The IMF and Aid to Sub-Saharan Africa.  Independent Evaluation Office of the IMF: Evaluation Report.

- IEO. 2008. Governance of the IMF. An evaluation. Independent Evaluation Office of the IMF: Evaluation Report.

- Oxfam International. 2009. What Happened at the G20? Initial analysis of the London Summit. Oxfam briefing paper, April 2009.

Some interesting views on the G20 and G8 from Asian activists at a meeting on the financial crisis I attended in Malaysia this week. None of them complimentary.

Several speakers at the meeting – held at the National Union of Banking Employees training centre in Port Dickson - said that the media in their countries had almost no coverage of anything that Asian leaders said at the G20 and only focussed on the fact that they had managed to shake Barrack Obama’s hand. Some of the Asian leaders (also Europeans, as Barroso showed at a meeting in Brussels the other day) were carried away with pride to have been invited and forgot to organize a proper negotiating strategy. There was certainly none of the pushiness from the so-called BRIC group of countries that was seen for example at the Cancun or Seattle trade talks.

Indeed one speaker here said that the G20 as a format was announced just a week or so after the Seattle trade talks in 1999 and that it has aimed to divide and conquer developing countries, bringing in what it calls “systemically important” ones to split them off from weaker ones and prevent a developing country block being formed for trade negotiations.

Vinod Raina, an activist and author from India commented that the G20 was an attempt to “co-opt governments into a problem they didn’t create – the financial crisis”. He continued that perhaps the principle of “honour amongst thieves” will now prevent the leaders who travelled to Washington and London from splitting off and publicly challenging the major world powers.

All agree that the G20 provided no paradigm shift and that Gordon Brown’s hyperbolic new world order assertions from the London Summit sound ridiculous from here. Also that Europeans governments were amazingly over-represented at the summit, have added more positions at the Financial Stability Board, and have only conceded marginal power in international institutions such as the World |Bank and IMF. Writing in today’s Guardian Martin Jacques has a different perspective. He refers to a meeting of BRIC central bank chiefs and finance ministers before the G20 and says “the IMF and the World Bank will be subject to reform, with the developing countries acquiring a greater say”.

Beverley Keene, speaking for Jubilee South at the Malaysia financial crisis meeting, poked fun at the G20 website which claims, amazingly, that “the G-20 has progressed a range of issues since 1999, including agreement about policies for growth, reducing abuse of the financial system, dealing with financial crises”.

My presentation at the meeting discussed the financial reform processes underway in Europe, including the flawed De Larosiere process, the public mood including protests against bank bonuses, and Eurodad's reaction to the G20. My comment that the fiscal stimulus represents an attempt to get people to "shop their way out of the financial crisis without shifting towards a more sustainable economic model" got some interesting reactions.

As for the G-7 – both Raina and Jacques agree that it is clearly a complete anachronism. Raina urged that people pull together to help send the G-7/G-8 concept “to bottom of the sea in Sardinia” when the leaders meet there, hopefully for the last time, in July this year. Our Italian member organisation CRBM is organising a series of meetings in Rome to discuss the G8's failings, including a public meeting on 11 June in parallel to the G7 finance ministers.

The IMF Independent Evaluation Office has just announced that it will start a review to assess the role of the Fund in the run-up to the crisis, “including questions related to the effectiveness of surveillance, particularly of advanced economies, identification of systemic risks, including the vulnerability exercise, and multilateral consultations and treatment of capital account/financial sector advice in some emerging markets.”

“Lack of evenhandedness has proved to be the Fund's Achilles heel in pursuing its mission of global stability” said Thomas Bernes, director of the Independent Evaluation Office of the IMF. He added that “On governance, perhaps IEO should examine more critically the Fund's ability to "speak truth to power," and highlight the risks of not doing so, when the members that pose the greatest systemic risk are also the largest shareholders.”

Probably, the next piece of work by the IEO should be an independent evaluation to check whether the Fund has changed its advice and conditions vis-à-vis those given at the time of the Asian Financial Crisis at the end of the 1990s. Some IMF staff are persuaded that this is the case; however, preliminary evidence from IMF crisis loans is not necessarily pointing towards this direction.

Late February this year, the Board of the World Bank International Finance Corporation (IFC) decided to approve $100 million to support the exploitation of Ghanaian oil fields. The recipient of this amount is the company Kosmos Energy Ghana, which is indirectly wholly owned by Kosmos Energy Holdings, a privately-held Cayman Island company. So, effectively, IFC is providing a relatively small chunk of investment to a company located in a tax haven (technically, in the OECD's greylist which was issued after the G20 meeting in London last week, where G20 leaders agreed to combat tax havens).

Once again, the discovery of resources such as oil in the shores of developing countries risks to turn out into a curse. CSOs have been repeatedly warning that loopholes and lack of regulation of the global tax system is leading to an outrageous drainage of resources for developing countries. The Global Financial Integrity estimates that "illicit financial flows out of developing countries are some $850 billion to $1 trillion a year". A good share of these illicit flows is directed either to Northern countries or secret jurisdictions or tax havens. It is a contradiction in terms that the the private sector arm of an institution such as the World Bank that claims to "work for a world free of poverty" is actually feeding one of the worst development's black holes.

Fortunately, CSO pressure in the last few months has pushed some World Bank Executive Directors to ask the IFC about such practices, to which the IFC responded that they preferred tax havens because of the easier legal procedures. The EDs will now request the IFC to review their practices and align them to the black and grey lists that were agreed upon and released as a result of the G20 meeting last week in London.

On Friday April 3^rd the Financial Times published the news that the IMF would be suspending lending to Latvia “until it sees more progress in cutting public spending”, as “the budget deficit threatens to overshoot the target of 5% of gross domestic product agreed with the IMF because the Latvian economy is contracting more severely than forecast.” In a nutshell, the percentage of the deficit is growing as the Latvian GDP is shrinking, as it is in most countries around the world these days. In plain language, this may mean that Latvia is actually not spending more than expected in the deal stroke with the IMF, but rather that its deficit numbers are rising as the economy is unavoidably contracting.

As we’ve witnessed before, the IMF is tightening fiscal policy in the countries where it is providing emergency lending. On the other side of the negotiation is the incoming Latvian government, trying to get the Fund to accept a slightly higher deficit (of a 7% of the GDP).  On the one hand, IMF management is repeatedly calling for increased fiscal stimuli. Just few months ago, Olivier Blanchard, IMF Chief Economist, was very clear in his declaration: “I would put it more starkly. What is needed is not only a fiscal stimulus now, but a commitment by governments that they will follow whatever policies it takes to avoid a repeat of a Great Depression scenario.” And he added, “Monetary and fiscal policies need to become even more supportive of aggregate demand.”

However, on the other hand, the Fund is also advising countries to cut on their spending. Is the Fund fully assessing what expenditures the country will be cutting as a result of their conditions and how this may affect the Fund’s own advice to support safety nets for the most vulnerable? Or even considering how these cuts, despite whatever structural changes the economy may or may not need, will unavoidably lead to what Blanchard called “a Great Depression scenario”? Is the IMF, once again, undermining the country’s efforts to mobilise the additional resources that are needed (in this case, an extra €1bn from the European Commission, EU member states and financial institutions)?

Not only greater flexibility is needed in this exceptional circumstances; but most important consistency on what the Fund says it’s needed and what it advices to do.

Some of the G20 London summit comments from across the web we think you'll find interesting.

Dani Nabudere on Pambazuka News writes that "There is no point in ‘reforming’ the financial architecture when everything else will remain in place. There is no need to call for strong ‘supervision’ of the banks, when those using their political power are still in a position to manipulate them for their own interests. The real question is: ‘Who will supervise the supervisors?’ Therefore we need recognition of alternative credit systems".

Mary Robinson, former president of Ireland and determined human rights advocate says she is "worried about what the outcome of this G20 Summit will be for poor developing countries". She continues: "Article 28 of the Universal Declaration of Human Rights.
[is] very short: 'Everyone is entitled to a social and international order in which the rights and freedoms set forth in this Declaration can be fully realized.' Today, I see our 'social and international order' unraveling. There have been food riots. There will be others. The financial crisis is having a profound de-stablising effect. I believe that the security concern is an extremely strong one".

Richard Murphy, on Tax Justice Research, has the latest on the tax havens issue, including a supplementary document issued by the G20. He concludes "I am assured right now that the developing country issue I highlight should be seen as an opportunity for innovation, for bringing forward serious changes to TIEAs and to bring in multilateral exchange agreements. The UN has its status endorsed on this issue, as I predicted. The commitments to enhanced regulation will, I hope deliver. But the developing country issue is key. It’s the focus of the next round of work". Eurodad will certainly be active on that.

Ann Pettifor, former head of the Jubilee 2000 debt campaign writes on Huffington Post: "The Summit Communique makes plenty of fine noises about being kind to the poor. ... There were similar sound-bytes, and similar commitments made at the Edinburgh G8 Summit in 2005 - commitments yet to be fully honored". And, on the IMF, "much was made by Gordon Brown of the re-financing of the IMF -- the most loathed and marginalized of international financial institutions. The motivation is clear: the IMF is a Euro-Atlantic institution, and the Europeans want its finances bolstered so that the economies on the fringe of Europe -- like Hungary, Latvia, Ireland, Iceland and Greece -- can be prevented from bringing down the whole of the European project, and with it the Euro".

Add your further links in the comments below. (Also to non-English comments).

From the ExCel, G20 Leaders Summit London – MP Steven Timms, under-secretary on finance of the UK Treasury, stated a few minutes ago that “the era of banking secrecy is over” and the remarkable process achieved on exchanging information with some tax havens has already been a result of the G20 process.

It is a pity that apparently the era of secrecy around the list of which are the tax havens to name and shame and eventually sanction will not be over today at the G20 summit. As a matter of  fact, the whole negotiation on the issue still spins around who should draft the list – just the OECD? China is not keen. Also which criteria will be used and most importantly by when will this list be finalised?

We are almost back to square one, when a first list of tax havens produced at the end of the last decade finally produced no change.

In the meantime France and Germany claim not to be alone in their action to press for strong measures on tax havens: Brazil is said to be supporting them, and Berlusconi also. He knows tax havens well from his past and current business.

Elsewhere on the blogs Alex Evans on Global Dashboard reports a discussion just now with UK officials. His readout: "A big fight is underway on tax havens. Sarkozy's going in hard for tough language. But China is against as it's worried about the effect on Hong Kong and Macao. Gordon Brown is looking for a compromise. The Czech presidency has been 'unhelpful'".

Richard Murphy, also inside the Excel building, quotes UK junior treasury minister Stephen Timms saying "I'm expecting sanctions, and in due course a listing".

A couple of days ahead of the G20 summit in London, more than 200 CSO participants from across Europe and from the South gathered in Prague for a three day conference to analyse causes and put forward alternatives to the global crisis under the title: “The World in crisis: economies and policies for global transformation” . This event is a première in the Czech Republic and was coordinated by Eurodad member Glopolis.

Many issues have been discussed under this ambitious title. A new paradigm to redefine economics and finance, systemic crises and the opportunities they offer, resource transfers and economic governance were some of them.

Mr. Heider Flassbeck, chief economist at UNCTAD, presented an overview of a very complex crisis driven by “pyramids of speculation which eventually collapsed”. Indeed speculation was one of the key drivers of his analysis, drawn from the last UNCTAD report on the financial crisis.

“It’s not about creating new products, nor new investment techniques, it’s just gambling” He pointed out illustrating it as the 363 banking model: clients borrow for 3% you lend for 6% and at 3 o’ clock the director of the bank goes to play golf.

He also criticised the exclusive focus G20 countries are putting in the need for more transparency and more regulation, while ignoring the real problem, the need to “weed out gambling from the real world” and the need for governments’ intervention in the financial markets, beyond regulatory measures.

Sargon Nissan, from the New Economics Foundation, pointed out the need to “reinvent the wheel” and come back to some basic overarching principles and raising fundamental questions that an adequate response to this multiple crisis should address:

Scale: The financial sector, and dominant financial institutions, has grown to previously unimaginable proportions. Is there a more appropriate scale of operation that can ensure a more equitable and sustainable system?

Distance: The model of financial globalization privileges the idea of a single, global marketplace as the best way to ensure the levels of investment rich and poor countries required. Does the local or regional matter?

Stability: Financial markets seem unable to avoid cycles of bubbles and catastrophic busts. What types of institutions and financial sector models tend to be more stable or more precarious?

Diversity: A global trend toward financial sector consolidation has been one novel aspect of the modern system, where a myriad of different types of banks in different markets came together to form financial behemoths spanning the globe. Does it matter if every bank increasingly looks the same, working to a single shareholder value model and competing over the same products and clients?

Value: Efficiency has come to be synonymous with the drivers of short-term profit. How can we expand our concept of value so that businesses and economies work toward social and environmental goals as well?

Democracy and Participation: Through international institutions and multilateral forums a regulatory structure has emerged that is binding and universal which has been justified on the grounds of there being no better alternative.

Eurodad also presented its responsible finance charter as a concrete step towards a binding global framework to protect citizens' rights when public money is spent. 

As a specific outcome of this conference a final declaration to be addressed to G20 and Czech political leaders has been produced outlining some major demands. They include:

         -   reasserting effective market regulation in favour of a sustainable development and including a new currency regime

         -   putting the economies at the service of social, environmental rights of people

         -   breaking the dominance of finance over the real economy

         -   rethinking external finance for development to foster local and regional economies

         -   ensuring tax justice, including environmental taxes, rebalancing capital, corporate and income taxation through progressive taxation

         -   establish international taxation, in particular in currency transactions and CO2 emissions in order to finance global public goods

         -   putting all international and regional financial institutions under the auspices of the UN.
 

The Czech government, as president of the EU, has a role at the G-20. CSOs hope some of the conference proposals will be carried from Prague to London.

A quick round-up of some of the interesting statements we've spotted ahead of tomorrow's G20 London summit. Focussing in particular on developing country activists.

Rajesh Tandon, leader of Participatory Research in Asia, warmed up a DFID conference in London last month saying that world leaders preparing the G20 were "like a religious sect, continuously offering more of the same",despite the change in circumstances. He said that activists felt "little enthusiasm to fix the current system or the institutions that represent it" and urged bringing "questions of consumption and lifestyle" into the discussion of what needs to change. 

In an article written today on the PRIA site he spells out his arguments further: Pious appeals for more aid as a cushion for poor people against the impact of financial meltdown "lack the understanding of the shifting nature of global economic power from the west to the east; it also ignored the reality that the Americans and Europeans are suffering most, while Asians (Chinese in particular) are expected to 'save' them. The traditional Aid paradigm, and Bretton Woods Institutions associated with it, have all but lost their relevance today".

Colleagues in Zambia at the Jesuit Centre for Theological Reflection, which has long studied poverty and the impacts of the World Bank and IMF in that country have produced their own 20 points for the G-20. Sadly this is not yet on their website. But some highlights ... Their diagnosis is similar to Tandon's (though lighter on the ideology=religion metaphors, for obvious reasons). JCTR says the situation of developing countries has been made possible "through the aggressive enforcement of an ideologically driven economic paradigm that minimizes the role of government, institutes asymmetrical global governance and critically weakens regulation". They point out that: "the majority of developing countries are engulfed in the brutal cycle of selling low value products and buying products of high value. Trade measures should be adopted to address this imbalance". On aid: "aid should not be conditional to liberal[isation] reforms" and should be predictable.  They also echo the approach of the Eurodad Responsible Finance Charter, saying that "responsible lending and responsible borrowing is a pertinent issue for the international lending institutions as this is a time when developing countries could all too easily fall into a debt trap".

Third World Network has also produced several articles and positions ahead of the G20. They have consistently championed a stronger role for the UN, rather than the G-20 or other more limited approaches. They also cite UNCTAD's new report The Global Economic Crisis: Systemic Failures and Multilateral Remedies which argues that "some financial instruments can generate high private returns but have no social utility whatsoever".

In another recent article (subs) TWN quotes Father Miguel D'Escoto Brockmann of Nicaragua, current head of the UN General Assembly. D'Escoto said the United Nations is not being marginalised by the G20 process but argued that he is "absolutely convinced that the only credible enabled group to bring about the necessary reforms for the 21st century is the G192, that is to say, the entire membership of the United Nations."

For more web tips see also our 20 recommended websites and blogs on the G20, posted yesterday.

24 hours before the leaders of the world's 20 largest economies meet in London, the world's poor are increasingly at risk of being dismissed at the Global Summit. The G20 draft communique which was leaked some hours ago still has painful blanks where the leaders should stamp the figure they agree to contribute to save 53 billion people at the verge of extreme poverty. Some money has been put on the table. But this is not additional money.

What does this mean in plain language? This means that, mostly, extra money will be spent now at the expense of cutting down on future spending. Poor countries are well aware that aid is highly unpredictable. They have all too often suffered sudden cuts. And they are afraid of running the risk of being left without any financial support in the future if they spend more now, without a promise that the aid pot is going to be topped up to meet poor's countries financial needs. "Poor countries are pushing the decision to the limit. They do not want to ask for additional crisis response funding unless they are really at the verge of collapse, as they know this may lead to serious financing gaps in coming years unless more money is put forward", a senior World Bank official told me this week. 

Needless to say, the unreliability of aid is at the core of the problem. Developing countries should be allowed to retain their own resources through fair tax systems, and fair terms of their economic, financial and trade relations with the North. And aid should become an effective means to distribute wealth worldwide, along the lines of progressive national tax systems, rather than a matter of rather unpredictable and one-sided decisions in rich countries.

As we track (and try to influence) international economic policies, institutions and summits on an ongoing basis, we thought it would be helpful to feature some of the sites that will help bloggers covering the G20. They give the insights you need to write about the financial crisis and what should be done about it, particularly to ensure that developing countries don't get left off the map entirely. We obviously don't agree with everything on all of them, but think everyone covering the G20 London summit can benefit from reading them.

 
To start three sites on tax havens, an issue that has shot to political prominence, partly because of great blogging.

1) Tax Justice Network blog. Great daily news analysis (by former Reuters correspondent) on campaigns, policy initiatives and debates on tax haven reform.
2) Richard Murphy's Tax Research UK blog  (more details re technicalities and great ripostes to industry vested interests)
3) And the French equivalent Paradis Fiscaux et Judiciare, complete with news blogging covering France and continental Europe, plus reports of recent protests.

Then three collective sites by NGOs and campaign groups that give great overviews of the activism that's bubbling up.

4) Rethinkingfinance : new collaborative portal containing feeds from multiple commentators and activists applying pressure to change financial regulation and the global monetary system.
5) Casinocrash : two progressive researcher collectives blog about the impacts of the crisis and propose a radical shake up of institutions and policies. Plenty of videos of recent debates, including a great one with Filipino economist Walden Bello giving European Commission official Gert-Jan Koopman a hard time.
6) Timeforchange. Want to know where the next protest will be held, or get fired up for one? See this new blog from several European campaign organisations analysing and mobilising on the financial crisis.

Followed by three sites by think tanks or researchers which give more of a sense of what are the causes and possible policy solutions of this crisis.

7) Networkideas.org -Global_Financial_Crisis  features progressive economists from across the developing world (though mainly Asia). 
8) NEF Triple Crunch A progressive think tank assesses the climate, financial and poverty crises and recommends solutions.
9) Bruegel Well-connected mainstream researchers from across Europe give their views on the financial crisis, whether the Euro can survive and how the EU can play a part in governing finance.

The digital divide is still strong, but here are some sites with views from thinkers in the global South.

10) Pambazuka News. The 'weekly forum for social justice in Africa' contains frequent comment, news and analysis from African journalists and activists. On the crisis see particularly Demba Dembele's recent piece, the Global Financial Crisis: Lessons from Africa.
11) Southcentre.org an inter-governmental body that supports governments with their negotiations, now led by influential Malaysian author Martin Khor.
12) IDS Southern Voices on the Financial Crisis. 
 
As for official sites (which we don't normally promote so much), take a look at:

13) The London Summit 2009. The British government has done a great job compared to previous similar summit sites. Let's hope that, in the spirit of sustainability, the site stays live longer than the UK 2005 G8 one, which now displays nothing at all, and a few months ago was being virtually forwarded to a dubious Turkish enterprise. (Sadly the G24 website seems to be hors de combat, too. We were going to recommend this, as it has several papers and positions. Perhaps it has been pysched out by the new prominence of the G20).
14) Last week I had officials from the EC and World Bank use annoying phrase "having a good crisis". But it is certainly true that the World Bank and IMF have shot back to prominence in recent months. 

The best section of both of their sites from my point of view is: the Africa Can blog where Shanta Deverajan and others discuss crisis impacts on Africa and what to do about them. Although the IMF has taken steps to reduce some of its conditionality recently (for which we congratulated them  its website is too straight and self-congratulatory, so no links here).

And the final six of the best:

15) IFIwatch TV  Path-breaking website featuring videos of the effects of the World Bank and other international financial institutions, and what people are doing to raise pressure to transform their policies and practices.
16) Global Dashboard Incisive writing on global governance and foreign policy.
17) Global Dashboard is also part of the G20 Voice blog experiment. This is a brilliant concept, which has got the blogosphere buzzing competitively to find correspondents to cover the G20, partly from the inside. The technical execution is a bit patchy at present, but this certainly one to watch this week.
18)  For an independent journalist who has long been digging into the dark underbelly of the shadow banking system and corporate dubious dealings see The Komisar Scoop.
19 Wire service Inter-Press Service has good, critical, coverage of financial crisis news and civil society responese.
20) And, finally two quite zany videos we have enjoyed. The first flips the normal hierarchy of job-seeking in a brilliant way. The second is a new Spanish one complaining that the bail-out money has been completely misdirected and should have been used to set up new, green, financial institutions.

 
Eurodad declares an interest in the rethinkingfinance website. As well as continuing to use this blog (and our main news and analysis site sections) we will be using this to keep the web world informed of our network's views and positions. 
 
Have we missed some good sites?  If so add them in the comments below
 
 
Alex Wilks
(Also micro-blogging on Twitter)

Nicolas Sarkozy a annoncé ce jeudi son intention de traiter le problème de la dette des pays africains lors du G20 du 2 avril prochain. Etant donné le risque grandissant d’une nouvelle crise de la dette pour beaucoup de pays pauvres ceci est certes une bonne nouvelle… pour autant que ca ne devienne pas une discussion focalisée uniquement sur la Chine. Des mesures ambitieuses pour résoudre durablement le problème de la dette s’imposent aujourd’hui plus que jamais et le G20 doit prendre ses responsabilités.

Le président français s’adressait au parlement congolais avec fermeté : « J'ai bien l'intention de poser au G20 la question de la dette africaine ». Mais il a été tout aussi clair en ajoutant : « pour peu que vous acceptiez (…) que, si certains pays parmi les plus riches du monde remettent votre dette, il ne faut pas alors que vous vous réendettiez avec d'autres dans des conditions moins bonnes encore que celles que vous avez connues à notre époque ».

Le message est clair. Certes, le rôle de la Chine en Afrique a fait couler beaucoup d’encre sur les conditions liées à ses investissements, le respect des droits humains, etc. Mais est-il légitime de s’acharner sur un pays sans reconnaitre ouvertement ses propres défauts ? Par ailleurs, n’est ce pas aussi une question de concurrence entre les intérêts économiques chinois et ceux de la France ou d’autres puissances occidentales, installées depuis bien long temps dans le continent africain ?

Sarkozy ajoutait dans son discours qu’il « ne s’agit pas de reproche à l'endroit de personne mais ma conception de la justice, c'est 'les mêmes règles pour chacun ». Et pourtant, la dette illégitime reste encore une question taboue pour beaucoup de pays occidentaux, y compris la France. Des avancées ont vu le jour ces dernières années avec la Norvège et l’audit intégral de la dette en Equateur mais beaucoup reste à faire.

C’est pourquoi les organisations de la société civile demandent des audits de dettes et des règles justes et claires, ex ante et ex post pour les créanciers et débiteurs, afin d’établir un cadre international de financement responsable. Dans ce sens, Eurodad a produit une charte de financement responsable dont les clauses pourraient servir de base à un tel cadre.

Dans ce contexte de crise les pays pauvres, surtout les plus pauvres et dépendants de quelques exportations, seront le plus gravement frappés par des nouvelles crises de dette. Des mesures urgentes s’imposent, à commencer par l’arrêt du service de la dette afin de permettre aux pays de destiner ces ressources pour faire face à la crise.

Mais au-delà des mesures d’urgence, il est grand temps de prendre des mesures structurelles come la mise en place d’un mécanisme impartial et transparent de résolution de dette, comme demandent beaucoup d’ONGs dont Eurodad. Les leaders du G20 devraient également se faire écho des recommandations de la commission d’experts de Nations Unies dont la mise en place d’un Tribunal indépendant de faillite. Voilà les vraies questions sur la dette qui devraient être abordées par Monieur Sarkozy et par le G20.

The momentum is strong for action on tax havens (see Secrecy jurisdictions under pre G20 pressure) and the tax evasion industry they feed. Yet what can we really expect from the G20 summit?

An effective combat against illicit flows and tax evasion will require strong, concrete and binding measures to be applied at the global level. The proposals by Gordon Brown and others rely on the OECD as the enforcing body. But this body only represents industrialised countries. The plethora of existing bilateral agreements that Jersey, Andorra, and yesterday Monaco are rushing to sign on tax information exchange will not make a big difference. Automatic exchange of information is needed at the multilateral level.

Also, the information exchange model upon request, used by OECD, where the burden of the proof falls upon the requesting party, will prove burdensome to implement. Richer countries will struggle to produce requests about their citizens or companies who may have hidden money offshore. Imagine how hard it would be for the many poor countries with very weak administrations. Automatic exchange of information should therefore be the rule.

A global response also means targeting big financial centers of which many of the small tax havens are mere satellites. Otherwise we will just be assisting a blame and shame policy towards some small territories and countries while legitimizing the bigger players, such as the City of London. As the Tax Justice Network blog explains – based on the experience with OECD blacklists ten years ago - the idea may be to: “whip up a storm of righteous anger saying (with considerable justification) that these microstates are being victimised and the big countries need to clean up their houses too; then use this manifest unfairness, combined with aggressive lobbying, to de-legitimise the entire process, leading to the collapse or enfeeblement of the whole project”.

A recent study quoted in Richard Murphy’s blog emphasizes that respectable members of the OECD should be also in the spotlight. “Its conclusion is doubly embarrassing for members of the G20 currently leading the hunt for tax evasion. First, it is easy to transfer money anonymously, despite all the rules of conduct and the conventions. Second, and more surprisingly, countries where the misuse of rules is easiest are not the exotic islands, Switzerland or Liechtenstein - but the United States and Great Britain.”

Activists are planning further letters, advocacy and media work in the coming days to emphasise the need for stronger measures to ensure effective action, not just any action on the havens.

“Vote Earth” is the motto. “Switch off your lights” is the name of the campaign sponsored by WWF to raise awareness on climate change.  The idea is simple yet efficient: turn off the world’s lights for one hour on the 28th on March from 20.30 to 21.30 (local time, wherever you are) and then gather the results.

The initiative is like a voting campaign between two parties: the Earth and Global Warming. The vote is delivered by switching off the lights or by keeping them on.
The brilliant idea gives a meaning also to the passive action of leaving the lights on. Often it is hard to get the public involved, but with this formula not responding to the call actually means standing on the side of climate change.

The goal is tough but not impossible: 1 billion votes. The results will be presented to world leaders at the Global Climate Change Conference in Copenhagen in December 2009.

The first Earth Hour was in Sydney, in 2007 when 2.2 million homes and businesses switched off their lights for one hour. In 2008 the message had grown into a global sustainability movement, with 50 million people switching off their lights.

To reach the 1 billion goal everyone who reads this will have to pass on the message to their colleagues and friends and set a reminder for 20.25 on Friday. If there remains any doubt that climate change is a vital issue facing humanity, consider this quote from Achim Steiner, Executive Director of the United Nations Environment Programme: 

“Intelligence is defined as ‘the ability to understand and to learn’ and ‘to deal with new or trying situations. Over the coming years and decades climate change is set to present perhaps the most ‘trying situations’ humanity has ever faced”

The calls to support and promote Earth Hour are worldwide; Ban Ki-moon expressed the UN’s will to join the cause and the number of participants that have signed up is constantly growing. Right now there are 2140 cities, 82 countries and 5481 Organisations that will switch off their lights on the 28th of March. Eurodad is one of them.
Get involved! 

The gigantic sums of money which rich countries’ governments pump into financial sector bailouts, make their aid levels look more and more ridiculous. In a note to the meeting of G20 Finance Ministers and Central Bank Governors, the International Monetary Fund indicated that headline support to the financial sector by advanced economies had already reached 43.12% of their GDP (!) by the 18th of February 2008, and the crisis is not yet over.  This impressive amount is made up of five different parts:

1. Capital injections (2.90% of advanced economies’ GDP)
2. Purchase of assets and lending by treasury (5.20%)
3. Central bank support provided with treasury backing (1.34%)
4. Liquidity provision and other support by central bank (13.93%)
5. Guarantees (19.74%)

In comparison, the official development assistance (ODA) which has been provided in 2007 by the 22 member states of the Development Assistance Committee (DAC) reached a mere 0.28% of their GNI.  When the DAC unveils the ODA data for 2008 in the beginning of next week, we will most probably see that rich countries’ engagement for the fight against poverty has not significantly increased. Even more shocking: at current aid levels the actual and potential costs of bank bailouts equals their official development assistance of 154 years!

EU leaders are meeting in Brussels today and tomorrow to get their act together on financial crisis response and what they are going to propose, as a block, in the upcoming G20 meeting in London on the 2nd of April. Eurodad and other NGOs have expressed concerns that development is falling off the negotiation table and that there is no clear, specific and common plan on global financial regulation and reform of the international financial architecture.

This is definitely the case for the World Bank reform and reforms at the IMF, which may be of relevance to the world’s poorest countries. While calls to top-up the resources of these institutions mount, there is absolutely no discussion on how these institutions have contributed to disarm poor countries from the sort of policies and regulations that could have made them less vulnerable to such a global crisis. There is also no discussion on how these institutions are going to change their “business as usual”, as they lend all these new resources (the Europeans have promised to put $100 billion more into the IMF), and how they are NOT going to attach the cumbersome strings and harmful economic policy conditions that they have attached to their loans in the past. 

Differences in views are wide. it seams that they can not even agree on what role the Bank should play in assisting new EU Member States affected by the crisis. Whereas some of these countries may want to resort to the World Bank to ask for extra finance, some “old” European countries express great discomfort with that option. What is unclear to me is, why should the EU be calling for greater World Bank intervention in developing countries, while they want the Bank to keep its hands off the European Union?

As Poul Nyrup Rasmussen, former Danish prime minister and now senior socialist in the European Parliament puts it in today's FT feature on the EU summit: “In the past, Europe blamed President George W. Bush for the lack of constructive global leadership. Today it is Europe that risks being blamed by the rest of the world.”

The 10 steps to de-tax:

1) reduce taxes for your corporate constituency.
2) discover that your budget deficit is not sustainable.
3) cut some budget items.
4) choose items that affect the weakest, preferably the poor outside your own country.
5) your development cooperation budget plummets by almost 50 percent.
6) with an estimated ODA/GNI quota of roughly 0.1 % you find yourself at the bottom of the global donor league.
7) discover that you have the G8 presidency, and “Africa” is high on the agenda again.
8) realize that you’ll have to come up with an idea to demonstrate leadership.
9) make sure that it doesn’t strike your own constituency.
10) recycle the de-tax proposal.

The de-tax scheme was initially proposed in 2002 by Italian Finance minister Giulio Tremonti, as an alternative to other innovative financing mechanisms such as the currency transaction tax (CTT). Berlusconi’s government was under pressure to act after more than 170,000 Italian citizens signed a bill demanding the introduction of the CTT, many more than the 50,000 signatures required by Italian law to pass a bill directly to the parliament. Since then, the bill has lain dormant in the Parliament and has never been voted on.

In 2009 Berlusconi’s government is in office again, and once again under political pressure. So the de-tax proposal has been dusted down, presented again by Tremonti on 26 February. It involves companies voluntarily deciding to give a little part of the VAT they should anyway pay to finance international cooperation.

Andrea Baranes, an activist at Eurodad member Campagna per la Riforma della Banca Mondiale tells us “this approach is perfectly coherent with the idea of ‘privatisation’ of ODA that our government is carrying forward. More and more explicitly, Italian officials are saying to the NGO community and the general public that there's no public money for international solidarity, and that the private industry must and will contribute in a growing way to the overall Italian commitment towards the South. Thus, the De-Tax could give the impression that the private firms are doing more and more (even though it's public money in the end, I can see no other reason not to directly collect the VAT due by the firms and use it for ODA, without this voluntary mechanism)”.

The de-tax is regressive because it is based on the value-added tax, a consumption tax. Poor people have to spend a larger share of their income on consumption to satisfy their needs, and are therefore taxed disproportionately. By comparison a tax on international financial transactions would target the financially strong, especially those who profited from the liberalisation and deregulation of cross-border financial flows in times of globalisation. Now is the time to introduce such a measure, as financial constituencies are too weak to lobby against it.

Leadership on renewing development finance from the Italian G8 presidency is needed. The global economic crisis threatens to reverse the progress made in poverty reduction, and trap an extra 53 million people in poverty, thereby increasing the number of absolute poor to 1.5 billion. The first step to demonstrate leadership should be to revise the 2009 budget, reverse the downtrend in the development budget and make substantial progress on the road to 0.7 percent. At present the world champion in football is stuck in the relegation zone of the donor’s league.  

Andrea Baranes sums it up: “I believe that several Italian officials feel quite ashamed to lead a G8 officialy dedicated to the MDGs, Africa and fighting poverty while scoring 0,1% in ODA. Thus, they're looking for some cheap idea to regain a minimum of credibility towards the other G8 countries”. 

Eurodad has today seen the draft conclusions of the EU's Spring Summit to be held in Brussels on 9 and 10 March. One interesting proposal is a Global Charter for Sustainable Economic Activity. This was first raised by Angela Merkel at the Berlin summit on 22 February to prepare the G20. Neither we nor some members or officials we've quickly checked with know what that may mean, though.

The clues we have are that this is in the document section on strengthening governments' ability to manage and prevent crises at the global level. This means that 'sustainability' must mean payability, rather than environmental balance. The document says the charter would be "based on market forces, but preventing excesses, as a first step towards a set of global governance standards". That is very unclear.

But, hoping that this is something of an empty vessel waiting to be filled, Eurodad is happy to draw European leaders' attention to our Responsible Finance Charter. This was launched in January 2008. Its aims? To go beyond the limited debt sustainability approach promoted by the World Bank and IMF. Instead we wanted "to provide guidance, fairness and certainties to borrower states and lenders as well as protect the citizens and environments of developing nations" by "outlines the essential components of a responsible loan. These aim to ensure that terms and conditions are fair, that the loan contraction process is transparent, that human rights and environments of recipient nations are respected and repayment difficulties or disputes are resolved fairly and efficiently".

We will be very happy to get elucidation (in the comments, below) from any readers who know about this proposed new Sustainable Economic Activity Charter, or indeed any thoughts about what you think of Eurodad's one.

For a more detailed analysis of what we hear European leaders are preparing as their crisis response for developing countries, see our article of today EU crisis response plan for development revealed ahead of key summits. 

Tonight (Thursday, 12 March) Eurodad and other NGO networks from across Europe will hold a public meeting in Jersey alongside low-income residents, as pressure mounts on the UK government to scrap tax haven practices. Activists and analysts will be there from the UK, Ireland, France, Italy, Belgium and Switzerland, among other places.
 
Gordon Brown recently called for tax haven practices to be ‘outlawed’. Tonight European campaigners join forces with Jersey islanders to raise awareness of the local and global problems caused by tax havens while Jersey Chief Minister rushed to London this week to sign a deal, in a bid to escape being put on the blacklist of tax havens which will be laid out at  next month's G20 summit.

On the issue much has already been said on the eve of the Jersey Event. Tax Justice Network blog has dedicated more than a few articles to the matter, particularly focusing on the Jersey Event and the hopes surrounding its outcomes and consequences.

The Tax Research blog has done a great overview of the problems with Jersey. Just a few key facts from us to make the link to development. Corporate tax evasion and avoidance - much of it using tax havens - costs developing countries €250 billion a year, money which could be used to reach the UN's anti-poverty goals five times over.

Although vast sums of money flow through tax havens, many people living in them do not benefit. NGOs contrast the £700,000-a-year pension for the disgraced chief of RBS - which has 30 offshore companies in Jersey - with the one in four of the islanders who depend on state help to survive amid one of the world's highest living costs. 45 per cent of Jersey single pensioners, and 64 per cent of single mothers and their children, live in relative poverty.

Chairing the event will be - and we are particularly proud to announce this - Marta Ruiz, member of Eurodad’s staff. She gave a quote for our press release of today: “it is estimated that individuals hold $11.5 trillion in tax havens, almost the GDP of the Euro zone in 2007. Cracking down on tax havens is vital for economic justice in Europe and globally. We cannot make major progress on development without cracking down on illicit capital outflows. More and more political leaders now recognise that tax haven practices are unacceptable.”

Also commenting today is Simon McRae, senior campaigns officer at War on Want. He said: "The British government claims to care about global poverty. Yet the UK plays a major role in helping companies dodge the tax they owe which could help the poor. If Brown is to put people's needs before global greed, he must shut down fat cats' tax havens.”

Tomorrow will be an unlucky Friday 13th for Jersey’s financial institutions. On the eve of talks by finance ministers from the G20 group of leading economies in London, participants will protest outside 10 major UK and European banks in the island's capital St Helier.

Eurodad, as a major organizer and participant in this public event, hopes that bringing the topic in the backyard of the G20 talks, may contribute to raising awareness on the topic and shape public opinion to demand serious changes.
 
And in Belgium the newspapers today started discussing (in French) whether the OECD’s labelling of Belgium as a tax haven was justified. Our member organisation 11.11.11. has been raising the same issue in an information campaign last year.

Looks like we’ll have to have some public events on this here, not just in the Channel Islands.

I’m attending a major conference organised by the Department for International Development as part of its consultations towards a new white paper and preparations for the G20 summit here in London on 2 April. UK Secretary of State for development Douglas Alexander opened by reminding the 300 delegates that as “every source of finance” to developing countries is being hit it is time to “regroup, rethink and renew our efforts”.

Given the dearth of political leaders mentioning development these days Prime Minister Gordon Brown was a welcome surprise speaker at the conference at the end of the day yesterday. He said “Some have argued that in these difficult times the rich world should turn our back on the Millenium Development Goals and retreat from the promises we have made to the poor, but I wanted to come here today to say that amidst all the other challenges for globalisation we must not and will not lose sight of our vision of a world freed form poverty.”

The main initiative that is under discussion to flesh out this interest is the Vulnerability Finance Facility. Ngozi Okonjo-Iweala, World Bank Managing Director said this fund could be “a key deliverable for the G20 summit”. It was first proposed in January by World Bank president Robert Zoellick. He wrote then that “developed countries should agree to devote 0.7 per cent of their stimulus packages to a vulnerability fund to support the most needy in developing countries”. DFID’s press release says “the multi-billion pound fund would offer basic services such as feeding children and medical care for pregnant women and be specifically targeted at the most vulnerable groups including women, children, elderly people and the disabled. The fund would also invest in projects to get people back into jobs including ‘food for work’ projects.

A second initiative mentioned by Douglas Alexander in this speech was a new “Global Poverty Alert system”. DFID says this “would link international organisations, aid agencies and research groups into a single network that would provide instant updates on the impact of the economic crisis on the poor. This would include ‘real-time’ updates using text messaging and emails”.
A third initiative outlined here was a new High Level Commission to reform World Bank governance. Leading this will be seasoned commission chair Ernesto Zedillo. Personally I have heard about so many different commissions and other processes to rebalance the voices and votes in the World Bank and IMF that I don’t see that this will find a solution. As I blogged last year this is a major issue for developing country ministers and campaigners and I’m sure that European governments will have to give up some power and presence in the Bank and Fund. 

Finally a couple of quotes that have struck me.

Singer and activist Bob Geldof gave his view that “the periphery should be at the centre of our plan to address the crisis” and, as the Guardian picks up today, that Berlusconi “does not give a shit” about development.

The chief economist of Pakistan said world leaders have understood the dangers of religious fundamentalism, but have not paid enough attention to market fundamentalism so can’t fight the crisis.

Donald Kaberuka, former Rwandan finance minister and now head of the African Development Bank commented “there are questions of aid effectiveness, how to do it better, but aid does work.” He further suggested that aid is “too process-driven, not results oriented”.

Ngozi Okonjo-Iweala called for “a new paradigm for development aid”

Finally Paul Collier demanded action on the fact that “our banks hold billions of dollars stolen from developing country citizens”. 

Readers can post comments here, or also at DFID's on-line consultation towards their white paper which will set out their objectives and approaches to development for the coming years.

I hear that Gordon Brown was the only European leader to mention development at last weekend’s informal European summit (Euractiv summary, official invitation). The other 26 leaders remained inward-looking (photo).

To ensure the ECOFIN Council meeting in March does differently Development Commissioner Louis Michel has asked to attend. He wants, usefully, to inform finance ministers of the many problems developing countries are facing as a result of the financial and economic crises. But Czech finance minister Miroslav Kalousek is apparently vetoing the idea, considering development unimportant at a time when many former communist bloc countries are struggling day by day to avert currency meltdowns, stagflation and similar economic woes. (Not that it’s the most reliable indicator, but it’s depressing that searching the official EU presidency website this morning yielded no mentions of the word development.

More’s the pity – you would think recent economic events in that region would encourage more empathy with other regions of the world that have struggled with similar economic and social dramas (i.e. Argentina earlier this decade). Or to find common cause with others facing a crisis caused not by them but by Western Europe and the USA.

One clear overlap issue is the rapid withdrawal of capital by private banks, many of them European. The FT last week gave BIS figures showing that three quarters of bank loans to emerging markets originate from European banks. Giving a talk yesterday at the Friends of Europe Global Development Forum meeting I paraphrased the Euro 96 ‘Football’s coming home’ song, saying in 2009 ‘capital is coming home’. A representative of Standard Chartered bank agreed this is a real concern.

But even if development won’t be on the official ECOFIN agenda, it certainly will be at the alternative ECOFIN conference in Prague on 30 March and 1 April. This event, being organised by Eurodad member GLOPOLIS with assistance from Eurodad and other groups, will bring together an all star cast of analysts and activists knowledgeable about the financial crisis, its causes, consequences and remedies. We hope to see you there – and will ensure strong messages are passed to finance ministers and heads of state to persuade them that a Europe first agenda will severely damage Europe’s reputation and directly damage our interests.

A key text for the conference will be Glopolis’ excellent new manifesto for the Czech EU presidency (PDF). A taster: “the litmus test of the economic and financial reforms to be adopted in response to the crisis should be whether they bring more control over food, fuel and finance to poor communities, whether they increase the stability of the climate and not just the economy, and whether they lead to sustainable and equitable, not just increased consumption.”

Being relieved from debt means you will have to pay less one would think. But in some cases this is not true; one example is Cote d’Ivoire. The Western African country participates in the debt relief initiative for the Heavily Indebted Poor Countries (HIPC). When Eurodad member Erlassjahr.de analysed the preliminary HIPC-document, which was recently published, it found out that Cote d’Ivoire’s annual debt service will increase from 126 million USD before HIPC in 2006 to 608 million USD after HIPC by 2009.  But why?

The fact is, the HIPC-Initiative has some remarkable conditions. To qualify, a country first has to pay back all outstanding debt to International Financial Institutions such as the IMF or the World Bank. Since poor countries are naturally short of cash, they have to take out new loans to be able to make these payments. However, these new loans have been taken out after the so-called cut-off-date (meaning that all borrowing after that date is no longer eligible for debt relief under the HIPC-Initiative) at the same time, the new interest rates for these loans can be much higher than the ones relieved under HIPC.

Debt relief initiatives were supposed to ensure that poor countries can spend their scarce resources on developing their economies, educating their children or healing their sick, rather than transferring the funds to creditors abroad. Unfortunately HIPC does not work that way, at least not in the case of Cote d’Ivoire.

Source

We asked activists and policy analysts from 23 different civil society organisations which personality had inspired them, not one of them mentioned a European political leader. (Instead Mahatma Gandhi, Medha Patkar and Barack Obama got honourable mentions). A further sign perhaps that confidence in most of our political leaders seems to have vanished and is being replaced by an angry voices demanding reform of an undemocratic and opaque financial system.

During the recent meetings hosted by Eurodad in Brussels on the 17 and 18 February, civil society representatives came together to discuss capital flight, debt and IFI reforms in view of the ongoing financial crisis. The EuroIFInet and debt strategy meetings strongly expressed the need for change in financial architecture, stating that the current international monetary and financial arrangements are not organised around a multilateral rules-based system, limiting developing countries’ ability to take adequate measures to deal with the current crises.  However, it is clear that these poor countries are the ones that will be hit hardest by the financial downturn.

Clear common analysis and policy recommendations resulted from this two day meeting, formulated under three main policy areas:

• Global finance regulation and measures against capital flight;
• Debt cancellation, arbitration and prevention;
• World Bank and International Monetary Fund (IMF) reform.

The 50 or so civil society representatives present here in Brussels are demanding stronger regulations, denouncing the liberalisation and deregulation of the banking sector, the greedy and unsocial character of existing tax havens and their secrecy jurisdiction enabling a banking system far from democratic principals. A reform of the international accounting standards set by the International Accounting Standards Boards was also called upon, as it is partially responsible for a nontransparent global tax environment. 

Secondly participants highlighted that due to the credit crunch and recession in the North, the South will experience a withdrawal of credit, fall of export volumes and commodity prices as well as migrant remittances. This will cause a balance of payments crisis on top of the existing debt crisis. Civil society groups demand an immediate stop to debt servicing and a new debt cancellation scheme.  The Eurodad Responsible Financing Charter sets out measures to prevent further unsustainable and illegitimate debts.

Thirdly, the EuroIFInet meetings discussed the reforms of the World Bank and the IMF.  These crucial institutions have shaped global, regional and national financial governance systems. Participants demanded democratisation and compliance with transparency and accountability,  as well as the abolition of the economically weighted voting system.

In order to attain a sane financial architecture, it will be crucial that political leaders start listening to the voices of civil society and start implementing real alternatives to the current unsustainable system. The financial system needs new and different medicine to cure the current malaise. 

A detailed position paper resuming the outcome of the EuroIFInet meeting will soon be published on the Eurodad website.  We will keep you posted.

Sheriff or cowboy? That was the question that we raised on the De Larosiere Group as their report on European financial regulation was launched yesterday. Eurodad staff joined colleagues from Corporate Europe Observatory and Friends of the Earth to dress up in checked shirts and hats and parade outside the European Commission’s Berlaymont building. Some of us carried “unwanted” placards, complaining that the so-called ‘wise men’ in the De Larosiere Group represent the same clique that had got Europe into the current financial mess. Friends of the Earth has the release and pictures.

'Cowboy' bankers are symbolically dragged away from influencing how Europe handles the financial crisis 

A Euronews story picks up the campaigners’ angle. It quotes Paul de Clerck, one of the organisers of yesterday’s protest, saying “The financial industry has always had a very huge influence over the EC policies. The Commission basically took what the banks are telling them and this you can see is reflected in this advisory group.”
De Larosiere is an elder statesman of the European political scene – having headed the IMF, the Bank of France and European Bank for Reconstruction and Development. He is now Co-chair of the financial sector lobby organization, Eurofi, and until recently advised French bank BNP Paribas.

His fellow panellists are described in the protest press release as follows:

The more detailed report Would you bank on them? Why we shouldn’t trust the EU’s financial “wise men” sets out the grounds for the “unwanted” charge in more detail. It discusses each of the individuals named above and concludes “the composition of the group is astonishing. It is hard to imagine a clearer example of privileged access to decision-makers by vested interests”.
What did this compromised group come up with? The main points were to strengthen cross-border financial supervision in the EU, but without adding a new pan-EU regulatory body. When? Over the next four years and stops short of introducing an all-powerful, pan-EU regulator. More details are in a handy Reuters FACTBOX.

Some of the points are certainly aiming in the right direction, for example on regulating the shadow banking system, including hedge funds. But will the "European Systemic Risk Council" actually be able to agree on and enforce measures to deal with risk? Unlikely. And there is much more to be done to introduce order into the messy European financial governance system. (See a January 2009 Eurodad et al report  Financial Regulation in the European Union. Mapping EU Decision Making Structures on Financial Regulation and Supervision for more detail).  Chris Giles in the FT is not over-impressed. He say’s De Larosiere’s “report is far from a European attempt to regulate hedge funds and tax tavens. Instead, it is a slavish follower of the latest regulatory fashions”.   The one proposal that does get Giles’ praise is that the EU speak with a single voice and via a single representative in international arenas such as the IMF. As Giles acidly puts it” if anything should please those outside the EU, fed up with dealing with four or five large egos attached to medium-sized economies, this is it”. This is a point that Eurodad has been working on for some years – see our 2006 report A Question of Harmony: European Governance of the World Bank and IMF, our 2007 update How to Fit 27 Elephants in a Single Chair, and our update from last September. Oh, and you can also wait with baited breath for our forthcoming policy papers on the G20 summit, currently being finalised in consultation with our members and other allies across Europe.

Check out the video on Euronews' website!

Today, Wednesday 25 February, protesters took to the streets of Dublin to challenge U2 to support global tax justice.  The targets? Bono, U2 and tax justice.

Nessa Ni Chasaide of Debt and Development Coalition at the mic with "Bono" (Paul O'Connell) on guitar 

Photos of a Bono impersonator putting a small amount of money into a ‘global piggy bank’ were taken. Behind him was a pile of money hidden. A song competition was launched to find the best re-writing of a U2 song written about tax justice. The interesting alternative lyrics are already pouring in (see below). Our current favourite:

"I want to play

the tax evasion game

Where accounts have no name"

In 2006 U2 moved one of their companies from Ireland to Luxembourg.  By doing this, campaigners argue, U2 was taking money away from the Irish government, and depositing it into their own pocket. Now protestors are calling for U2 to have ‘A Sort of Homecoming’ by bringing their companies back to Ireland, and help pay for social services and development aid.

Nessa Ní Chasaide of Eurodad member Debt and Development Coalition Ireland said, "Bono may campaign for a better deal for the world's poor – but his band are taking advantage of the same tax avoidance schemes that rob impoverished countries of billions. At least $160 billion drains out of impoverished countries each year because of multinational companies shifting their profits to avoid tax. We need international action to ensure that everyone pays and pays their fair share.”

For more information, or to participate in the U2 alternative song lyrics competition see Debt and Development Coalition Ireland.

The story has already been picked up by the Irish Times, more coverage is expected. Richard Murphy's excellent Tax Research Blog has also picked it up.

Click here to see more pictures.

U2 alternative lyrics

Where the streets have no name

I want to run

I want to hide

I want to tear down these rules

that build civic pride

I want to play

the tax evasion game

Where accounts have no name

Sunday Bloody Sunday

I can’t believe the tax I pay

Oh, can’t I move abroad and make it go away?

How long, until I see what’s right and wrong?

How long? How long?

I’m alright … I look after number one

Alright, tonight

A new report from Oxfam asks the World Bank and other financial institutions to ‘smell the coffee’ and desist from over zealous promotion of private health care. To have the best possible medical care for people in the developing world, Oxfam argues, they must fund public care. Why? “Publicly financed and delivered services continue to dominate in higher performing, more equitable health systems.  No low- or middle- income country in Asia has achieved universal or near-universal access to health care without relying solely or predominantly on tax-funded public delivery”. Eurodad has previously shown how many of the conditionalities attached to World Bank lending promote private social service delivery.

Oxfam presents six common arguments in favour of private care as a solution for developing countries, then disputes each of them.  The first is: “The private sector is the majority provider so should be at the heart of scaling-uphealth services”.  The counter: “the data used by the IFC finds that nearly 40 per cent of the ‘private provision’ it identifies in Africa is, in fact,  just small shops selling drugs of unknownquality…If the shops are removed from the calculation, counting instead only the clinics staffed by trained health workers, what most people would think of as ‘health services’, the share of services provided by the private sector falls dramatically”.

Apparently none too happy about being called 'blind' the World Bank rushed out a formal response claiming Oxfam, “misrepresents the evidence on private health care in poor countries and the work of donors, including the World Bank, and draws conclusions more reflective of dogma than science”. 

Exchanges between the Bank and Oxfam have mostly been collegiate and friendly in recent years, with frequent exchanges at all levels of staff. Are these healthy diplomatic relations going to suffer from this latest report? Not for long we reckon; this is a debate that Barrack Obama and many others are also fostering in Washington at this time.

See Also:

• Ten Percent: Those Filthy Communists At Oxfam & Their Evil ‘Facts’
  
• Center for Global Development: Oxfam - This Is Not How to Help the Poor
• Campaign for Fighting Disease: Oxfam's "Blind Optimism" can't see truth behind fakes

MEPs Launch Anti-Corruption Petition

In reaction to Eurodad's Fight Capital Flight mailing we’ve been told by Ana Gomes MEP that European Parliamentarians are today launching a new anti-corruption petition.

We're pleased to say that as one of its four substantive points it lists actions against capital flight and tax havens.

The MEPs' text reads: "EU should better coordinate its efforts to halt tax evasion and the illicit financial activities that are made possible through use of 'offshore heavens' and advocate, at the global level, for strict regulation of off-shores".

Another good point made in this cross-party initiative is that: "The EU should ensure transparent and predictable aid flows to partner countries, so that it is clear to recipient countries what can be expected".

The initiative is being promoted by MEPs Ana Gomes (PSE, Portugal), Fiona Hall (ALDE, UK), José Ribeiro e Castro (EPP, Portugal), Luisa Morgantini (GUE, Italy), Marie-Hélène Aubert (Greens, France) and Ryan Eoin (UEN, Ireland).

Chapeau.

Click here to link to the petition

Eurodad is hosting the EuroIFI meetings that began yesterday in Brussels.  These meetings are scheduled twice a year for the network of European International Financial Institutions watchers (EuroIFI watchnet), and will conclude tomorrow, Feb. 18.

While the scope of work for these meetings usually focuses only on IFIs, this year it was decided that they could be opportunities to broaden the scope of the discussions, and therefore groups which have not been regular participants were invited as well.

Yesterday, the meeting was devoted to discussing and strategising climate finance, while today and tomorrow the three main areas of focus are:

• financial regulation and capital flight,
• debt, and 
• International Financial Institutions.

The aim is to develop joint positions and a collective advocacy strategy ahead of the G20 meetings in April in London.

For more information please contact assistant@eurodad.org . A report will be posted in a few days time.

Eurodad’s Marta Ruiz spent ten days in Belém, Brazil attending the World Social Forum, where she discussed the financial crisis with NGO, church, trade union and other representatives.  In total there were over 130 thousand people from around the world participating in the Forum, where they debated strategies about how to deal with the food, financial, economic and environmental crises. 

Forum participants called for a new financial system that puts the people first, a reformed UN to deal with the crisis and the end of hedge funds and tax havens.  A statement is being circulated that calls for worldwide mobilisation in favour of this new financial system. To read it or sign it go here.

The picture shows Marta reading the statement to a massed crowd at the final assembly of assemblies. Her excited delivery earned her the nickname “la Pasionaria”!

Listen to Marta and others in short interviews about the World Social Forum, on the World Council of Churches website.

Every day the newspapers are filled with evidence that the world's financial architecture is unbalanced cracked and unfit for purpose. (I like this Guardian 'financial pyramid explained" animation) Every politician and think tank wonk has a plan for a rebuild.

Eurodad is also shaping proposals to minimise the harm to developing country citizens from the current crises and ensure that the structures to be unveiled at the G20 and elsewhere during 2009 are sustainable, equitable and effective.

Meanwhile every day we see how one sustainable building construction can move forward. Eurodad has just moved offices to a new building, Mundo-B which will be shared by some 30 non-profits working on environment, development, sustainable consumption and other issues.

It is by no means complete, but already after 10 days we can see significant signs of progress - the hole in the floor is patched up, the overheating problem is solved and the noise levels are dropping.

Discussions among ministers seem to be going more slowly, but we are working hard to ensure that they also make tangible progress to fix the leaky global financial system.