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The European Parliament urges the EU to address odious debts and capital flight in Doha

26 September 2008

On September 23rd, the European Parliament adopted a report on the follow-up of the Monterrey conference on Financing for Development. This report is meant to suggest to EU member States what should be the joint EU position at the follow-up Doha summit in two months time. Eurodad and many other European NGOs regret the lack of commitments from the EU member states on debt issues  (see Sept. 18th Article) but the European Parliament’s report provides an encouraging step towards more ambitious commitments on financial assistance, debt, capital flight and other issues.

This report addresses contains useful language on debt and capital flight. Firstly, the report regrets “that the debt relief plans exclude a large number of countries for which debt remains an obstacle to fulfilling the MDGs” and it “stresses the need for an urgent international debate on extending the reduction of international measures to a number of indebted countries currently excluded from the HIPC initiative”.

Secondly, the report “calls on the Commission to address the issue of 'odious' or illegitimate debts, meaning debts having arisen from irresponsible, self-interested, reckless or unfair lending and the principles of responsible finance in bilateral and multilateral negotiations on debt relief”.

Thirdly, the report “Urges the EU to promote international efforts which aim to put in place some form of international insolvency procedures or fair and transparent arbitration procedure to deal efficiently and equitably with any future debt crisis”. Having a fair and transparent debt workout mechanism is the only sustainable and equitable way to address developing countries’ debt problem. This is particularly the case in a context where financial crisis, instability and the rise of food and oil prices will definitely increase the debt burden in many poor countries, leading them to a new debt crisis if no comprehensive measures are taken.

On capital flight, the report “calls on the Commission to ask the International Accounting Standards Board (IASB) to include among these international accounting standards a country-by-country reporting requirement on the activities of multinational companies in all sectors”. This is a major step forward in the fight against tax evasion, which is reported to drain illicitly $350 to $500 billion a year from developing countries.

It also calls on the Commission “to include measures to prevent capital flight in its policies (…), with the goal of closing down tax havens, some of which are located within the EU or operate in close connection with Member States” and calls upon the Commission and Member States to “promote the global extension of the principle of the automatic exchange of tax information, to ask that the Code of Conduct on tax evasion currently being drawn up at the United Nations Economic and Social Council (UN ECOSOC) be annexed to the Doha declaration and to support the transformation of the UN Committee of Experts on International Cooperation in Tax Matters into a genuine intergovernmental body equipped with additional resources to conduct the international fight against tax evasion alongside the OECD”.

The report also contains strong language on increasing aid levels and introducing innovative finance mechanisms. It condemns as “totally unacceptable the discrepancy between the frequent pledges of increased financial assistance and the considerably lower sums that are actually disbursed” and backs “innovative finance mechanisms such as levies on aviation and oil trading, as well as by earmarking of auctioning revenues from the EU Emissions Trading Scheme”. Unfortunately the report does not find space to emphasise that any such new funding must be reported additionally to Official Development Assistance.

European Development Ministers will gather in Bordeaux on 29 and 30th September to agree the main lines of a common European position towards Doha. It will be the last chance for EU leaders to show coherence with their ambitious positions in Accra by also taking strong commitments on debt and capital flight. But it will also be a unique opportunity for our leaders to echo the clear call from the European Parliament. Eurodad and other NGOs will send representatives to the ministerial meeting to push for a strong outcome.

LINKS
Follow-up to the Monterrey Conference of 2002 on Financing for Development 

Eurodad letter to European ministers on Financing for Development