EU budget summit edges toward collapse

Updated 24 November 2012
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EU budget summit edges toward collapse

BRUSSELS: EU leaders looked set to throw in the towel Friday as talks on a trillion-euro budget for the 27-member bloc faltered over tensions between rich and poor states and Britain’s “virulent” demands for austerity.
British Prime Minister David Cameron kept up his defiant stance as he arrived for a second day of bitter negotiations on the European Union budget for the seven years from 2014-2020.
“There really is a problem that there hasn’t been the progress in cutting back proposals for additional spending,” Cameron, who back home has to pander to the powerful euroskeptic wing of his Conservative party, told reporters.
Britain, like many countries across Europe, is responding to economic crisis with major public spending cuts and Cameron argues that at a time of austerity at home the EU must also make deep cuts.
His bleak assessment of the state of the budget talks was shared by other EU leaders, who arrived one by one at European Council building in Brussels for bilateral meetings before the summit proper resumed at midday.
“I believe that also in this round, we won’t be where have to get to, which is a unanimous decision,” said German Chancellor Angela Merkel, repeating a line she had taken even before arriving in the Belgian capital.
“If we need a second round, then we will take the time necessary for it,” se added, referring to the prospect of a second summit in the coming months to nail down a deal.
Nearly a year after he angered his European counterparts by vetoing a pact to resolve the eurozone crisis, Cameron was again at odds with them by demanding cuts to the perks enjoyed by so-called “eurocrats” — the well-paid EU civil servants who are frequently targeted by the British press.
British officials insisted that other countries including Sweden, the Netherlands and Germany largely backed Cameron’s position for a reduction in the planned trillion-dollar budget for the seven years from 2014-2020.
But an EU diplomat said the main obstacle was Cameron’s demand for cuts, adding: “The most virulent were the British, the Swedish and the Dutch.”
Cameron had vowed to bring down the budget from a proposed 1.047 trillion euros ($1.347 trillion) to 886 billion euros.
The summit was scheduled to resume at 1100 GMT on Friday once delegates from the 27 member nations have had time to examine new proposals on the budget submitted by EU President Herman Van Rompuy.
The proposals reintroduce his own earlier figure of 972 billion euros in spending, which comes to just over one percent of the EU’s total economic output, the usual benchmark used in Brussels budget talks.
The latest blueprint which negotiators will work from Friday spreads the funds more generously to sensitive envelopes like the “cohesion” funds for regional development, and the Common Agricultural Policy, the farm subsidy program cherished by France that is the budget’s biggest single item.
“We will not accept the unacceptable,” warned Prime Minister Mario of Italy, which like France defends farm subsidies, but also backs cohesion funds which have vastly aided Italy’s less developed south.
Italy is among the countries that contribute more to the EU budget than they get back, known as the “net contributors,” while once mighty Spain, rocked by the eurozone debt crisis, rejoined the camp of those who get more cash than they put in.
Cohesion funds — billions of euros outlayed each year to the EU’s poorer members so they can catch up with richer neighbors — are being defended tooth and nail by the 15 “Friends of Cohesion” nations, led by Poland and Portugal.
“Cohesion is an issue of competitiveness and growth for the whole European Union, not just for the countries with the greatest needs,” argued Prime Minister Antonis Samaras of debt-stricken Greece.

 
 


World Bank shareholders approve $13 billion capital increase

Updated 22 April 2018
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World Bank shareholders approve $13 billion capital increase

  • Capital increase follows three years of negotiations
  • Increase of $7.5 billion for main institution and $5.5 billion for IFC

World Bank shareholders approved a “historic” increase in the bank’s lending capacity late on Saturday after the United States backed a reform package that curbs loans and charges more for higher income countries like China.
World Bank President Jim Yong Kim said neither China nor any middle income countries was happy about the prospect of paying more for loans, but they agreed because of the overall increase in funds available.
The agreement, which also increase shares and voting power to large emerging market countries like China, was “a tremendous vote of confidence” in the institution that came after three years of tough negotiations, Kim said.
“World Bank Group bureaucrats don’t often jump around and high-five and hug each other,” Kim told a small group of reporters following the Spring meeting.
He said the increase was needed because even with the end of the global financial crisis, the bank has been called on to provide funding to address a new series of challenges facing poor countries, like climate change, refugees, pandemics, “all new things for us.”
The increase provides an additional $13 billion in “paid in” capital: $7.5 billion to the main institution and $5.5 billion to the bank’s private financing arm, the International Finance Corporation.
Kim said the increase will allow the bank to ramp up lending to an average of $100 billion a year through 2030, from $60 billion in 2017 and an expected $80 billion in 2018.
Countries will have five years to provide the funds, but can ask for a three-year extension. The last increase occurred in 2010 and added $5 billion to the bank’s capital and $200 million for the IFC.
The United States, the institution’s biggest shareholder, rejected the World Bank request in October and the administration of US President Donald Trump has argued that multilateral lending institutions should graduate countries that have grown enough to finance their own development, like China.
But US Treasury Secretary Steven Mnuchin on Saturday said Washington supports the increase because of the reforms to lending rules.
“I look at this as a package transaction... we support a capital increase on the World Bank, along with the associated reforms that they’re talking about making,” Mnuchin told reporters.
The increase requires legislative approval, but Mnuchin said he was hopeful Congress would back the plan. Kim also said he has had contact with representatives from both parties and received strong support.
In a statement to the World Bank’s governing committee, Mnuchin applauded the plan to “significantly shift lending to poorer clients.”
While he did not mention China by name, Mnuchin applauded the shift to a “new income-based lending allocation target and the re-introduction of differentiated pricing” for loans — meaning wealthier countries would pay higher interest rates.
“The latter will incentivize better-off, more creditworthy borrowers to seek market financing to meet their needs for development,” he said.
Mnuchin said the new arrangement, including for the IFC, “frees resources for countries that don’t have sustainable access to private capital markets.”P
China’s Vice Finance Minister Zhu Guangyao said Beijing supported increasing World Bank resources but had reservations about the agreement for changes in lending policies.
“We are concerned about some of the policy commitments in the capital package, such as those on graduation, maturity premium increase for loans and differentiated loan pricing based on national income per capita,” he said in a statement.
“We hope that the management take different national circumstances into full account in the implementation of the graduation policies... to ensure that these policies will not impede cooperation between the (bank) and upper middle income countries.”
Kim acknowledged that lending to China would decline, but only gradually. That means “whatever borrowing they do has to be as impactful as possible.”
And he noted that because of the capital increase, “we will be able to maintain volumes for middle income countries as a whole.”
Zhu said the capital increase is “a concrete measure to support multilateralism” at a time when “anti-globalization sentiments, unilateralism, protectionism in trade” were creating uncertainties in the global economy.