Stefania Bianchi

BRUSSELS, Dec 15 2005 (IPS) — Developing countries are set to be the biggest losers as European leaders meet in Brussels this week for a crucial summit to reach agreement on the European Union’s next seven-year budget.

European heads of state are meeting Thursday and Friday (Dec. 15 and 16) in an attempt to break the deadlock over the European Union (EU) budget, which has dominated European politics in recent weeks.

The British presidency of the bloc, which will chair the summit, unveiled its latest plans Wednesday after weeks of wrangling between member states.

The proposals include an increase in the budget by 2.5 billion euros (3 billion dollars) to 849.3 billion (1,020 billion dollars) over seven years, and continued target cuts for funding earmarked to the new EU member states and Europe’s external actions, including aid to developing countries.

Eurostep, a Brussels-based network of development non-governmental organisations (NGOs), fears that if Europe’s leaders sign up to the proposals, the main losers will be people living in poverty – both inside and outside the EU.

The group says the budget deal may contradict aid pledges made by the bloc earlier this year when member states agreed to raise the level of the bloc’s aid spending by 20 billion euros (25.3 billion dollars) by 2010 so the bloc can meet a pledge of 0.7 percent of gross national income (GNI) in official development aid (ODA) by 2015..

“This wrangling over the EU’s future budget takes place as Europe seeks to project itself as a global leader in tackling world poverty,” Eurostep director Simon Stocker told IPS Thursday. “In 2005 European member states made commitments to diminish world inequalities by increasing the quality and quantity of their aid efforts, by providing additional debt relief to developing countries and through promoting reforms to world trade to benefit the poorest.”

Eurostep says the budget battle means that less attention is being paid to eradicating poverty both in Europe and in the developing world.

“Rich member states cannot continue to make nice promises to developing countries while cutting Europe’s development spending,” Stocker said. “Lowest common denominator deals on the 2007-2013 budget will not solve the current European crisis. Europe needs sufficient resources to demonstrate it can deliver on social justice and the eradication of poverty.”

Development groups are also urging European leaders to use the European summit to agree to a fundamental overhaul of the bloc’s Common Agricultural Policy (CAP) in 2008. They say changes agreed at this meeting must go further than the 2003 review, which they say failed to properly address the issue of “redistribution of subsidies in Europe or dumping on developing countries.”

Despite several CAP reforms, French farmers continue to receive about a fifth of more than 43.2 billion euros (52 billion dollars) in subsidies the EU pays out every year. These subsidies add up to about 40 percent of the EU budget.

The international aid agency Oxfam International says EU leaders meeting in Brussels have the last chance for almost a decade to agree an overhaul of CAP financing so that it does not destroy the livelihoods of people in developing countries.

“CAP has now become a byword for inequity, and European leaders must not pass up this chance to agree a full-scale revamp of the farm payment regime. Failure to do so would sentence small farmers in Europe and the developing world to another nine years of misery,” Luis Morago, head of Oxfam in Brussels, said in a statement Wednesday.

“If this moment is lost the EU will be not only be failing the majority of farmers in its own backyard but continuing to harm poor country farmers and driving millions deeper into poverty,” he added. “We need CAP reform that ends dumping, promotes rural development and environmentally sustainable farming.”

The African, Caribbean and Pacific (ACP) group of sugar-producing countries are also fearful of the impact that the new budget will have on their sugar industries when then EU overhauls its sugar regime next year.

The group is urging the EU to provide a “substantial assistance package” for the ACP sugar supplying states and to provide secure and adequate financial resources to enable them to adjust effectively to the “disproportionate burden” arising from the reform of the regime.

“The most vulnerable stakeholders must not be the helpless victims of the reform. This is the time for EU to deliver on its promises. We strongly urge them to show the political will to do so, because their decision will have a crucial impact on the long-term sustainable development of the sugar industries of the ACP,” Arvin Boolell, minister of agriculture of Mauritius and chairman of the ACP sugar group, said in a statement from the World Trade Organisation (WTO) ministerial conference in Hong Kong.

ACP countries are set to lose more than 250 million euros (300 million dollars) a year in direct export earnings as a result of a 36 percent cut in the net price of sugar over two years from 2007 under the EU’s current proposals.

The European Commission, the EU executive, has proposed that ACP sugar supplying states be provided with 190 million euros (228 million dollars) a year 2007-2013 to offset the devastating impact of sugar reform on their economies. But ACP countries say this figure will barely cover the 35 million euros they will lose in the first year of the new regime.

“We welcome this proposal from the Commission as step in the right direction. However, it is still very unclear how this will fit in the overall budget package. Moreover, the figure is grossly inadequate to enable us to restructure and diversify within sugar,” Jamaican minister for foreign affairs and trade Keith D. Knight said in a statement. Jamaica’s sugar and also banana production is severely threatened by changes to the EU regime.

The ACPs have argued that 500 million euros (600 million dollars) a year will be necessary to allow them to adapt and survive.

“It is impossible to overstate the urgent need for a clearly ring-fenced and substantial assistance package for the ACP sugar supplying states. We call on the British presidency, member states and the European Parliament to recognise the very real and grave threat to our economies and social fabric of our countries if our concerns are not addressed,” Fiji’s minister for foreign affairs and external trade Kaliopate Tavola said in a statement Thursday.