EU Member States must not only deliver on their international aid pledges, but also bring in
a financial transactions tax and a temporary debt moratorium, to help developing countries
to cope with the effects of the global financial and economic crisis, says the Development
Committee on Monday. Member States are also urged to earmark at least 25% of the EU's CO2
emission trading revenue to help developing countries to deal with the effects of climate
change.

“Fulfillment of the Official Development Assistance (ODA) commitments is imperative but
still not sufficient to tackle the development emergency", so additional innovative sources
of development funding are needed, say Development Committee MEPs in a report drafted by
Enrique Guerrero Salom (S&D, ES) on the impact of financial and economic crisis on
developing countries.

Need for a levy on international transactions

MEPs are firmly convinced that taxing banking transactions "would be a fair contribution
from the financial sector to global social justice". At the same time, they call for an
international levy on financial transactions to make the tax system more equitable and to
generate additional resources for development funding, including meeting climate change
adaptation and mitigation costs of developing countries.

Financing climate change measures in developing countries

MEPs call upon EU Member States and the European Commission to agree, within the European
Union Emission Trading System framework, "to devote at least 25% of the revenues generated
from the auctioning of carbon emission allowances to support developing countries in coping
with climate change."

Combating tax havens and illicit capital flows

MEPs warn that "the negative impact of tax havens may be an insurmountable hindrance to
economic development in poor countries", because it undermines national tax systems and
increases the cost of taxation.

Illicit capital flows from developing countries are estimated at US$ 641-941 billion, i.e.
roughly ten times global development assistance, says the Development Committee.

MEPs therefore call for "a new binding, global financial agreement which forces
transnational corporations, including their various subsidiaries, to automatically disclose
the profits made and the taxes paid on a country-by-country basis, to ensure transparency
about sales, profits and taxes."

Risk of further indebtedness

Developing countries will be obliged to borrow more in order to tackle a crisis caused by
developed countries, thus increasing their indebtedness to international financial
institutions, say MEPs, who call on national governments to reform the world's financial
architecture as soon as possible.

Temporary moratorium on debt repayments

Developing countries face a huge financial gap (estimated at between US$ 350 billion and US$
635 billion in 2009), which imperils spending in vital areas like education, health and
social protection.

MEPs therefore advocate "a temporary moratorium on debt repayments, including capital and
interest, and a debt cancellation for least-developed countries, to enable developing
countries to implement counter-cyclical fiscal policies to mitigate the severe effects of
the crisis."

Reducing remittance costs

One very direct consequence of the crisis for developing countries is the drop in
remittances, the money sent home by migrants working abroad. Remittances fell by an
estimated 7% in 2009 compared to 2008, which in turn had a considerable impact on the GDP of
low-income countries.


To help remedy this, MEPs "ask Member States and recipient countries to facilitate the
delivery of remittances and to work towards the reduction of their costs" and welcome the G8
commitment made in L'Aquila "to reduce the cost of remittance transfers from 10 % to 5 %
in 5 years."

 

 

 

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