Debt Relief

Bush and Brown head for showdown on debt relief

US likely to block Britain’s ‘Marshall Plan for Africa’ at G7 summit.

George W. bush will emerge as the major obstacle to Britain’s ambitious proposals for a new ‘Marshall Plan’ for Africa this week as the world’s finance ministers converge on London for the G7 summit.

With troops mired in Iraq, and Bush under pressure to reduce his vast budget deficit, Washington is reluctant to commit extra cash to relieve the plight of Africa.

German Chancellor Gerhard Schröder set the scene for a transatlantic confrontation when he became the latest European leader to throw his weight behind Britain’s plans for an International Finance Facility that Gordon Brown hopes will release an extra $50 billion for the world’s poorest countries. France and Italy had already expressed support for a large increase in aid and debt relief, and a Treasury official said: ‘We can go into the G7 this week with Europe presenting a united front. There’s a momentum building.’

However, campaigners are warning that US opposition could prove a major stumbling block. ‘We are not expecting a complete agreement along the lines of the UK proposals: I think the US is still pretty intransigent,’ said Romilly Greenhill of Action Aid.

Japan has also expressed doubts about the proposals, but the Treasury believes Tokyo would fall into line if the US signed up.

As the first step in Britain’s year-long campaign to ‘make poverty history’, Brown has promised to meet the cost of writing off 10 per cent of the debt of the world’s poorest countries to the World Bank, and challenged his fellow G7 finance ministers to follow suit. Canada could agree to do so this week. But the US is proposing its own, cheaper, scheme in which debt relief would be deducted from existing aid flows.

Brown is also keen to win wider support for his proposal to revalue the International Monetary Fund’s gold stockpile in order to pay for further debt relief. The IMF owns 100 million ounces of gold, which is worth $45 billion, but it is only valued at $8 billion in its accounts.

As well as the plight of Africa, finance ministers will discuss the sharp decline in the dollar over recent months. Eurozone politicians have blamed massive US deficits for the dollar’s slide, which has pushed up the price of eurozone exports. But Bush’s Treasury Secretary, John Snow, repeated last week that it was also the responsibility of the Europeans to redress the balance by growing their economies more quickly.

China, which has been invited for a special session with the finance ministers, is expected to come under renewed pressure to float its currency, the renminbi.

Heather Stewart, The Observer, January 30, 2005

Categories: Debt Relief, Odious Debts

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