EuroIFInet launches a position paper on the financial crisis and capital flight, debt and IFIs

by Eurodad

12 March 2009

On 16th to 18th February, Eurodad hosted the EuroIFInet meetings in Brussels. These meetings are scheduled twice a year by the network of European watchers of International Financial Institutions (EuroIFInet).

While the scope of work for these meetings usually focuses only on IFIs, on this occasion the network decided to broaden the discussion and focus on the impact of the current financial and climate crises on developing countries. The meeting gathered some 50 NGOs from across Europe, including both members and non-members of the EuroIFInet. While usually only members participate, it was thought that unique perspectives on the global crises brought in by non-members would be critical in this week’s debates.

After three days of intense discussions on the policy proposals that European CSOs should advocate to meet the challenges of the current crisis and fix the international financial architecture for the longer term, the meeting delivered a position paper on “ Preventing capital flight, overcoming debt and transforming the international financial institutions ”.

The paper highlights that there is a broad, global systemic crisis with environmental, social, economic and democratic dimensions; and that there is a need for new structures and a new paradigm. In the paper, European civil society groups propose deep reforms to international financial institutions and policies on the following areas:

Regulating global finance and fighting capital flight

* Ban tax haven and corporate accounting practices that enable tax evasion.
* Close the shadow banking system.
* Allow countries to introduce capital controls.

Reacting to the debt crisis

* Immediately stop debt servicing for countries in difficulties.
* Introduce responsible finance principles to prevent unsustainable and illegitimate debt.
* Institute fair and transparent debt workout mechanisms.

Reforming the International Financial Institutions

* Democratising the governance of the Bank and the Fund and hold them accountable to citizens.
* IFI finance must comply with responsible finance principles and avoid any new economic policy conditionality.
* Remove the IMF’s roles in long-term development finance and restrict the Bank’s roles in climate change finance.

Never before has there been such a broad consensus that the current financial system does not work properly, has resulted in an inequitable transfer of resources to a narrow group of richer people and an unsustainable pressure on natural resources, and has to be transformed. The public anger offers a unique opportunity that must not be wasted. And yet, European civil society groups are extremely concerned that the effects of the crisis on the world’s poor are not being properly addressed in the European Union’s response to the financial crisis.

The upcoming Spring Council that will take place in Brussels on 19th and 20th March provide a unique opportunity for European leaders to take the lead on the challenges ahead. European civil society calls upon their governments to ensure that the challenges facing developing countries are properly addressed in the EU response to the financial crisis, and to show leadership in brokering global agreement on the need to reform the global financial system. Strengthening solidarity with developing countries is not only a vital matter of ethics; it is also a matter of self-interest.

Contact your Finance and Development Ministers, and your Head of State/ Government to send them the CSO proposals and ensure that the challenges facing developing countries are properly addressed in the EU response to the financial crisis, and to show leadership in brokering global agreement on the need to reform the global financial system.

For more information: http;//www.eurodad.org