Open letter to EU leaders

Further action to reform the global financial architecture urgently needed at the European Council this week

25 October 2010

Dear Heads of State and Government of the European Union,

The achievement of European and international commitments on poverty eradication is under threat. Poor progress in the last decade is being further undermined as a result of the global crisis: 90 million more people in poverty by the end of 2010. However, the human casualties of the financial crisis could be much worse if available development finance is less and worse in the years to come.

The global financial crisis was triggered by irresponsible behaviour by the financial sector. It is only by addressing fundamental flaws in the global financial system that Europe will be able to deliver on its commitments on Policy Coherence for Development – including by taking account of “the objectives of development cooperation in the policies that it implements which are likely to affect developing countries” and by adopting measures towards “a more development-friendly international framework to address harmful tax practices and tax evasion.”¹

The European Council must take resolute action this week and ensure that the upcoming G20 leader’s meeting in Korea delivers further and deeper reforms to build a development-friendly global financial architecture. The decision by G20 finance ministers last week to increase developing countries’ representation at the IMF is welcome but not enough. Unfortunately, it is just a piecemeal step on the right direction. Concrete commitments in key areas to enhance development finance are yet sorely missing.

Concrete measures to regulate global finance and make it work for the world’s poor are urgently needed, including:

• Establishing a binding framework of responsible finance standards, for both public and private financial flows to developing countries. It should include provisions for an independent and transparent debt work out procedure to address debt disputes in case of repayment difficulties or over the legitimacy of debt claims.
• Agreeing upon a clear set of binding measures to combat capital flight and tax evasion. These should include a country by country reporting standard for multinational companies. The EU should also play a leading role at the international level in combating transfer mispricing and in promoting a multilateral framework for automatic information exchange.
• Ensuring that aid targets and aid effectiveness commitments are met by establishing binding national and EU legislation.
• Further and deeper reforms at the International Financial Institutions to ensure greater voice and representation for developing countries and policy space to adopt alternative macroeconomic policies that accommodate pro-poor growth and development oriented strategies.

It is not too late. More than ever a responsible finance framework is needed to ensure a decent and equitable future for the people of developed and developing countries. The principles, mechanisms, and proposals are out there. Putting them into practice just takes courageous and decisive political will.

The hopes and aspirations of the European citizens rest in your commitment this week to push forward these measures in the upcoming G20 leaders summit in November in Korea.

Yours sincerely,

Nuria Molina
Eurodad Director

¹ GAERC Conclusions of November 2009, and FAC Conclusions of June 2010.

Institute of Global Responsibility (IGO) is a Polish member of Eurodad.