Identifier
Created
Classification
Origin
04BRUSSELS5221
2004-12-10 09:58:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Brussels
Cable title:  

ENGAGING THE EU ON DEVELOPMENT ASSISTANCE IN

Tags:  EAID ECON PREF PREL EUN UN USEU BRUSSELS 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 05 BRUSSELS 005221 

SIPDIS

SENSITIVE

DEPT FOR E,EB,EUR/ERA,AF,NEA,PRM,S/CRS
DEPT PASS MCC FOR MORFORD
USAID FOR PPC,EGAT,AFR,ANE,GH,EE,LAC
NSC FOR MCKIBBEN,STRONG,SIMON

E.O. 12958: N/A
TAGS: EAID ECON PREF PREL EUN UN USEU BRUSSELS
SUBJECT: ENGAGING THE EU ON DEVELOPMENT ASSISTANCE IN
2005: THE GLOBAL SCOPE OF U.S.-EU COOPERATION

REF: (A) BRUSSELS 5070 (B) BRUSSELS 4630

UNCLAS SECTION 01 OF 05 BRUSSELS 005221

SIPDIS

SENSITIVE

DEPT FOR E,EB,EUR/ERA,AF,NEA,PRM,S/CRS
DEPT PASS MCC FOR MORFORD
USAID FOR PPC,EGAT,AFR,ANE,GH,EE,LAC
NSC FOR MCKIBBEN,STRONG,SIMON

E.O. 12958: N/A
TAGS: EAID ECON PREF PREL EUN UN USEU BRUSSELS
SUBJECT: ENGAGING THE EU ON DEVELOPMENT ASSISTANCE IN
2005: THE GLOBAL SCOPE OF U.S.-EU COOPERATION

REF: (A) BRUSSELS 5070 (B) BRUSSELS 4630


1. (SBU) Summary. The 25 EU member states have a GDP roughly
equal to the United States, but spend twice as much on
development assistance. One fifth of EU assistance is
funneled through the European Commission (EC),making the
Commission the third largest single donor in the world and an
important catalyst for other EU funding. Although EC
decision-making and budgeting processes are sluggish in
adapting to changing needs, when we can articulate a
long-term vision, as we have in Afghanistan and the Balkans,
for example, the US and the EU can work to each other's
strengths in structuring our assistance.


2. (SBU) It is striking just how much US and EU development
and humanitarian assistance priorities coincide. The
numbers speak for themselves: 200 million euros/year for
Afghanistan; 320 million euros to Iraq over the last two
years, with another 200 million slated for 2005; over 300
million euros to Sudan/Darfur, and 250 million euros for the
Palestinians this year (with another 20 million euros already
set aside to support Gaza engagement).


3. (SBU) As the world's two largest donors, the US and EU
have enormous scope for cooperation and coordination on our
respective development assistance programs globally. As we
look to address the next phase of challenges in Afghanistan,
Iraq, and Darfur, or longer-term development in the Middle
East, Africa, and Eurasia, the force-multiplier opportunities
are there. New EU Commissioner President Barroso is also
much more attuned to development and assistance needs than
his predecessor was. Despite the political strains of recent
years, development cooperation and coordination around the
globe remains strong as this cable's survey demonstrates and
critical to achieving our strategic policy objectives.
(starting at paragraph 12). End Summary

Putting Assistance in Context
--------------


4. (SBU) The December 2003 European Security Strategy ("A

Secure Europe in a Better World") closely mirrors the US
National Security Strategy emphasis on Defense, Diplomacy and
Development. The strategy notes that "as a union of 25
states with over 450 million people producing a quarter of
the world's Gross National Product (GNP). The European
Union (EU) is inevitably a global player... (that) should be
ready to share in the responsibility for global security and
in building a better world." In fact, 2003 net Official
Development Assistance (ODA) data from the OECD DAC reveal
the EU member states disbursed $37.139 billion (compared to
16.254 billion by the United States). Nearly
20 percent of EU ODA flows, or over $7 billion annually, are
channeled through the European Commission. Clearly, the EU
and US working together represent the two largest donors
globally.

Cumbersome Decision-making
--------------


5. (SBU) Getting internal consensus within the EU on how to
respond to development needs remains a time-consuming process
and may well prove even more complex with 25 member states
than it has been with 15. However, when we can articulate a
long-term vision of what we see as the end game, as we have
in Afghanistan and the Balkans, for example, the US and the
EU can work to each other's strengths in structuring our
assistance.


6. (SBU) Within the EU there are clear patterns of
Development Ministers' views. Most Northern Europe
Development Ministers, with the notable exception of the
current Dutch Minister, tend to take a more purist approach
to development assistance. The UK Development Minister in
particular lambasts the EC for aid programs which he views as
not consistent with a poverty reduction focus. The Southern
Europe Development Ministers, on the other hand, tend to take
a quite different approach, consciously linking development
assistance to foreign policy goals, which leads to a
perceived skewing of assistance to Latin America based on
other than development grounds. The new member states are
not significant donors, are still on a steep learning curve,
and have yet to align themselves in one or the other camp.


7. (SBU) The EC's seven-year budget cycle also influences EU
assistance. The EC is in a better position to respond to
long-standing crises than to major new initiatives for which
they have not planned. Similarly, while our interests
largely coincide, in some instances they have different
priorities -- as we are now seeing with the EU emphasis on
the Great Lakes crisis. One important factor to bear in mind
as we encourage the EC to respond to our priorities is that
the Community resources are part of a zero sum game. When
the EC agrees to fund something of interest to us, it will
come at the expense of something else we might like them to
fund.

Institutional Reforms
--------------


8. (SBU) Under the previous Commission, a number of
institutional reforms were put in place to enable the EC to
be more agile in its response mechanism. Those reforms
included the establishment of a new Directorate General for
European Aid Cooperation (DG AIDCO) for the implementation of
development assistance policy, concurrent with a policy of
"deconcentration" or devolution of staff to the field. As a
result, the 80 Delegations in the field managing development
assistance have been strengthened, and now possess the
technical and administrative capacity to implement programs
and pay contractors directly. Brussels headquarters
therefore focuses more on policy and coordination, with
significantly reduced technical capacity here.


9. (SBU) As part of the preparations for the 2007 -2013
Financial Perspectives, the Commission recently proposed a
consolidation of funding instruments for external assistance
from the current 90 "funding instruments" (budget lines) to
just 6: (a) an instrument for pre-accession assistance; (b)
a European Neighborhood and Partnership instrument; (c) a
Development Cooperation and Economic Cooperation instrument;
(d) an instrument for stability; (e) an existing instrument
for humanitarian assistance; and (f) an existing instrument
for macro financial assistance. The Commission is also
seeking significant increases for these external assistance
instruments.


10. (SBU) The debate on the overall size of the EC's
development budget will go on all next year. Based on the
recent debate over the 2005 budget, however, we saw the EU
Finance Ministers defying the European Parliament and
striking a deal on the 2005 budget (the first full-year
budget for the EU-25) which limits the increase to 5.9% over

2004. The total EC budget of euro 106.3 billion (with less
than 7 percent for foreign assistance) amounted to just over
1% of GNI. The six EU member states that are net
contributors to the budget seek to likewise cap the 2007-13
budget at 1% of GNI, rather than 1.24% of GNI proposed by the
Commission.

US-EU Cooperation Spans the Globe
--------------


11. (SBU) Meanwhile, the US and EC coordinate and cooperate
closely on humanitarian assistance worldwide. Over the past
year the cooperation has included Afghanistan, Iraq, Liberia,
Haiti, Palestinian Territories, Uganda, Sudan (including
Darfur),Cote d'Ivoire, Colombia, Democratic Republic of
Congo, Burundi, Ethiopia, Zimbabwe, Angola, Myanmar,
Chechnya, Yemen, Tajikistan, Cambodia, Sierra Leone and
assistance to the victims of the Bam earthquake in Iran.


12. (SBU) US-EC Cooperation on key USG strategic priorities:


A. Afghanistan - From the beginning of the international
engagement, the EC made a long term commitment to Afghanistan
by pledging $1 billion over five years at the Tokyo
Conference. The European Commission and EU Presidency have
been active co-chairs of the Donor Group. The EC has
exceeded its pledge and been responsive in mobilizing
resources for police training and the recent elections. We
expect that commitment to continue. The EC welcomes the new
Afghan counter-narcotics plan and the strong backing the US
is providing this effort.


B. Iraq - Despite differences within the EU over the
approach to Iraq, the EC and EU member states pledged $1.4
billion of assistance at the October 2003 Madrid Donors'
Conference. The EC has fully disbursed the 2003 - 2004 funds
($320 million) to the World Bank and UN Trust Funds. Both
the EC and the EU Presidency have been active participants in
the Core Donor Group and are now preparing their 2005 package
of euros 200 million (subject to European Parliament
approval),with an emphasis on the upcoming elections,
private sector development, trade, investment, public
services, jobs, democracy and rule of law. The major
challenge facing the EC is how to disburse their program
without an office in country. The Commission argues that it
has no mechanisms to provide protection for their offices, so
they are attempting to run their program from Amman until
such time as the security situation will allow them to
re-locate.


C. Sudan - The EU shares our concerns over the horrific
humanitarian disaster in Darfur, and has mobilized euros
326.5 million of assistance, including support for the
African Union peacekeeping efforts. New Development
Commissioner Louis Michel made his first foreign trip to
Khartoum and Darfur November 25 - 27. We expect continued
strong support from the EC, as well as the EU Foreign
Ministers and Development Ministers, in efforts to resolve
the humanitarian crisis, and to produce a North-South peace
agreement which will unleash significant development
resources. The US and EU already are in close policy
coordination on Sudan.


D. Palestinian Authority - This year assistance to the
Palestinians from the EC budget is set at around 250 million
euros, including a package for the West Bank and Gaza for
124.25 million euros. The assistance has two objectives:
addressing urgent needs and contributing to the creation of a
viable and democratic Palestinian state. The EC is
contributing 65 million euros to the Public Financial
Management Reform Trust Fund established by the World Bank at
the request of the Palestinian Authority with backing from
the international donor community to continue improving
management of public finances and the viability of
Palestinian Authority institutions. Following a recent
request of the Council to the Commission to consider
developing concrete measures to make a success of the
disengagement from Gaza, a reserve for an amount of 20
million euros has been set aside. This will be defined in due
course subject to developments on the ground. In addition,
some 3 million euros have been set aside to support civil
society initiatives in East Jerusalem with a view to
strengthening institutions that are working on the
improvement of living conditions in the area. This total
package comes on top of around 128 million euros already
earmarked through the following programs: 89 million euros
through the United Nations Relief and Works Agency for
Palestine Refugees in the Near East (UNRWA),(of which 8
million euros from ECHO),29 million euros for humanitarian
aid through ECHO, around 10 million euros for food aid /food
security through the World Food Program and NGOs and for the
European Initiative for Democracy and Human Rights
(EIDHR).


E. Liberia - At the February Donors' Conference in NY, the
EC pledged $125 million for reconstruction and $75 million
for humanitarian assistance. Both the EC and Dutch EU
Presidency report ongoing concerns with donor coordination in
Monrovia. These concerns are discussed Ref A.


F. Haiti - The EC was the single largest donor of budget
support at the July Donors' Conference in Washington.
Ongoing violence in the country is affecting the EC's ability
to disburse funds in a timely fashion. The EC also has funds
reserved for rehabilitation programs which are now under way.
They are also moving ahead with a justice reform program
which they consider a priority. The EC plans to contribute
euros 10 million for the elections if they take place.


G. Ethiopia - The EC and EU member states are actively
engaged in the G8 Famine Initiative in Ethiopia where we are
jointly assisting the GOE get on an economic growth path,
which will liberalize markets and get agricultural growth
above 6% within the next three to four years. The initiative
includes a multi-donor sector wide program supporting a
"productive safety net" which will stabilize rural incomes of
the chronically food vulnerable and build productive assets
of rural communities.


H. Georgia - The Donors' Conference in Brussels saw a robust
EC commitment of over 125 million euros of EC funds to
Georgia over the period 2004-2006. Taken together with
humanitarian and other assistance, total European Community
aid to Georgia for 2004-2006 amounts to 137 million euros.
The EU broadened the European Neighborhood and Partnership
policy to embrace Georgia in addition to the 14 other
countries and Palestinian Authority which form the EU's new
neighborhood.


I. Sri Lanka - The EC remains a strong donor Co-Chair having
joined the US, the Norwegians and the Japanese in urging in
the strongest possible terms a rapid resumption of the peace
negotiations so that Sri Lanka can benefit from the
generosity of the international community. The EC has asked
for the next Co-Chair meeting to be scheduled.

J. Broader Middle East and Mediterranean - Donor
coordination on assistance programs in USAID presence
countries with the EC and EU member state bilateral programs
is already quite strong. Recent instructions from State and
Brussels to respective field missions in the region to meet
on a quarterly basis should identify additional areas of
potential cooperation and coordination on messages of support
for reform agenda. We were pleased to see the EC
demonstrating leadership on the Forum for the Future by
convening a technical level dialogue among key donors
supporting the Literacy initiative. The EC has indicated
they would welcome follow up to the series of DVCs held in
March -April in preparation for the drafting of the US-EU
Summit statement on BMEM, particularly in the areas of
vocational education and training for the labor market, small
and medium enterprise development, support for independent
media, support for youth, etc.


K. Broadening and deepening our coordination and cooperation
in Africa - the EU Development Ministers recently called for
a renewed focus on Africa as part of the effort to prepare
for the MDG 5 Stocktaking event next September. New
Commissioner for Development Louis Michel has made it clear
Africa will be his focus, given his long and abiding interest
in the continent. The US and EC already enjoy excellent
cooperation on a range of issues in Africa, and it behooves
us to actively engage in broadening and deepening those
efforts including elections, agricultural technology, food
security, economic growth. In 2003 the EC also introduced
the Africa Peace Facility (APF),funded out of European
Development Funds at the 250 million euro level for three
years to respond to emerging security needs linked to
development. This instrument was established in record time,
demonstrating that where there is internal EU consensus they
can move quickly to deliver. The APF has been critical to
mobilizing peacekeeping efforts in Darfur.


L. Cyprus - The EU is in the process of securing a Euros 259
million aid and trade package to end the isolation of the
Turkish Cypriot community. Given Cyprus' member state status
in the EU, this has proven more complex than originally
envisioned. The EC has asked for consultations to ensure the
respective efforts the EC and USG will fund are complementary
and mutually reinforcing.


M. DPRK - The EC shares US concerns over monitoring of
humanitarian assistance in North Korea. Ref B provides
further details


N. Food Security - Over the past two years we have made
notable progress in our dialogue with the EC on food security
and there is now a greater understanding of how each donor
uses food aid when assisting countries to get on an economic
growth path, as in the case of Ethiopia. The EC remains
skeptical about US food aid policies in the abstract.
However, in the context of the Darfur humanitarian crisis,
the EC encouraged EU member states to increase their food aid
contributions. The dialogue needs to be maintained with each
donor playing to its strengths -- US food, EC cash to buy
locally or regionally. We also need to continue to work
together on the economic impact of local purchase and needs
assessments as this is the principal means upon which more
credible response plans can be developed.


O. HIV/AIDS - The EU has made its support for The Global
Fund to Fight AIDS, Tuberculosis and Malaria (GFTAM) the
principle vehicle for contributions from the EC and EU member
states, pledging $1.5 billion as of June 2004. EU member
states also fund bilateral assistance programs for HIV/AIDS
in many countries. In Europe the perception is the USG is
more focused on our bilateral PEPFAR initiative than on our
support for the multilateral GFATM, despite US chairmanship
of the GFATM. Early engagement at Cabinet level with the EU
in the new year on this issue would be helpful. The last
such visit to Brussels was carried out by HHS Secretary
Thompson in 2003.


P. Water - The EC and EU member states are heavily engaged
in water projects globally and recently initiated an EU Water
Facility funded at the euro 1 billion level. Opportunities
for greater US-EU coordination exist, but would require a
joint STATE-USAID team to come to Brussels for serious
discussions.

Conclusion
--------------


13. (SBU) As the world's two largest donors, the US and EU
have enormous scope for cooperation and coordination on our
respective development assistance programs globally. While
the focus of the donor community for the coming year will be
in preparing for the September 2005 Millennium Development
Goals Stocktaking event, we will continue to have numerous
opportunities through the US-EU task forces and US -EU Senior
Level Coordination Group (SLCG) Dialogue, US -EU Troika
experts level consultations on Africa (COAFR),the Middle
East (COMEM),South East Europe (COSEE),the Western Balkans
(COWEB),Eastern Europe (COEST),Latin America (COLAT),and
Asia (COASI),as well as the Humanitarian Assistance
Strategic Partnership dialogue and other informal or ad hoc
discussions to engage our interlocutors in the new Commission.

MCKINLEY

YY
PRIORITY NSC WASHDC
PRIORITY SECSTATE WASHDC

Y

DEPT FOR E
EB
EUR/ERA
AF
NEA
PRM
S/CRS: USAID FOR PPC
EGAT
AFR
ANE
GH
DCHA
EE
LAC: PASS MCC FOR MORFORD: NSC FOR MCKIBBEN
STRONG
SIMON

Y
UNCLASSIFIED

SIPDIS