EUROMED ECONFIN MINISTERIAL CONFERENCE JUNE 25-26,

UNCLAS TUNIS 001816

SIPDIS

SENSITIVE
SIPDIS

STATE PASS TO USTR (BELL)
STATE FOR NEA/MAG (HARRIS),EB/IFD/OIA (TRACTON),EB/TPP,
EUR/ERA
USDOC FOR ITA/MAC/ONE (ROTH)

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EU TS
SUBJECT: EUROMED ECONFIN MINISTERIAL CONFERENCE JUNE 25-26,
2006

REF: TUNIS 1599


1. (SBU) Summary and Comment: On June 25-26, 2006, economic
and finance ministers (ECOFIN) of the 35 countries of the
Euromed zone met in Gammarth, Tunisia to discuss the future
of the European Investment Bank's (EIB) Facility for
Euro-Mediterranean Investment and Partnership (FEMIP) and the
possibility of creating a new regional development bank.
While Tunisia and many southern Mediterranean countries
support the idea of a regional development bank, that was
only one of several scenarios the conference considered, and
it is unlikely to materialize anytime soon, notwithstanding
their support for the idea. Demonstrating the importance the
GOT attaches to this issue, Minister of Development and
International Cooperation (MDIC) Jouini postponed the
scheduled June 30th Trade and Investment Framework Agreement
(TIFA) Council Prepcom with AUSTR Donnelly so he could attend
the conference. End summary and comment.

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EUROMED CONFERENCE HIGHLIGHTS
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2. (U) On June 25-26, a joint meeting of the sixth
Euro-Mediterranean Ministerial Committee and the second
Economic and Finance Ministers (ECOFIN) Council took place in
Gammarth, Tunisia. Its purpose was to discuss the future of
the European Investment Bank's Facility for
Euro-Mediterranean Investment and Partnership (FEMIP).
(Note: The FEMIP Mediterranean partner countries include
Morocco, Algeria, Tunisia, Egypt, Gaza/West Bank, Israel,
Lebanon, Jordan, Syria, and Turkey. End note.) The current
mandate of the partnership expires at the end of 2006.


3. (U) In his opening statement, European Commissioner for
Economic and Monetary Affairs Almunia spoke of the problems
of low per capita growth and high unemployment, especially
among the young, that exist on the Mediterranean's northern
and southern shores and emphasized the need to pursue reforms
to lift obstacles to investment, innovation, and sustainable
growth. The commissioner also pointed to GDP growth in the
region, which averaged 4.8% in 2005. In his opinion, the
development of the private sector is the only way to help
address the economic concerns of the region.


4. (U) According to news reports, several EUROMED countries
agreed on how to enhance regional economic strength. The
main issues discussed were improving the business climate for
private sector development, further liberalizing trade and
opening up the economy, upgrading public institutions and
economic governance, and securing macroeconomic stability.
The Ministerial Committee also reportedly suggested ways to
develop the energy markets in the region, particularly the
natural gas sector, and to maintain FEMIP's investment in
support of renewable energy.


5. (U) The members did not agree on how to reorganize FEMIP.
According to the French Embassy's 'Tunisian economic and
financial news' country review, the conference envisioned
three potential scenarios: a) renew FEMIP in its current form
and keep the status quo; b) create a Euro-Mediterranean
Regional Development Bank to gain greater visibility in the
Euromed region; c) create a steering committee that would
manage FEMIP-related activities and loan programs of the EIB.


6. (U) The Ministerial Committee's next meeting will take
place in Cyprus in May 2007. In the months before the next
meeting, FEMIP will hold two forums: one on the development
of trans-Euro-Mediterranean transport networks during the
final quarter of 2006 and one on remittances by Mediterranean
migrants during the first quarter of 2007.

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COUNTRY POSITIONS ON REGIONAL BANK
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7. (SBU) Tunisia, like many other southern Mediterranean
states, has long seen the establishment of a
Euro-Mediterranean Development Bank as a way of promoting
growth. In a statement quoted in the press, Tunisian
Development Minister Mohamed Nouri Jouini said the creation
of a bank would be beneficial because it could grant loans at
lower interest rates. Separately, in conversations with
econoff, Tunisian MDIC officials said that they wanted to see
the creation of a regional bank because they believed EIB

funds were being diverted away from FEMIP to new EU member
countries from eastern Europe. One MDIC official made clear
that the GOT was disappointed that the regional bank was not
created.


8. (SBU) Comment: Demonstrating the importance the GOT
attaches to this issue, Jouini postponed the scheduled June
30th Trade and Investment Framework Agreement (TIFA) Council
Prepcom with AUSTR Donnelly (reftel) and did not attend the
June 26-28 U.S.-Arab Economic Forum in Houston, TX. The
Tunisian-American Chamber of Commerce (TACC) also cancelled
its congressional trade promotion visit (scheduled for June
26 -30) to Washington because Jouini could not attend. End
comment.


9. (U) According to the media, Morocco turned out to be the
staunchest defender of the proposed bank, while Egypt
proposed that such a bank only be set up in the long term.
Media reports speculated that some southern Mediterranean
countries worried that a Euromed bank would lead to political
rivalries between countries over loan applications. Many
countries also reportedly prefer to pursue bilateral
arrangements.
HUDSON