Huge bill on cards as EU plans cash boost for Iraq

Date:24/07/03

By David Cronin and Dana Spinant

EU MEMBER states have set in train work which could lead to the Union footing a sizeable bill for Iraq's reconstruction.

Meeting in Brussels yesterday (23 July), the EU ambassadors authorised a plan for the European Commission to have proposals on the Union's role in the country ready this autumn.

These would then be discussed by the foreign ministers on 29-30 September.

Commission officials say they have already decided that the main priority areas for funding would be education, health and the building of political institutions.

The EU's executive has previously said that calculating sums which the Union might offer will be, to a large degree, dependent on a needs assessment which the World Bank is undertaking in Iraq.

But European Voice has learned that EU officials are also undertaking their own assessment, albeit in cooperation with the bank.

On Sunday (20 July), Bernard Savage started work as the Commission's special representative in Baghdad.

Savage is due to spend August collecting data on the country's needs; back-up staff from the Commission's external assistance arm EuropeAid and other departments are due to be flown over to assist him over the summer.

A well-placed Commission source said the "financial structure" of an EU support plan is already being worked on, but it is premature to estimate its overall cost.

Hefty though the bill will be, it will be lower than the amount pumped into Afghanistan, following the fall of the Taliban regime in 2001, the official said.

In January 2002 the Commission pledged l1 billion, over five years, for the reconstruction of Afghanistan.

"The situation in Iraq is not that dramatic," the source added. "There is a shortage of basic needs but there is no humanitarian crisis.

"In addition, Iraq's oil means there is a significant possibility of generating revenues quickly."

Visiting Washington last week, Chris Patten, the external relations commissioner, signalled that the Union would be willing to place money in a trust fund for Iraq.

But this would be conditional on it being independent from the Iraq Development Fund run by the US-UK alliance which toppled Saddam.

"We, the Union, are not going to finance the occupation," said one Brussels official.

An insider at the Council of Ministers expressed doubts about whether the Commission will be able to have a comprehensive plan ready by September, given that the World Bank has said its needs assessment is unlikely to be finished until a few weeks later.

The bank announced it was sending an official to Iraq in late May and has since deployed additional staff in the country.

It is hoping to have its final report on the needs completed in time for an international donors' conference on Iraq, expected to take place in mid-October.

But a spokeswoman for the bank said last night (23 July): "This is taking longer than it normally would because of the security and logistical situation.

"We will need every bit of time before the donors' conference."

An extra problem is that the bank has not had experience of working in Iraq for many years. The last loan it approved for the country was in 1973.

In 1990 it accorded Saddam Hussein's regime with "non-accrual status" over failure to pay a debt. Baghdad still owes the institution more than €70 million.

Felix Neugart, an analyst with the Bertelsmann Group for Policy Research, said he felt that an EU blueprint for Iraq would "not have to focus on a traditional development policy such as building bridges or drilling for water".

Iraq itself, he said, should be able to fund work of that nature after an initial transitional period, on the conditions that its oil exports increase and its foreign debts are rescheduled.

Instead, Neugart argued, the Union should be concentrating on activities such as the training of police and civil servants and the building of its political institutions.

"Institution building is something where the Europeans have a comparative advantage over the Americans as they have been involved in this in eastern Europe," he said.

Ministers from the EU's Member States have called on the European Commission to table proposals by Autumn 2003 for the EU to play a sizeable role in Iraq's reconstruction.