- Associated Press - Friday, May 27, 2011

DEAUVILLE, France — Rich countries and international lenders are aiming to provide $40 billion in funding for Arab nations trying to establish true democracies, officials said at a Group of Eight summit Friday.

Officials didn’t fully detail the sources of the money, or how it would be used, but the thrust was clearly to underpin democracy in Egypt and Tunisia — where huge public uprisings ousted autocratic regimes this year — and put pressure on repressive rulers in Syria and Libya.

The overall message from President Barack Obama and the other G-8 leaders meeting in this Normandy resort appeared to be warning autocratic regimes in the Arab world that they will be shut out of rich-country aid and investment, while new democracies are encouraged to open their economies.

On war-torn Libya, European leaders sought to wield carrot and stick. French President Nicolas Sarkozy insisted NATO was ratcheting up military pressure against Moammar Gadhafi’s embattled regime, just as British Prime Minister David Cameron said Libya could get a cut of aid — if Gadhafi goes.

“This support will initially be available to Egypt and Tunisia, but will ultimately be there for any country that embraces the path to democracy and reform — and of course that could include, for example, Libya,” he said.

Tunisia’s finance minister said Sarkozy floated the $40 billion figure at talks Friday, in which the prime ministers of Tunisia and Egypt joined the G-8 leaders to seek help after the uprisings scared away tourists and investors.

A French official says $40 billion is the overall goal, but that breakdowns by country and timetables are still under discussion. The official was not authorized to be publicly named according to his office policy.

A group statement from the G-8 leaders said that $20 billion from international development banks could go to Egypt and Tunisia over the next three years.

Another $10 billion is to come from Persian Gulf countries, and the rest in bilateral aid from other countries, including €1 billion from France, Sarkozy said.

But a close look at the $20 billion package from international banks suggests that some aid is not all that different from previous money for the region — when autocrats, not democrats, were among the main beneficiaries.

The European Investment Bank — dubbed the European Union’s bank — has since 2002 had a financing arm for projects in North Africa and Middle East countries.

Last year, EIB doled out a record $2.6 billion to the region. It’s now planning $7.5 billion in aid to the region for the next three years.

In a telephone interview, Philippe de Fontaine Vive, who heads the EIB’s Mediterranean project, said the difference with the money dispensed now is that nearly half of it is going to just two countries in the region: Egypt and Tunisia, poster nations for Arab democracy movements.

He also said the main thrust of the money now will be job creation, compared to last year, for example, when its single biggest project was $500 million for a submarine gas line between Algeria and Spain.

“We are really very satisfied by the very strong, very clear, very precise declarations that have come from all the G-8 nations and financial institutions — bilateral agencies and development banks,” Tunisian Finance Minister Jaloul Ayed told reporters in Deauville.

Tunisia’s government said it was asking the G-8 for $25 billion over the next five years, and Egypt says it will need between $10 to $12 billion for the fiscal year that begins in July to cover its mounting expenses.

“This isn’t the end. Additional funding will likely come from other sources after the G-8, and I think they’ll be satisfied with at least the ball starting to roll,” Jenilee Guebert of the G-8 Research Group at the Munk School of Global Affairs in Toronto.

“They said their main problem was the economy. They need some support,” European Commission President Jose Manuel Barroso told reporters Friday after meeting the Egyptian and Tunisian leaders. “I think they are ready. Let’s do everything to support the Arab Spring. I think they can succeed.”

Uncertainty lingers, however, about the fragile governments in Egypt and Tunisia as they prepare for elections later this year — and debate over how to handle Libya’s war.

The G-8 leaders also are worried that fighting in Libya and violence against protesters in Syria could derail the pro-democracy movement that has swept around the Arab world since Tunisian protesters rose up against an autocratic regime and forced out their longtime president.

In their final statement, the G-8 leaders said Gadhafi “must go” and are pressing Syria’s regime to “stop using force and intimidation” against its people.

The G8 leaders say Gadhafi and his government have failed to fulfill their responsibility to protect Libya’s people “and have lost all legitimacy. He has no future in a free, democratic Libya.”

The main product of the G-8 summit was a partnership program aimed at supporting the countries’ fragile political leadership and fighting corruption and stabilizing the economies.

The G-8 leaders laid out a plan for refocusing the European Bank for Reconstruction and Development — created to help eastern European economies after the collapse of communism — to help Arab democracies.

The EBRD was set up 20 years ago, when the sudden collapse of the Soviet Union convinced European leaders of the urgency to provide support to a region emerging from decades of political and economic dictatorship. The idea was to set up a “transition bank” to help lead the way on banking systems reform, price liberalization, privatization and establishing legal property rights in a region just shaking off the effects of almost 50 years of planned economies.

The G-8 leaders also met with African leaders Friday, calling for concerted efforts to settle conflicts on the continent. Activists warned that money for Arab countries shouldn’t be given to the detriment of rich country aid to sub-Saharan Africa.

Julie Pace and Sylvie Corbet in Deauville contributed to this report.

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