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The DRGR-Idea Is Getting Traction

Both in the EU and the USA the general idea of aligning debt relief with climate action is getting high level support.

Both in the EU and the USA the general idea of aligning debt relief with climate action is getting high level support.

Joe Biden, president of the United States, recently mentioned the general idea of “Debt Relief for a Green and Inclusive Recovery” in an “Executive Order on Tackling the Climate Crisis at Home and Abroad

More precisely, the Executive Order requests the Secretary of the Treasury to:

“ (ii) develop a strategy for how the voice and vote of the United States can be used in international financial institutions, including the World Bank Group and the International Monetary Fund, to promote financing programs, economic stimulus packages, and debt relief initiatives that are aligned with and support the goals of the Paris Agreement;”

The DRGR-Project is willing to lend its advice on how to flesh out these ideas.

Furthermore, debt relief and the link to a green recovery was part of the monthly debate of the EU economic and finance ministers.

The “Politico Brussels Playbook” announced the meeting as follows:

“DEBT RELIEF DEBATE: EU finance ministers are willing to give African countries more debt relief to help combat the coronavirus and will discuss the topic when they convene for the Ecofin Council today. Ministers signaled their willingness to discuss the issue further in a draft policy paper that outlines EU positions ahead of this month’s gathering of G20 finance ministers and central bank governors. “The EU is open to discuss a possible extension of the [Debt Service Suspension Initiative] to reduce the financial pressure on low income countries,” said the two-page policy paper, seen by POLITICO’s Bjarke Smith-Meyer.”

Another report by Politico added:

“Bjarke reports that the debt relief would only be extended in exchange for national reforms to improve countries’ public and tax administration and green their economies, an idea which Commission Vice President Valdis Dombrovskis and Commissioner for Economy Paolo Gentiloni recently floated in a letter to Portuguese Finance Minister João Leão, who chairs the Ecofin during his country’s turn in the rotating Council presidency.”

In the follow-up of the informal videoconference it reads as follows:

“Ministers held an initial exchange of views on the financing and policy priorities for the recovery of low-income countries in the context of an EU Global Recovery Initiative.

The pandemic has raised the issue of how developing and low-income countries can finance their recovery, given that half of low-income countries are currently at high risk of or already in debt distress. Ministers discussed different ways in which the EU and its member states could work together to address these financing gaps for recovery at both global and country level. The discussion built on the conclusions on international debt relief, in particular for African countries, adopted by the Council in November 2020.”

Next to that, Josep Borrell, current High Representative of the European Union, has already published an op-ed on the topic, headlined “Let’s strengthen our ties with Africa”, back in October: 

“We are also pushing for the foreign debt of the most heavily indebted countries to be restructured or written off. African countries do not have the same capacity as Europe to withstand the socio-economic fallout from the crisis by running up a massive budget deficit or providing a substantial monetary policy stimulus. […] 

[M]any countries are still spending more on servicing their debt than on healthcare for their citizens. Some of these countries will need to restructure their foreign debt: this restructuring cannot be unconditional, but it must be substantial.

It culminates in the following conclusions:

“To achieve that aim, we intend to propose that our African partners work with us to ensure that the economic recovery can be green, digital and fair in Africa and Europe alike. […]

At the same time, it will be essential to develop a low-carbon and circular economy in order to meet the legitimate needs of Africans in the long term while also tackling the ecological crisis that currently threatens humanity. And here, Africa’s potential is considerable, be it in terms of sustainable farming, solar energy, biomass or hydropower, although care will also have to be taken to ensure they are exploited in a sustainable way.”

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