May 27, 2011 / 6:54 AM / 6 years ago

G8 pledges $20 billion to foster Arab Spring

<p>From L-R, G8 leaders, European Council President Herman Van Rompuy, Japanese Prime Minister Naoto Kan, Italian Prime Minister Silvio Berlusconi, Canadian Prime Minister Stephen Harper, German Chancellor Angela Merkel, French President Nicolas Sarkozy, U.S. President Barack Obama and European Commission President Jose Manuel Barroso are seen during a round table meeting at the G8 summit in Deauville, northern France May 26, 2011. REUTERS/Markus Schreiber/Pool</p>

DEAUVILLE, France (Reuters) - The Group of Eight promised $20 billion in aid to Tunisia and Egypt on Friday and held out the prospect of billions more to foster the Arab Spring and the new democracies emerging from popular uprisings.

Likening it to the fall of the Berlin Wall that changed Europe, G8 leaders ending an annual summit in France launched a partnership for North Africa and the Middle East that ties aid and development credits to progress on political and economic reforms by states which have thrown off autocratic rulers.

Most is in the form of loans rather than outright grants, to the two countries in the vanguard of protest movements which have swept the Arab world from the Atlantic to the Gulf. Egypt and Tunisia are planning to hold free elections this year.

French President Nicolas Sarkozy said that on top of $20 billion of credits provided by the World Bank and similar regional lenders dominated by the major powers, there would be as much again from other sources -- $10 billion from oil-rich Gulf Arab states and $10 billion from other governments.

Other countries could hope for aid in future. In a statement after the two-day summit in the northern resort of Deauville, the G8 leaders signaled they “strongly support the aspirations of the Arab Spring as well as those of the Iranian people.”

“The changes under way in the Middle East and North Africa are historic and have the potential to open the door to the kind of transformation that occurred in Central and Eastern Europe after the fall of the Berlin Wall,” the G8 said.

Multilateral development banks “could provide over $20 billion, including 3.5 billion euros from the EIB, for Egypt and Tunisia for 2011-2013 in support of suitable reform efforts.”

SUPPORT REQUESTED

Senior Egyptian and Tunisian officials met the leaders of the G8, expanded from seven Western powers to include Russia and bridge the East-West divide after the end of the Cold War, to plead for massive support for their fragile economies.

Tourism, major sources of revenue for both Tunisia and Egypt, has been particularly badly hit by the popular uprisings that have also spooked investors.

“We are truly very satisfied with the very strong, clear and precise statements proffered by all of the G8 nations, and the financial institutions,” said Tunisian Finance Minister Jalloul Ayed told a news conference in Deauville.

“It’s very clear that everybody wants to help us.”

An International Monetary Fund report on Thursday said the external financing needs of oil-importing Middle East and North African states would top $160 billion over the next three years.

The IMF said it could provide $35 billion, but many states are implementing austerity measures to rein in budget deficits and trim public debt, which could affect the amount they are willing to stump up to help emerging Arab democracies.

The summit also backed the extension of the mandate of the European Bank for Reconstruction and Development into North Africa and the Middle East. The bank was created after the Cold War to help former Communist states become market economies.

A U.S. official traveling with President Barack Obama was among several to stress that money is tight, that the credits would be forthcoming only if political change went ahead and that the main goal was to help the Arabs help themselves.

<p>General view of the room where G8 summit leaders meet for a working session at the G8 summit in Deauville May 26, 2011. REUTERS/Jewel Samad/Pool</p>

”It’s not a blank cheque. It’s in the context of overall reform programs,“ said Mike Froman, a deputy national security adviser at the White House. ”It’s an envelope that could be achieved in the context of suitable reform efforts.

“More important than any numerical figure, I think, is the vision that it lays out,” he added

“This is largely a case of trade not aid, investment not assistance over time. It’s really about establishing the conditions under which the private sectors in these economies can flourish and the benefits of growth are broadly shared.”

“GADDAFI MUST GO”

The World Bank on Tuesday unveiled $6 billion in new funding for Tunisia and Egypt, whose revolts have inspired popular uprisings in Yemen, Bahrain and Syria. Demands for reform have also been heard from Morocco to Saudi Arabia.

The popular movement for change has also left Libyan leader Muammar Gaddafi fighting to stay in power, and G8 leaders said he had lost all legitimacy because of his use of force against civilians protesting his rule: “He has no future in a free, democratic Libya. He must go,” the leaders said.

Slideshow (5 Images)

Russia signaled it was ready to mediate in the crisis, Moscow’s special representative on Africa Mikhail Margelov telling reporters Russia had contacts in Gaddafi’s entourage.

But Sarkozy said: “Mediation is not possible with Gaddafi.” And other Western leaders stressed that they were mainly grateful for Moscow’s agreement that the Libyan leader should step down, even if Russia has opposed NATO’s bombing campaign.

British Prime Minister David Cameron, however, said he did not recall Medvedev offer to mediate and said Britain was sending attack helicopters to Libya to step up pressure on Gaddafi.

Earlier, Obama and Sarkozy said they were determined to “finish the job” in Libya.

On Syria, the G8 leaders said they were “appalled” by the killing of peaceful protesters opposed to the rule of President Bashar al-Assad, and demanded authorities stop using force against them.

They also condemned violence against protesters seeking the removal of Yemen’s President Ali Abdullah Saleh, and urged him to respect a pledge to stand down.

SUMMIT AGENDA

The world’s current crises have forced their way on to the agenda of the Group, whose importance has diminished with the rise of emerging economies like China and India.

The G8 leaders, on Thursday discussed nuclear safety and the global economy, noting on Friday in their communique that the recovery was becoming more “self-sustained,” although higher commodity prices were hampering further growth.

They renewed a pledge to wrap up talks this year on Russia’s entry into the World Trade Organization and said long-stalled global trade talks was a matter of “great concern” and that they would explore all options to get things moving.

With aid to Arab states dominating, the G8 also issued a special declaration saying it stood side-by-side with Africa and would intensify its efforts to achieve peace and stability, economic development and growth, regional trade and investment.

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