Greek red light to austerity: Will the EU listen?

Posted by oxfameu on 11/02/15
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By Àngela Corbalán, Oxfam’s Head of EU Communications and Deputy Head of EU Office

When the election results were finally announced in Greece on Sunday, they were just a formality.

Exit polls confirmed what most had suspected long before votes began fluttering into the ballot boxes – that Syriza would sweep into power in Athens on a firm anti-austerity ticket. Greece’s rejection of austerity policies may raise eyebrows across Europe, but it should not come as a surprise.

Civil society has been warning about the possibility of a continental ‘lost decade’ for several years, with Oxfam predicting that damaging austerity policies could force up to 25 million Europeans into poverty by 2025. Such a slide towards destitution has already occurred in Greece, and elsewhere, including Spain and Portugal.

As of the end of last year, one in four Greeks were unemployed, rising to over 60 per cent of under 25s. This unemployment, coupled with cuts to public services, plunged many in Greece into dire straits. Public debt stands at 175 per cent of GDP, with the Mediterranean nation experiencing a worse period of growth than the US during the Great Depression in the 1930s. Meanwhile, investment in the Greek healthcare system dropped dramatically due to austerity policies, leaving one in three Greeks without medical insurance due to long term unemployment.

The implications of Syriza’s election may concern Greece’s creditors, but such a strong public call against austerity is understandable when the decimation inflicted upon Greek society is taken into account.

Growing extreme economic inequality across the globe is highlighted in Oxfam’s latest report, Wealth: Having It All and Wanting More, as is the detrimental effect this is having on attempts to combat poverty. Today the 80 richest people on the planet have the same wealth as the poorest half.

The level of inequality rose in Greece after austerity policies were implemented, as it did in other countries cutting back on public spending, resulting in the poor getting poorer or the rich getting richer – and in some cases both.

The good news is that inequality is not inevitable and alternatives to austerity exist. Decision-makers should promote a new economic and social model that invests in people, strengthens democracy and pursues fair taxation.

Ensuring that workers are paid a living wage to cover basic needs like food, housing and clothing, while providing this workforce with safety nets, is crucial to stave off the negative effects austerity could force onto societies across Europe. The effects of austerity in Greece saw wages there drop by an alarming ten per cent between 2012 and 2013, further adding to the country’s poverty epidemic.

But money raised from an efficient tax system in Greece could have avoided cuts to healthcare and education budgets and provided the ‘virtual income’ that many poor people benefit from through access to public services.

Tax evasion and avoidance by large companies and wealthy individuals costs Europe at least €120 billion in lost tax revenue every year, not to mention the billions siphoned away from developing economies in desperate need of revenue to finance their own progress. In Greece, the amount of tax dodged may have reached almost a third of GDP between 1999 and 2007 – the biggest informal economy of any EU country.

But why is tackling inequality so important to fighting poverty? Well, when economic and political power is only in the hands of the few, the needs of the rest of society fall by the wayside. This is the message Greece delivered to the European Union on Sunday, and it’s a message that must be heeded by European governments and institutions alike.

After this firm rejection of the economic status quo, there is only one course of action the EU can take. For starters, European Commission President Juncker must begin to shift Europe’s focus away from detrimental austerity measures and propose tangible initiatives to clamp down on tax dodging by individuals and companies – for the benefit of both Europeans and people the world over.

This article was originally published in New Europe.

Davos: How Europe can tackle extreme wealth inequality

By Àngela Corbalán, Oxfam’s Head of EU Communications and Deputy Head of EU Office

As world leaders arrive in Davos for the first day of the World Economic Forum, storm clouds are gathering overhead. Skyrocketing global inequality has shone a flashlight onto the murky workings of global finance, with Davos becoming center stage this week of how to address this imbalance of power.

Ahead of this year’s conference, a new Oxfam study has shown how wide the chasm now is between the ‘haves’ and ‘have nots’. Wealth: Having It All and Wanting More demonstrates that if current economic trends continue, next year the wealthiest 1 per cent on the planet will own more than everyone else combined. This staggering imbalance of wealth is holding back the fight against poverty at a time when 1 in 9 people do not have enough to eat, and more than a billion people live on less than $1.25 a day. Extreme inequality used to be seen as a problem solely for developing countries, where presidential jets flew over slums and shanty towns. Now it affects us all.

World leaders such as US President Barack Obama, French President François Hollande and IMF chief Christine Lagarde have already spoken about the dangers runaway inequality can cause. Other European leaders must also take up the call. The EU should act to stem the torrent of wealth flowing from the poorest people in the world to the richest – starting with these three concrete steps.

Firstly, the EU must take decisive action to fight tax dodging both within Europe and beyond. Tax evasion and avoidance by large companies and wealthy individuals cost Europe at least €120 billion in lost tax revenue every year, not to mention the billions siphoned away from developing economies in desperate need of revenue to fund public services like health and education.

Secondly, the EU must support ambitious plans to fund the upcoming UN-backed Sustainable Development Goals, including a re-commitment to providing 0.7% of their annual GDP as overseas aid to developing countries. A new UN tax body is also badly needed to re-write the current unfair international tax rules that deprive poor countries of millions in revenue, and should be agreed at the third International Conference on Financing for Development in Addis Ababa, Ethiopia in July.

Finally, a mandatory register for European lobbyists must be set up to shed light on corporate practices that keep the cogs of global inequality spinning. Twenty per cent of billionaires have interests in the financial and insurance sectors, which spent €550m whispering into the ears of policy-makers in both Brussels and Washington in 2013. The pharmaceutical and healthcare sectors – also favorites of the super-rich – spent €500m lobbying both the EU and the United States in the same year.

Oxfam is concerned that the lobbying power of these industries is road blocking the major reforms needed to the global tax system, and giving stringent intellectual property rights priority over the health of the world’s poorest people.

Increasing evidence from many sources, including the International Monetary Fund, shows that economic inequality isn’t just bad for those at the bottom but also damages economic growth. Putting the brakes on extreme wealth inequality must happen now for everyone’s benefit, before the storm clouds really do come rolling in.

European ‘hot air’ should not inflate overseas aid spending

Posted by oxfameu on 20/11/14
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By Hilary Jeune, Oxfam’s EU policy advisor

When 2015 was declared the European Year of Development, it was seen as an ideal opportunity for the European Union (EU) to raise awareness on the bloc’s role in lifting people out of poverty. Yet with the calendars counting down fast, this commitment now appears to be more ‘hot air’ than actual assistance – lots of bluster that simply never materializes on the ground.

This doubt has been brought further into the spotlight today by the release of CONCORD’s new AidWatch report, Aid Beyond 2015: Europe’s role in financing and implementing sustainable development goals post 2015.

What’s the problem?

The report shows the EU’s approach to development aid could do with a breath of fresh air. Despite the growing number and scale of humanitarian and development challenges being broadcast on news outlets across Europe, the EU’s development funding still has a €41 billion hole in it – an amount which could pay for the EU’s current Ebola response to be expanded over forty times.

The EU has also deliberately over counted the amount of aid transferred to developing countries, inflating the figure by €5.2 billion in 2013. Both EU governments and institutions did this by including funding for student and refugee costs, as well as other domestic programs and interest on developmental loans in their overseas aid spending. To claim this interest on already cancelled debt as development aid is staggering when you consider that some EU countries made over €1 billion in interest on loans to developing countries in 2013, with France alone receiving €239 million in interest from development loans at a time when French aid budgets were being slashed. Such actions mean that while global aid appears to have slightly increased, actual aid to the world’s poorest countries – particularly in Africa – will drop by around 5% until 2016.

What are the solutions?

Despite this pessimism surrounding the EU’s development contributions, next year will present the opportunity for both EU governments and institutions to redeem themselves by ensuring a genuine commitment to combating global poverty and inequality.

Firstly, the EU should ensure that upcoming changes to the definition of developmental aid specify that aid is used to eradicate poverty and puts people first, rather than creating new ways for donors to artificially inflate the amount they actually give.

Secondly, both member states and institutions need to prove their mettle and recommit to the aid targets they have so far failed to achieve. Only Luxembourg, Sweden, Denmark and the UK have met the 0.7% of Gross National Income (GNI) target spent on development funding, with half of the EU member states projected to miss the 0.56% target set for 2010. If the EU wants to create a positive incentive for increased global funding for the world’s poorest, it needs to set a far better international example.

Finally, the EU should recommit to aid effectiveness principles and make sure that its contribution has a positive and sustainable impact on the lives of the world’s poorest people.

The EU may have failed to keep its funding promises to help combat global poverty, but with the 2015 European Year of Development fast approaching there is time yet for Europe to shake off the funding cobwebs, turn it’s rhetoric into reality and help improve the lives of poor people the world over.

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Oxfam's EU Advocacy office in Brussels works to ensure EU policies and practices affecting poor countries have a greater impact on those most in need. Our work spans numerous policy areas including development aid, food security, climate change, and the provision of humanitarian assistance to victims of conflicts and natural disasters. more.

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