European Union’s EUR500m foreign public spending grants

[Anne Marwick, EU Finance & Economy Contributor]

Whilst the ‘bailout’ funds injected by the EU into their failing member states’ economies during the financial crisis will need to be paid back by them and in the meantime, their public spending programs remain severely restricted by the EU, the EU has  committed more than EUR 500m in free grants to foreign states to boost the foreign countries’ public spending programs.

As a result, the PIGS (Portugal, Ireland, Greece, Spain) countries and others in the European Union like Latvia, Bulgaria and the United Kingdom, struggling to keep their citizens from dire straits during the financial crisis as a result of the EU’s clampdown on their public spending, are becoming increasingly angry over the EU’s public spending double standards.

New Europe reports that the European Commission is to spend more than €500 million in non-repayable grants  under its Vulnerability FLEX mechanism which is a program for helping African, Caribbean and Pacific (ACP) countries  deal with the effects of the global financial crisis. The funds are targeted as assisting the countries to maintain their public spending programs.  Andris Piebalgs, EU Commissioner for Development said: “Developing countries continue to face important difficulties, including funding gaps in their government’s budgets, as a direct consequence of the global financial crisis. This year, this EU mechanism will help 19 ACP countries maintain their level of public spending in priority areas, and therefore mitigate the social impact of the economic downturn”.

The countries that have benefited from the program so far include:  Benin, Burundi, the Central African Republic, the Comoros, Dominica, Ghana, Grenada, Guinea Bissau, Haiti, Malawi, Mauritius, the Seychelles, Sierra Leone, Solomon Island, and Zambia.

In addition, Dominica Central Newspaper reported last week that the Caribbean Export Development Agency (Caribbean Export) received over €32 million from the European Union to assist governments in developing the private sector in CARIFORUM countries.

Analysts are asking that if the EU, by its foreign grants program policy, like the IMF, recognises that a country’s public spending is vital to its economic recovery, it is not logical, nor financially viable for the member states in the long run  for it to require  them to enforce austerity measures in their public spending programs.

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