U.S. TREASURY CHIEF PUSHES MORE FOREIGN AID GRANTS. US Treasury Secretary Paul O'Neill hotly defended the Bush administration's foreign-aid policy in a public exchange Wednesday with senior European officials, a Nobel Prize-winning economist and billionaire philanthropist George Soros, the Wall Street Journal reports.
A quiet conference on international assistance Wednesday unexpectedly pulled back the curtain on a months-long debate that has been raging privately between O'Neill and his counterparts from the world's richest nations.
European officials slammed President Bush's proposal that half of World Bank aid to the poorest nations be in the form of grants, instead of low-interest loans. The US says many poor countries can't afford to repay even bargain-rate loans so the World Bank shouldn't go through the fiction of lending money, especially for education and health projects that don't generate quick revenue for the borrowing government. The Europeans, worried that the Bank will run low on funds later if it gives money away today, now openly doubt that the US can be counted on to refill the Bank's kitty if that happens. As it is, repayments constitute a significant share of the money the Bank lends.
"We don't know what future administrations will do," Hilde Frafjord Johnson, Norway's minister of international development, told O'Neill. The European position is that no more than 10 percent of the Bank's discount lending pool -- which totals some $23 billion over the next three years - should be grants. Currently, virtually all of the money is given out as loans.
O'Neill's response was scornful, the story says. "Europeans say more than 10 percent is too much," he told a couple of hundred guests at the Institute for International Economics and Center for Global Development. "I say to hell with it. Tell me a good reason."
AFP adds O'Neill said he had welcomed a proposal from Frafjord Johnson for grants to be allocated for set causes such as HIV/AIDS or natural disasters, although he would also include education. But he was disappointed with the reaction of his Group of Seven partners at a February 8-9 meeting in Ottawa, Canada. "It seemed to me like a very good idea," O'Neill said. "But then at our G7 meeting last week in Ottawa I found, yes, there was agreement on that but only up to 10 percent." The US treasury secretary said he had pressed his G7 partners to justify their call for a 10 percent cap. "And then I start getting answers like: 'Well, don't you understand the (World) Bank is a bank and banks don't give grants'," O'Neill said. "At that point I get frustrated and say: 'What does that have to do with anything? Are you really interested in helping people or defending institutions'?"
Norway's Johnson said she was concerned about the need to avoid turning the World Bank and regional development banks into development institutions, undermining the UN.
The Wall Street Journal continues that O'Neill's frustration appears to be growing more palpable with the approach of next month's major United Nations development conference in Monterrey, Mexico. President Bush wants to attend that meeting with a victory on the grants issue to demonstrate US sympathy for the developing world, yet negotiations are stalemated.
"I think one reason the Europeans are so skeptical of the proposal [on grants] is they see us as so damned stingy," David Beckmann, president of Bread for the World, a US charity, told O'Neill.
O'Neill pointed out that the Bush administration has offered to provide an extra $300 million in World Bank funding in fiscal years 2004-2005 if it meets certain goals in education, health care or other areas. That argument drew a skeptical response from Nobel Prize winner Joseph Stiglitz, a former Clinton economic adviser. Turning to O'Neill, he said, "We could double the amount we're spending today and know we're spending it well."
Soros pointedly told O'Neill: "I think there is great support in this c ountry for doing more than we are doing. It's unconscionable." He advocated a complex proposal in which the IMF would, in essence, issue new currency for the poorest nations. Soros has privately urged Mr. O'Neill to make such a plan the centerpiece of President Bush's appearance in Monterrey.
The Treasury secretary, however, dodged Soros's suggestion, instead arguing American generosity is contingent on American satisfaction that development assistance is spent effectively and honestly. "It will not be real until we can do a better job of demonstrating value for the money spent," O'Neill told Soros.
BBC Online, Reuters, Dow Jones, AP, and the New York Times also report.