America and Europe at odds over helping poor

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Europe and the United States are at odds over how to help the world's poorest people – so the two blocs are likely to bring rival plans to a UN conference on aid that starts today.

The meeting, in the north-eastern Mexican city of Monterrey, is seen as a vital test of the developed world's willingness to grapple with poverty in under-developed nations – and is expected to draw fresh anti-globalisation protest.

Business and government leaders, including President George Bush and possibly the Cuban President, Fidel Castro, are expected to meet to discuss ways of improving the lives of more than 1 billion people who are living on less than $1 (70p) a day. A spokesman for the UN said: "This is the most attention that has been given to economic development issues since the Cold War."

Part of the new focus on development aid has arisen because of anti-globalisation protesters who showed their strength again at the weekend with a massive march to coincide with an EU summit in Barcelona attracting at least 250,000 people. The protests left 18 people injured, including seven policemen, after tear gas and rubber bullets were fired during running skirmishes with protesters marching in response to the EU economic summit.

Despite the fresh impetus behind plans to increase overseas aid, there is little real prospect of meeting the ambitious goal of the UN secretary general, Kofi Annan, who wants to see a doubling of aid levels during the next few years, to attack poverty and disease.

At Barcelona, the 15 EU nations agreed to lift spending on development aid to an average of 0.39 per cent of gross national product by 2006, compared with the present figure of 0.33 per cent.

Officials said that should generate an additional €4bn (£2.4bn) annually in aid to the world's poorest people.

In a similar initiative, President George Bush proposed giving an extra $5bn in aid over three years to reward poor nations that respect human rights, root out corruption and open their markets.

Both programmes were dismissed by anti-globalisation activists in Monterrey who called them "cosmetic and inadequate." One activist, Alejandro Villamar, told a news conference: "At the Monterrey summit, they should come up with concrete promises."

But the EU and the US disagree over how best to distribute their aid with the role of the International Development Association (IDA), the World Bank's lowest-cost financing arm, at the heart of the rift.

A World Bank request that rich nations boost IDA funding by $12.5bn this year was bogged down over a US demand that half of the money be provided in the form of grants, so that poor countries are not saddled with debt. The US claims too much of the aid money is wasted by governments, and wants 50 per cent of future World Bank spending to be converted to direct grants to non-governmental organisations.

President Bush argued that developing nations that "walk the hard road" should receive grants, rather than loans that they have to pay back. He also said that increasing foreign aid is not the only answer to reducing poverty.

The Europeans, led by Britain, flatly oppose Mr Bush's idea, arguing that loans make for more successful projects because they have to be paid back. Last week Clare Short, the Secretary of State for International Development, said the US plan would "wreck" the lending programmes that currently ensure repaid loans are recycled to provide additional aid to poor countries.

With negotiations under way for fresh World Bank funding, Ms Short argues that the resources available to the poor will go further if they borrow the money, and that grants would undermine the process – and, ultimately, hurt the poor.

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