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US, Europe Disagree on International Aid - 2002-04-19

Finance ministers from the world's major powers are in Washington for meetings at the International Monetary Fund to review poverty reduction and development efforts. The United States wants the bank to streamline foreign aid. But there is likely to be opposition to that from European contributors.

The United States wants the World Bank to provide more outright grants [gifts] to the poorest developing countries. European contributors to the Bank say the U.S. proposal is too ambitious, and could erode the World Bank's credit standing and earnings.

U.S. Treasury Secretary Paul O'Neill accuses the West Europeans of being more interested in preserving the World Bank's role as a lender than in fighting poverty. The treasury secretary predicts a testy exchange during the weekend meetings.

World Bank President James Wolfensohn says he is a mere bystander to the debate among the World Bank's principal shareholders. He says the priority is boosting the volume of aid to poor countries.

"Our view, I'm happy to say, is one from the sidelines," he said. "The people you're speaking about are my bosses. They own the Bank. And they have to make up their minds about the extent to which they want to provide funds for IDA [International Development Association]. I welcome the notion of IDA grants. But it is for them to work out."

IDA, the International Development Association, is the World Bank affiliate that makes low-interest loans to the Bank's poorest members.

Mr. O'Neill is hosting the meeting of Group of Seven finance ministers, which concludes Saturday morning. The G-7 comprises the United States, Canada, Japan, and the four largest West European countries. Russia also participates.

In addition to poverty reduction strategies, the G-7 is discussing recent protectionist trade actions by the United States, the campaign to seize the financial assets of terrorist organizations, and the world economic outlook.

An expanded group of finance ministers, comprising the management committees of the World Bank and International Monetary Fund, hold meetings Saturday and Sunday. Several thousand protesters - some opposed to U.S. support for Israel, others opposed to globalization - plan demonstrations during the meetings. Washington police say they are ready to prevent any disruption of the financial meetings.