European Crisis = ODA Crisis?

Image Courtesy of globaleconomy.foreignpolicyblogs.com
Image Courtesy of globaleconomy.foreignpolicyblogs.com

The debt crisis that has hit Europe could have far-reaching implications for ODA flows. As European governments struggle to reign in vast budget deficits, new austerity measures are engulfing the continent. These measures, which began in March of this year with the announcement by the Greek government of massive budget cuts, have expanded to the UK, France, the Netherlands, Spain, Romania, Italy, Germany, and Portugal. In an attempt to rescue Greece’s besieged economy, the IMF and European Union granted Greece a three-year $146.2bn bailout package in May. Following this in November, the IMF and EU agreed to a $113bn bailout package for Ireland. Now, many anticipate a similar necessary bailout for Portugal. Some are even expressing criticism of the continued viability of the Euro for many of these financially troubled nations.

As countries take whatever means necessary to cut costs and decrease government defect, ODA from many European DAC-donors will likely fall on the list of national priorities. According to the ODA 2010: Donor Performance report by the OECD, aid has fallen in many of DAC-donor countries from the EU.

  • Ireland, with ODA of $1,005m in 2009, fell by 18.9% in 2010
  • Spain, with ODA of $6,570m in 2009, fell by 1.2% in 2010
  • Portugal, with ODA of $512m in 2009, fell by 15.7% in 2010
  • Greece, with ODA of $607m in 2009, fell by 12% in 2010
  • Italy, with ODA of $3,297m in 2009, fell by 31.1% in 2010
  • Germany, with ODA of $12,079m in 2009, fell by 12% in 2010
  • The Netherlands, with ODA of $642m in 2009, fell by 4.5% in 2010

The report notes that this decline reflects budgetary and fiscal pressures in the case of both Greece and Ireland. As European countries continue to struggle with the financial burden of the current debt crisis, the resulting austerity could very well resonate elsewhere.

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