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Eurozone breakup could cost poorest countries $30 billion

Eurozone breakup could cost poorest countries $30 billion

June 15, 2012

June 14, 2012 —A European breakup could cost the world’s poorest countries $30 billion in lost trade and foreign investment, international agency Oxfam has warned ahead of the G20 leaders meeting in Mexico next week.  

“The damage to many poor countries, especially in Africa, would be astronomical,” said Robert Fox, Executive Director of Oxfam Canada. ”With 18 million people in West Africa at risk of a looming food crisis, the G20 must act swiftly and decisively to stabilize the Eurozone and return their attention to the poorest countries already reeling from aid cuts.”

Oxfam calculates that a sharp drop in European countries’ GDP as a result of a breakup would slash export earnings for Least Developed Countries – most of these in Sub-Saharan Africa – by up to $20 billion in the first year. Poor countries could expect to lose a further $10 billion due to reduced European investment.

Oxfam is calling on the G20 to support a financial transaction tax (FTT, know in many countries as a Robin Hood Tax) to help poor people hit by the economic crisis by allocating FTT revenues to development and climate change adaptation. The G20 also needs to curb financial speculation on food commodities, reverse biofuels policies that transform food into fuel and improve land rights. 

Oxfam spokesperson Steve Price-Thomas said: “We need a concerted effort to protect poor people from economic and food crises that have left one in seven people in the world hungry.”

Three years ago, the G20 launched a framework for “strong, sustainable and balanced growth”. Yet gross capital flows to developing countries plunged to $170 billion last year compared with $309 billion in 2010 and aid to developing countries fell by $3.4 billion last year. 

Canada is sadly typical of many G20 donors. This year’s federal budget slashed Canada’s aid to developing countries by $750 million. “Withdrawing vital, life-changing support from poor people puts lives and livelihoods at risk,” Fox said. “It also undermines Canada’s credibility and leadership within the G20.”

Read the full media briefing.

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