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Europe

EU Offers 200 Million Euro for Iraq Reconstruction

In a move it defends as “no drop in the ocean,” the European Commission has pledged 200 million euro for rebuilding Iraq. The Brussels’ offer comes amid Washington’s calls for increased foreign financial aid.

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Experts are weighing the costs of rebuilding Iraq.

The European Commission on Wednesday promised it would offer €200 ($235) million for the reconstruction of Iraq at a donor conference scheduled for the end of October in Madrid. The figure would be in addition to the €100 million in humanitarian aid already pledged by the EU and does not include individual financial promises made by some member states.

The European Commission’s relatively marginal offer -- compared to the mounting costs of securing peace and rebuilding infrastructure in Iraq -- comes at a time when an overburdened United States is casting about for broader international support both in terms of peacekeepers and money.

On Wednesday, U.S. Defense Secretary Donald Rumsfeld reiterated calls for increased foreign financial aid with an eye on the upcoming Madrid donor conference. Rumsfeld cited latest estimates by international organizations which said the reconstruction of Iraq could cost anywhere between $50 billion and $75 billion. United Nations sources quoting the World Bank and the International Monetary Fund put the figure at closer to $35 billion over the next four years.

German daily Handelsblatt on Thursday also quoted a high-ranking Washington source as saying the Bush administration was expecting Germany to shoulder a greater financial burden of rebuilding Iraq. Germany's budgetary problems are well known, but the U.S. government would welcome it if Berlin could "free up a substantial sum", the source was quoted as saying in the paper. Chancellor Schröder has already committed €50 million euro in humanitarian aid to Iraq this year.

The United States has already pledged $20 billion towards rebuilding Iraq over 18 months and counts on further funds coming in from Iraqi oil sales, Iraqi tax revenues and private investment.

EU: aid offer "no drop in the ocean"

The EU Commission’s External Relations Commissioner Chris Patten, however, was critical of Washington’s billion dollar estimates to patch up Iraq and said it was only meant as a tool to intensify pressure on the donor countries ahead of the Madrid conference.

Speaking in Brussels on Wednesday, Patten said one had to be "realistic" and consider the empty coffers in several EU states. Spanish Foreign Minister Ana Palacio, who is hosting the Madrid meeting, defended the planned offer of €200 million as "no drop in the ocean" and denied that aid contribution to Iraq was smaller than efforts to rebuild Afghanistan. She argued there was a limit to both EU funds and Iraq’s current capability to absorb foreign money.

"If we take into account the figures mentioned by (U.S.) President Bush of $87 billion (for reconstruction plus military costs), or $20 billion directly for reconstruction, any figure will probably appear to come up short," Palacio said.

EU makes aid subject to conditions

The EU’s financial offer is also linked to certain conditions. Patten demanded that international aid for Iraq should be channeled through an independent trust fund administered by the United Nations and the World Bank and should be kept strictly separate from the American reconstruction funding pool.

Patten also said that the security situation in Iraq, largely controlled by U.S. forces, should improve before rebuilding could begin in earnest. "The security situation in Iraq obviously affects how rapidly we work on Iraq’s reconstruction," Patten said. "It is difficult to develop and reconstruct if bombs are going off in all directions," he warned. Brussels has also demanded a clear commitment from the U.S. to the establishment of a sovereign Iraqi government, though it hasn’t specified a timeframe.

The EU’s €200 million offer is initially limited to the end of 2004. The money is expected to flow in particular into the social and health sector as well for providing water, education and creation of jobs.

EU lawmakers are now pinning their hopes on the Madrid conference to heal transatlantic rifts opened by the Iraq war and hoping for a high level of participation that would send the right signal to the U.S. "We very much hope that the discussion at Madrid will at least help to repair some of the damage."

"Whatever the depth of division in the international community over the war, we all have a stake in a stable, open, democratic Iraq," Patten concluded.

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