Frustration on the way to a fairer global financial system
Last week, the summit for a "New Global Finance Pact" took place in Paris. Government representatives from around 100 countries joined financial experts to discuss how to finance sustainable development in the Global South, how to make the global financial system fairer and how to develop new ways to help poorer countries protect the climate. The output of this meeting is disappointing for those who had hoped for new joint commitments.
Our global financial system is outdated
The countries of the global North are the main drivers of global climate change. In many cases, it is the countries of the Global South that feel its effects the most. This is why economist and Nobel Prize winner Esther Duflo is calling for a fairer financial system: "So when we talk about financial transfers between the countries of the North and the Global South, I don't think it's about solidarity anymore. It's simply about justice."
UN Secretary-General Antonio Guterres warned that the current global financial system is exacerbating inequalities and denying the poorest countries the credit and debt support they need and deserve.
"Almost 80 years later, the global financial architecture is outdated, dysfunctional and unfair. It is no longer able to meet the demands of the 21st century world: a multipolar world characterized by highly integrated economies and financial markets, but also by geopolitical tensions and growing systemic risks." French President Emmanuel Macron agreed when he said: "The financial system must become more efficient and fairer".
New world system
The world has changed. Countries that used to belong to the global South are now part of the industrialized world.
Some countries have become richer - India and China, for example. They are now not only able to take care of themselves, but can also lend money and finance activities in other countries. This creates a kind of competitive situation: the traditional role of Europe or the USA as 'big brother' is less important today.
Four main objectives were announced in advance for this summit, which were to be pursued by four working groups:
- Restoring fiscal space for countries with short-term difficulties, especially the most indebted countries
- Promoting the development of the private sector in low-income countries
- Promoting investment in "green" infrastructure for the energy transition in emerging and developing countries
- Mobilization of innovative financing for countries at risk from climate change.
Results of the two-day negotiations
According to the head of the International Monetary Fund (IMF), Kristalina Georgieva, it has been widely reported how positive it is that the 100 billion US dollars in financial contributions from the North to the Global South via special drawing rights for countries in need, which have been agreed for years, have been achieved.
Furthermore, the new head of the World Bank, Ajay Banga, announced that he would allow a pause in the repayment of debt if a country is affected by a climate catastrophe. He backed climate demands from the global South, whereas his predecessor last year was not even willing to commit to the idea that fossil fuels cause climate change.
A CO2 tax on international shipping was also discussed at the summit, an issue that is supported by a good two dozen countries. Macron said that there was no reason why the industry should not be taxed. The French president called on the USA, China and several European countries, from which there was resistance, to also participate. "An international tax only works if everyone participates," he said.
Criticism of the summit
"The summit is based on the mistaken assumption that the climate and debt crisis can be solved by redirecting private capital flows through new financial instruments. But this financialization of climate and environmental policy, which has already failed so far, ultimately only strengthens the power of financial corporations and creditors. At the same time, it distracts from urgently needed environmental and climate legislation," criticizes Mario Taschwer from Attac Austria.
Phasing out fossil fuels
Greta Thunberg, who demonstrated with other environmental activists in Paris on Friday, called for an end to the financing of gas and oil. "The rich countries and their banks must finance the move away from fossil fuels instead of fueling the climate crisis," she said.
Attac shares this view and calls for binding rules that lead to the phasing out and prohibition of the financing of fossil fuel projects. The organization is also critical of the fact that the completely failed instrument of "carbon offsetting", which allows polluters to buy their way out through alleged climate projects in other parts of the world, is to be expanded.
The problem of existing debt
"The dependence of the Global South on the financial institutions and governments of the Global South is being further cemented. Since 1980, the countries of the South have repaid 18 times their debts, but their debt levels have nevertheless increased twelvefold. Nevertheless, all the instruments discussed in Paris provide for the poorest countries to take out new loans and further increase their debt," said Taschwer.
According to Standard, the NGO Germanwatch also criticized German Chancellor Scholz for not addressing issues such as debt and newCO2 taxes.
"In the end, it's about holding the heads of state and government accountable for the promises they have made," said David Ryfisch, Co-Head of International Climate Policy at Germanwatch, in an interview with ZDFheute.
And Oxfam spoke of a "recycling of old and previously unfulfilled promises" in relation to the Paris summit.
