The case for ‘surge fund­ing’

Financial Mirror (Cyprus) - - FRONT PAGE -

Im­por­tant progress was made at the donors’ con­fer­ence for Syr­ian refugees con­vened in Lon­don on Fe­bru­ary 4. But much more re­mains to be done. The in­ter­na­tional com­mu­nity is still vastly un­der­es­ti­mat­ing what is needed to sup­port refugees, both in­side and out­side the bor­ders of the Euro­pean Union. To deal with the refugee cri­sis, while putting the EU’s largely un­used AAA bor­row­ing ca­pac­ity to bet­ter use, re­quires a paradigm shift.

Rather than scrap­ing to­gether in­suf­fi­cient funds year af­ter year, it is time to en­gage in “surge fund­ing.” Spend­ing a large amount of money up front would be far more ef­fec­tive than spend­ing the same amount over sev­eral years. Front­load­ing the spend­ing would al­low us to ad­dress the most dan­ger­ous con­se­quences of the cri­sis – in­clud­ing anti-im­mi­grant sen­ti­ment in re­ceiv­ing coun­tries and de­spon­dency and marginal­i­sa­tion among refugees – more ef­fec­tively. Mak­ing large ini­tial in­vest­ments would help tip the eco­nomic, political, and so­cial dy­nam­ics away from xeno­pho­bia and dis­af­fec­tion, and to­ward con­struc­tive out­comes that ben­e­fit refugees and the re­cip­i­ent coun­tries alike.

Surge fund­ing has been used of­ten to fi­nance im­mu­ni­sa­tion cam­paigns. The In­ter­na­tional Fi­nance Fa­cil­ity for Im­mu­ni­sa­tion (IFFIm), which bor­rows against fu­ture govern­ment con­tri­bu­tions to im­mu­ni­sa­tion pro­grammes, has raised bil­lions of dol­lars over the past sev­eral years to en­sure that vac­ci­na­tion cam­paigns are suc­cess­ful as soon as pos­si­ble. In the long run, this is more ef­fec­tive than spend­ing the same amount of money in yearly in­stall­ments. IFFIm pro­vides a con­vinc­ing prece­dent for the cur­rent cri­sis.

A sud­den large in­flux of refugees can cause panic that af­fects the gen­eral pop­u­la­tion, the au­thor­i­ties, and, most de­struc­tively, the refugees them­selves. The panic breeds a false sense that refugees are a bur­den and a dan­ger, re­sult­ing in ex­pen­sive and counter-pro­duc­tive mea­sures, like erect­ing fences and walls and con­cen­trat­ing refugees into camps, which in turn breeds frus­tra­tion and des­per­a­tion among the refugees. If the global com­mu­nity could fund large-scale, con­cen­trated pro­grams to ad­dress the prob­lem, the gen­eral pub­lic and the refugees would be re­as­sured.

A surge in spend­ing is needed both in Europe and in front­line states like Jor­dan, Le­banon and Turkey. The nec­es­sary in­vest­ments in­clude an over­haul of the EU’s asy­lum pol­icy and im­prove­ment of its bor­der con­trols. In front­line states, money is needed to pro­vide refugees with for­mal em­ploy­ment op­por­tu­ni­ties, health care, and education. If life for refugees is made tol­er­a­ble in front­line coun­tries, and they be­lieve that an or­derly process is in place for gain­ing en­try to Europe, they are more likely to wait their turn, rather than rush­ing to Europe and over­whelm­ing the sys­tem. Sim­i­larly, if the refugee cri­sis can be brought un­der con­trol, the panic will sub­side and the Euro­pean pub­lic will be less prone to sup­port anti-mi­grant poli­cies.

Jor­dan could pro­vide a test case. A coun­try of 9.5 mil­lion peo­ple, it is pro­vid­ing refuge to 2.9 mil­lion non-cit­i­zens, in­clud­ing 1.265 mil­lion Syr­i­ans, and fac­ing the in­flux of ad­di­tional Syr­i­ans up­rooted by Rus­sian bomb­ing. A com­bi­na­tion of mas­sive up­front di­rect fi­nan­cial as­sis­tance, en­hanced trade pref­er­ences, and tem­po­rary debt re­lief is needed. A suc­cess­ful pro­gramme for Jor­dan could demon­strate the in­ter­na­tional com­mu­nity’s abil­ity to bring the refugee cri­sis un­der con­trol, open­ing the way to sim­i­lar pro­grammes for other front­line states, ad­justed on a case-by­case ba­sis, de­pend­ing on lo­cal con­di­tions.

The ap­proach sug­gested here would cost more than EU mem­ber states can af­ford out of cur­rent bud­gets. A min­i­mum of EUR 40 bil­lion ($45 bil­lion) needs to be spent an­nu­ally in the next 3-5 years; but even larger amounts would be jus­ti­fied to bring the mi­gra­tion cri­sis un­der con­trol. In fact, so far, lack of ad­e­quate fi­nanc­ing is the main ob­sta­cle to im­ple­men­ta­tion of suc­cess­ful pro­grammes in any of the front­line coun­tries, par­tic­u­larly in Turkey. While Ger­many has an un­al­lo­cated bud­get sur­plus of EUR 6 bil­lion ($6.8 bil­lion), other EU coun­tries are run­ning deficits. Ger­man Fi­nance Min­is­ter Wolf­gang Schauble has pro­posed a panEuro­pean fuel tax, but that would de­mand ei­ther unan­i­mous agree­ment or a coali­tion of the will­ing.

This en­hances the mer­its of hav­ing re­course to the EU’s largely un­used AAA credit. The mi­gra­tion cri­sis poses an ex­is­ten­tial threat to the EU. In­deed, with the north pit­ted against the south, and the east con­fronting the west, the EU is com­ing apart at the seams. When should the EU’s AAA credit be mo­bilised if not at a mo­ment when the EU is in mor­tal dan­ger? It is not as if there is no prece­dent for this ap­proach; through­out his­tory, gov­ern­ments have is­sued bonds in re­sponse to na­tional emer­gen­cies.

Tap­ping the AAA credit of the EU, rather than tax­ing con­sump­tion, has the ad­di­tional ad­van­tage of pro­vid­ing much-needed eco­nomic stim­u­lus for Europe. The amounts in­volved are large enough to be of macroe­co­nomic sig­nif­i­cance, es­pe­cially as they would be spent al­most im­me­di­ately and pro­duce a mul­ti­plier ef­fect. A grow­ing econ­omy would make it much eas­ier to ab­sorb im­mi­grants, whether refugees or eco­nomic mi­grants. In short, surge fund­ing is a win-win ini­tia­tive, and it must be un­der­taken ur­gently.

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