Loan System Reform | European Council Discussion

Kingdom of Reitzmag

Honourable Councilors of the member-states of the European Union, it is in my vested interests as Premier Commissioner to ensure the financial workings of the union. For this, I'd like to take this opportunity for us to discuss the formation of a more harmonized loan system from the EDA.

During my campaign for the Premiership and service as Internal Affairs Commissioner, I have noticed that the funds for the EDA is not enough for the massive loans required for member-states to be able to achieve their projects. And this is especially true for green projects, that certainly do require massive spending that the member-states cannot simply fund on their own. With that, I'd like to introduce what I envision for a more enhanced EDA.

The agency will only receive funds from the EU once, and will grow these funds from interest.
Should a member-state leave the EU, the funds of the agency will not be deducted and the necessary funds to be returned shall be sourced from agencies that will receive annual funding from the union.
The agency shall be administered by the European Council, so that member-states shall be able to decide whether or not their national contributions to the budget shall be loaned and spent for such project.
New guidelines for deadline of payment for the loan and consequences for failing to pay on time shall be introduced.
No grants, or interest-free loans. Grants shall be requested from a more appropriate agency, this will focus the EDA more as a loaning agency for financing projects supporting human development and environmental sustainability.

The main point I wish to raise is number 1, which will allow for future EU funds to be channeled to other purposes after at least 3 billion euros of starter funds have been provided for the enhanced EDA for the beginning of its operations. This will also allow the EDA to be competent in growing its funds from interest, whilst being financially independent from the EU.

These are of course only ideas I envision, and I'd be very glad to hear whatever thoughts and suggestions my fellow Commissioners and the honourable members of this chamber will provide.

Sir Joseph William Amberton Biden Sr. GCVO
Premier Commissioner, European Commission

BrumBrum

I would like to raise my concerns over this system proposed. The system could unintentionally lead to debt traps for poorer nations in this union think Nofoaga , Gaddaland and Aspern ,Lusitania and Vettonia ,and North Diessan among a few and even possibly some of the middle income nations. This is not acceptable since it could lead to impoverishing said nations essentially making them slaves to EU debt whereas currently they can gret grants. This seems to me like an attempt by the rich elite nations to clean their hands of funding the development of poorer members and an attempt to undermine the principle that the Union should be helping its poorer members more. I hope these concerns are acknowledged and this reform idea is killed from conception as going down this imperialist neo-colonial path is the wrong way to go and its a dark future if this type of reform passes.The answer is simple get the rich nations to stump up every year , we can afford it and should be supporting our poorer EU nations who are still recovering from a past of colonialism and parasitic rich nations stealing all their wealth.

James Mizrachi-Roscoe , Councillor for United Duchies

Lusitanovetonia

After careful consideration of the proposal, we have come to the same conclusion. The main danger is to turn the EDA precisely into a lending agency. As the Councillor of the United Duchies has already said, it is a moral duty to help the less economically capable states to develop by means of grants.

The final problem is not only that, although it is true that new agencies can always be created to subsidise states, it would be an unnecessary creation of bureaucracy when it is already done, while the Development Agency would become a huge bank financed by interest, interest that would only serve to put many states further into debt.

Nevertheless, we are open to further consideration of this proposal, but in its current terms we are not convinced by it.

Federal Republic of Lusitania and Vettonia
President of the Republic: Augusto Domínguez
Governor-General: José Miguel Orato
European Councillor: Luis Castro

Inimicus

The Empire of Inimicus sees no reason to reform the current EDA system and will oppose any proposed reforms.

Nicholas Benfield
Empire of Inimicus

Kingdom of Reitzmag

I'd like to thank the inputs of the Honourable Councilors for the United Duchies, Lusitania and Vettonia, and Inimicus. Now, I'd like to explain as to why I see these reforms as necessary.

The EDA as of now has not yet catered to any developing country. Most recent requests that the agency received are from Inimicus, Duxburian Union, North Diessen, Czech Slavia, and the United Duchies. Among these nations, only North Diessen may arguably be the only developing country to have benefitted from the EDA. It had seemed to me, that large countries are the one that had been benefitting from the agency more. It may also be observed that requests of large amount from highly developed nations are usually in the form of interest-free loans except for that from the Duxburian Union, and the fact that most of these loans are proposed to be payed in a duration over 3 years gives me an impression that large developing countries are abusing the system. I find it very disappointing how these developing countries speak of helping developing countries but abuse the system they created for their own benefit. The EDA Budget as of now is limited, and with more high-value requests from highly developed nations coming and draining the budget, then I doubt that developing countries will ever benefit from this project.

This is why I'm proposing a separate agency that would cater solely for developing countries and reforming the system in place for the EDA so that nations do not abuse the availability of the option to have interest-free loans and not take into account inflation across the region.

I also included a proposal to make the EDA more financially independent and competitive to other loaning agencies. This is because I have observed and seen that developing countries who request large amounts of funds for a loan/grant turn to other loaning agencies when they are rejected due to lack of enough funds for the grant to be approved. And this embarrasses the EDA, teasing it for not having enough funds and not catering to their needs despite them not being the intended target for the EDA's funds. That proposal was made to counter this system of antagonization of the EDA in favor of other agencies/organizations. However, I do think that if nations choose to turn to other loan agencies to simply antagonize the most available one, then it would be more appropriate if the EDA is just removed altogether and the agency I proposed to solely cater for developing countries be the only one to remain in place.

I hope, that my arguments are understood clearly. This change isn't for an unnecessary bureaucracy, but for the benefit of those which the EDA was meant to focus on and of the entire union as a whole. Thank you.

Sir Joseph William Amberton Biden Sr. GCVO
Premier Commissioner, European Commission

Istkalen

Neoliberal clownery. Just no.

Ilmaras Kalessed
Internal Affairs Commissioner

Lusitanovetonia

@Kingdom-of-Reitzmag I must say that these new arguments seem more reasonable to us, but we still stand by our position as expressed. However, we should have in account that all the countries have margin for development, they should not be excluded. Even so, we are still not entirely clear about turning the EDA into a lending agency.

Perhaps the solution is precisely to create a lending agency appart from this, while the Development Agency continues to fulfil its role, to assist development.

We will continue to study the evolution of the proposal until the final conclusion is reached. But in the current proposal we would like to see more detail on how such a subsidy agency would be managed and less on how the EDA would become a credit agency. This is what has been talked about most so far.

República Federal de Lusitania y Vettonia
Presidente de la República : Augusto Domínguez
Gobernador General : José Miguel Orato
Consejero Europeo : Luis Castro

BrumBrum

I have to say I find the explanation from the right honourable Biden not good enough. He still fails to listen to nations and their concerns. He seems to only care about the rich nations that voted him and nought for poor nations like Nofoaga, Gaddaland and Aspern , North Diessen, Lusitanovetonia who under his proposals would all be debt trappeds as nations with per capita GDP's of below 20,000 Euros. Perhaps he should listen abolish this plan and come up with a plan that will not make these nations slaves to the EU institutions! You may ask why I oppose such a plan that would easily benefit my own nation well its simple , I was elected to look out for the European interest too , perhaps Biden should do the same rather than proposing making slaves of poor nations with this proposal.

James Mizrachi-Roscoe Councillor for United Duchies

Inimicus

First off, I find the insensitive branding of nations with a GDP that doesn't meet the exact standard the United Duchies sees fit as "poor" to be extremely unhelpful and, frankly, offensive. The entire discussion about this loan reform thus far has been patronising and demeaning to equal members of this Union who deserve far more than many councillors' pity.

That said, Inimicus must oppose Commissioner Biden's proposed reform. The EDA, such as it is, absolutely needs more funding, as it seems many nations appear to be interested in European-sponsored low-interest loans. However, splitting the EDA into two separate agencies is unnecessary and only adds to the divide between Cllr Mizrachi-Roscoe's "rich" and "poor" countries. Who gets to apply to the premium high-level rich kid EDA and who is consigned to the poor man's back alley EDA? What are the thresholds maintained? This reeks of arbitrariness and insensitivity to what is actually happening not only in people's daily lives but in the rooms of all our government administrations.

Nicholas Benfield
Deputy Speaker

Elthize

I am confused. Commissioner Biden, what does it mean when the agency will receive funds only once? Does it mean that the agency will be given money for one time and then it'll be left on its own?

Liam Zachary, Councillor for Elthize

Lusitanovetonia

I think he means that it will be financed by interest, like a bank.

Federal Republic of Lusitania and Vettonia
President of the Republic: Augusto Domínguez
Governor General: José Miguel Orato
European Councillor: Luis Castro

BrumBrum

Yes it means he plans to reform it to become a slave master to developing countries debt trapping them into a cycle of poverty and bankruptcy all so a few rich nations can get off lighter on contributions! This is nothing more than a screw you to developing nations!

James Mizrachi-Roscoe , Councillor for United Duchies

Kingdom of Reitzmag

I think I have to be clear on my point, and also frank, Mr. Roscoe this is not a screw you to developing nations but a screw you to hugely developed countries that are trying to abuse the system by asking for interest-free or low-interest loans for a multi-million euro project.

Members of this honourable chamber, the main aim as to why I wish to put forward a reform is to help developing countries in their endeavors with an exclusive fund for them whilst also maintaining a loan system accessible to anyone who is capable of paying a debt and the interest. So as not to lose track of what has been modified, here is the new proposal I have in mind considering the comments from all members:

Split the EDA into two agencies, the European Development Fund which will be funded every year by the EU and is reserved only for developing countries and the European Credit Agency which will be funded only once by the EU and is accessible to all EU members.
The European Development Fund will be allowed to provide grants and interest-free loans to developing countries therefore preventing them from being debt trapped and ensuring the budget for the agency is not drained.
The European Credit Agency will not be allowed to provide grants and interest-free loans, since this agency is most likely to cater developed nations that are capable of paying back a loan with its interest.
The European Credit Agency will be responsible for growing its own funds from interests, and the interest rate for each loan will be left to their decision making body. Low-interest loans will still be allowed, so that developed EU member-states will remain to enjoy low-interest EU-sponsored loans but not interest-free loans or grants.
The European Development Fund will set the threshold on which nations are allowed to make use of their services based on economic factors such as GDP, GNP, Average Income, or etc. This threshold will be set every year, or on an interval agreed when the bill for this proposal is already in debate.
The European Development Fund and European Credit Agency will be secured a minimum budget amount, based on what is agreed. We foresee that this value is not less than 1 billion Euros.

Members, my aim for this reform is simple. Fix our financial system and ensure a large flow of progressively development across the region, and I believe that this such reform is necessary to aid in that goal. But the ultimate decision lies in you the member-states who make up our union, and so I shall respect whatever the ultimate decision may be.

Sir Joseph William Amberton Biden Sr. GCVO
Premier Commissioner, European Commission

Istkalen

Mr. Biden, you are right, this is not an insult to just developing nations but an insult to everyone. No one has asked for this, there is no support for this, it is a nonsensical and unneeded neoliberal scheme that will only hurt rather than help.

Ilmaras Kalessed
Internal Affairs Commissioner

BrumBrum

Mr Biden United Duchies was long proposing highly restricting funds rich nations can claim but it was told by other nations at the time that apparently we were "undermining European solidarity principles" and that rich nations should be able to claim now rich nations are following EU guidance and the guidance of Eurocrats the richer nations are being demonised for doing what was suggested and blamed for "taking resources for poorer nations". Either EU wants a fully funded big fund with all claiming or it wants all help directed to poorer nations it cannot have it both ways. This is the fault of EUfanatics like Junker who were the ones telling nations like Duchies they should be able to claim funds in the first place. We are simply playing by the rules and values that we were told the system runs by , don't blame richer nations for claiming when they were told the fund was for them too. This is on the EU.

James Mizrachi-Roscoe , Councillor for United Duchies

Duxburian Union

The Union of Duxburian Dominions will not support a program it cannot use. If our funds are taken for an EU level program, then our entities need to be able to apply to use it, same as anyone else.

"Rich countries" and "poor countries" are not the only applicants, assuming every applicant is even a country is wrong to begin with. The Duxburian federal government only funds domestic projects that span across federal domain, things that cross dominion borders. Projects within a dominion or municipality are the exclusive responsibility of those areas, which may be "rich" or "poor" themselves. The national GDP or average income don't have any relevance to whether Azrekko can afford to move to solar power, if Laatzen can protect its dying coral reefs, if Niko can maintain its underground train system, etc.

If a developing nation feels that a deal is predatory, it can simply choose not to sign? If you sign a written agreement, you consent to its terms and thus by definition are not being exploited. That whole angle is nonsensical.

We feel the current structure of the EDA is fine, it just needs more funding. It's pretty rare that the Union of Duxburian Dominions supports increasing the EU budget, so don't blow the opportunity by excluding us from that which you seek to fund.

Wesley Greene
Councillor of the Duxburian Union

UK and California

California will support this. Developing nations need this.

Andrew Charlton
Councilor for The Republic of California

Istkalen

With all due respect, Cllr. Charlton, the European Development Agency as it is provides adequate funds for all. The proposal of Commissioner Biden is merely to force the EDA to act as a business - which, as a development fund, it must absolutely not - and to force it to wring whatever money it can from the member-states of this Union merely to stay afloat, all in the name of financial conservatism that can barely be differentiated from libertarianism.

Ilmaras Kalessed
Internal Affairs Commissioner

BrumBrum

With all due respect Biden you ran on listening to nations. Very few nations are supporting this and are in fact saying let's give the EDA more money , its especially significant the DU are when they usually don't support budget increases. Don't squander that , you have the oppurtunity with nations blessing to deliver a bumper boost to the EDA and increase the budget , yet you are trying to cut its funding so it can only gain off loan interest. This reform is clearly not wanted or necessary and will only lead to harm. In fact cutting off big nations from grants actually makes it more likely bigger nations will in fact support budget cuts in the future since if they cannot get grants why put money in. This sort of system works best if everyone can feel the benefit and that includes if richer nations can get grants and interest free loans , after all they pay in so why should they be penalised. Now if you want to say 40% of funding is ringfenced for Lower Income Per Capita nations go ahead , thats a sensible move we would support but to remove all grants and interest free loan options from bigger nations is only going to incentivise them to call for cuts and that is not good for anyone.

James Mizrachi-Roscoe , Councillor for United Duchies

Lusitanovetonia

We totally agree with the positions expressed by the honourable councillors of United Duchies and Istkalen in everything they have said.

Federal Republic of Lusitania and Vettonia
President of the Republic: Augusto Domínguez
Governor General: José Miguel Orato
European Councillor: Luis Castro