Global Financing Pact: Macron’s diplomatic tour de force

The Summit for a New Global Financing Pact in Paris on Thursday and Friday (22-23 June) could strengthen France’s “green diplomacy” and position President Emmanuel Macron as a key player when it comes to financing international development aid.

Read the original French story here.

The urgent need to tackle climate change, coupled with the considerable risk of a sovereign debt crisis facing many Global South countries, have made it “vital” to organise an international summit, according to the Elysée Palace.

The aim of the summit is threefold.

First, ensuring that the G20 pledge from 2009 of spending €100 billion a year to support the poorest countries is fulfiled, particularly as the fact that this has never been reached has created a “crisis of confidence” among the most vulnerable countries, the Elysée said.

Secondly, the summit should also serve as a forum to rethink the “Bretton Woods” institutions governing the operation of international financial organisations – especially the International Monetary Fund (IMF) and the World Bank.

The aim would be to optimise the impact of both public funding – through bilateral development aid, for example – and private funding, in particular through the multilateral development banks.

Third, there is a need to look into alternative financing to better support the many debt-ridden countries in their economic and green transitions, while ensuring that the Global South is better represented in international decision-making bodies.

Summit for a New Global Financing Pact: What it is and why it matters

Paris will be hosting a one-of-a-kind ‘Summit for a New Global Financing Pact’ on 22-23 June, in an effort to secure financing for Global South development aid and climate transition, and enshrine the need for a review of multilateral institutions.

A policy “anchored in multilateralism”

Faced with these challenges, France – now one of the world’s largest donors after the US, Germany, and the UK – has been trying to lead the way for several years.

In terms of development aid, France ratified a historic €15.1 billion or 0.56% of the gross national income for 2023 – higher than ever, yet still falling short of what NGOs believe is needed to ensure a just transition in the most vulnerable countries.

At the international level, France has also recently been pushing for reform of the multilateral financial institutions.

“Emmanuel Macron has always promoted a policy anchored in multilateralism, with strong support for the reorientation of Special Drawing Rights,” Brendan Harnoys Vannier, an economist at Finance for Development Lab (FDL), a think tank specialising in development finance, told EURACTIV.

Special drawing rights (SDRs) are a monetary instrument that act as international liquidity reserves, from which IMF member countries can benefit. The amount allocated to each country is determined in part by the size of its economy: the richer the country, the more SDRs it can claim.

With France’s assertive support, SDRs could now become a new mark of international solidarity, as the most developed countries redirect part of their foreign exchange reserves towards low-income counterparts.

Last December, France announced it would make €4 billion available in SDRs, or around 20% of the total allocated by the IMF to France in 2021.

Finally, with the support of the government, the French development agency, the AFD, became the first of its kind to become 100% “Paris Agreement-compatible”.

In other words, it is in full compliance with the objectives of the Paris Climate Agreement, which sets a global target to “limit the increase in global temperature to 1.5°C above pre-industrial levels”.

Green transition: Member states must ‘free themselves’ from financial markets, expert says

Member states must look to financing options other than public debt and taxation to support the green transition and free themselves from debt repayments, French financial economist Jézabel Couppey-Soubeyran told EURACTIV France in an interview.

“Green diplomacy”

The Paris Climate Agreement is an agreement that “really marked French diplomacy” when it was adopted in 2015, a French diplomat told EURACTIV.

Building on the momentum when he was first elected in 2017, Macron organised the “One Planet Summit” event in Paris in 2017 to coordinate public aid with private funding. Six editions of the summit have since been held.

Looking back even further, the Paris Club, founded in 1956 and still run from Paris, brings together a number of public creditors on an informal basis to review and renegotiate the debts of the least creditworthy countries. Its work is overseen by France’s Economy Ministry.

Ultimately, according to David McNair, executive director of the NGO One.org, the issue of development financing is ” above all political”.

France has a legitimate right to take the lead at international level, provided that Germany also follows suit, in order to ensure a real strike force in the face of the US and China, McNair told EURACTIV.

Because of this geopolitical situation, France seems to be signalling its wish “to make Paris a new centre for development finance”, according to Harnoys-Vannier who views France as “a pivot between China and the United States”.

France’s positioning is nothing new as Paris has long been at the heart of economic development issues, “for better or for worse”, the researcher added – making a thinly veiled reference to the old “Françafrique”, the post-colonial sphere of influence over former French and Belgian colonies in sub-Saharan Africa.

Unlike the annual formal UN climate summits known as COPs, this summit, the Elysée said, will be a “step aside” within which “momentum and political impetus will be created”.

Whatever the outcome, the summit must be a success, according to the diplomat. “We have no right to mess up”, he added.

[Edited by Zoran Radosavljevic]

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