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Cablegate: New Eu-Egypt Assistance Program

VZCZCXYZ0001
RR RUEHWEB

DE RUEHEG #0718/01 0731311
ZNR UUUUU ZZH
R 141311Z MAR 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 4027
RHEHNSC/NSC WASHDC
INFO RUEHBS/USEU BRUSSELS
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0263

UNCLAS CAIRO 000718

SIPDIS

NSC STAFF FOR WATERS
USAID FOR ANE/MEA MCCLOUD
USTR FOR SAUMS
TREASURY FOR NUGENT/HIRSON
COMMERCE FOR 4520/ITA/ANESA/OBERG

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON PREL PHUM KDEM EG EU
SUBJECT: NEW EU-EGYPT ASSISTANCE PROGRAM


-------
Summary
-------

1. (SBU) On March 6 the EU and Egypt signed a new bilateral
assistance agreement worth 500 million over the next four years.
The agreement includes cash transfers and funds to implement
projects in a number of areas, under the rubric of a bilateral
"Action Plan." Technical sub-committees of EU and GOE experts in
each of the areas of the Action Plan will meet at least once per
year to agree on projects to fund. The EU compromised on human
rights and democracy issues as a result of GOE obstinacy, but both
sides agreed to create a sub-committee to address such issues.
Through the sub-committee, the EU is able to raise issues, but the
GOE is under no obligation to engage substantively. EU diplomatic
representatives in Cairo were pleased to have a new forum for
dialogue with the GOE on democracy and human rights, but many also
expressed pessimism that the GOE would be able to engage effectively
in the format. End summary.

--------------------------------------
EU-Egypt Sign New Assistance Agreement
--------------------------------------

2. (U) On March 6, the EU and Egypt signed a new bilateral
assistance program worth 500 million ($658 million) over the next
four years. An additional 58 million will be available in the form
of loans and interest rate subsidies, primarily from the European
Investment Bank. Of the total 500 million, approximately 250
million will be cash transfers in the health and education sectors.
Another 250 million will support implementation of the EU-Egypt
"Action Plan," also signed on March 6 under the auspices of the EU's
Neighborhood Policy. EU Commissioner for External Relations Benita
Ferrero-Waldner announced during her visit to Egypt in late February
that the Action Plan would support the GOE agenda for political,
economic and social reforms. The new bilateral agreement replaces
the EU "MEDA" program, which provided 1.1 billion to Egypt from
1996-2006.

--------------------------------------------- --
"Sub-Committees" Will Agree on Funding Programs
--------------------------------------------- --

3. (U) Diego Mellado, Economic Development Officer at the EC
Delegation, told econoff that in fiscal year 2007, 120 million will
be allocated for education, and 77 million to begin implementing
the Action Plan. The Action Plan contains several areas of
cooperation, including internal market, industry, trade, services
and investment; transport, environment and energy; information
society and audiovisual, research and innovation, education and
culture; agriculture and fisheries; justice and security; customs
co-operation and political matters - human rights, democracy,
international and regional issues. Each of these areas will have a
"sub-committee" composed of EU experts and their Egyptian
counterparts, who will meet at least once a year to agree on
projects in each area to be funded by the assistance program.

--------------------------------------
Democracy and Human Rights Cooperation
--------------------------------------

4. (SBU) Mellado noted that 60 million is earmarked for democracy,
governance and human rights issues. Of the 60 million, 40 million
is in the form of a "governance facility" that allows the GOE to
apply for grants, which will be awarded based on the EU's assessment
of GOE governance. The governance facility is available to all
members of the EU's Neighborhood Policy, and the assessment-based
system allows the EU to differentiate between governments that are
governing well and those that are not. In the human rights areas,
the Action Plan is essentially a continuation of the EU's current
programs, which include grants to NGOs, and general efforts to build
civil society, according to Mellado. Sir Derek Plumbley, UK
Ambassador in Cairo, was upbeat about the agreement, telling the
Ambassador that the human rights component provided at least a
framework for regular dialogue with the GOE on human rights.

5. (U) An EU statement released prior to signing of the agreement
indicated that the EU and Egypt share a respect for human rights and
fundamental freedoms, democracy, the rule of law, good governance
and international law, all of which constitute an essential element
of the 1994 EU-Egypt Association Agreement and are guiding
principles of the EU Neighbourhood Policy. The committee on
political (i.e., human rights) matters will give special attention
to promotion and upholding of those values. The EU will seek to
identify with GOE authorities ways to support Egypt's own reform
measures in the area of the judiciary, civil society, police
procedure and individual rights, according to the statement.

6. (SBU) Mellado noted that the Action Plan was set for signing in
June 2006, but was delayed when the GOE balked at the EU demand that
it be able to raise, in the context of experts' negotiations,
specific cases of human rights abuse. The disagreement delayed
signing until this March. The two parties resolved the disagreement
by removing any reference to individual cases from the draft Action
Plan. Instead, letters were exchanged in which the two parties
agreed that the EU can raise individual cases with the GOE outside
the scope of the Action Plan (e.g., the experts group would be
unable to link release of EU funds to the outcome of specific cases,
such as Ayman Nour).

---------------------
Prospects for Success
---------------------

7. (SBU) At a March 7 meeting of G-8 DCMs in Cairo, EU DCMs tried
to gloss over the obvious step-back on human rights and democracy.
They noted that the amount attached to the new assistance program
was a decrease from prior assistance levels. Egypt, they argued,
was essentially "graduating" from assistance and the new format for
dialogue in the sub-committees would, the EU side hoped, raise the
quality and tenor of policy engagement by allowing EU experts to
deal directly with GOE counterparts. The Egyptians drove a hard
bargain on human rights issues, but had eventually agreed to
creation of a political sub-committee in which the EU can raise
human rights issues. The sides found constructive ambiguity on
whether the sub-committee would discuss individual cases. The EU
DCMs concluded that only time would tell if the GOE could adapt to
this new format, but many expressed pessimism.
RICCIARDONE

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