EU set for emergency Egypt talks with aid at risk

Morsi supporters at rally in Cairo, 16 Aug 13 In strife-torn Egypt the EU appears to have little economic leverage

EU diplomats will hold an emergency meeting in Brussels on Monday to discuss their response to the bloody crackdown in Egypt.

Some EU states have suggested formally freezing European aid to Egypt.

There would also be the possibility of imposing sanctions against members of the interim government or military.

"Nothing is off the table," said one source, though no formal decisions will be taken yet. Gulf Arab aid to Egypt dwarfs the EU's assistance.

It is thought likely Monday's talks could lead to a full gathering of EU foreign ministers on the Egypt crisis.

Denmark has already announced that it is suspending two projects it is currently working on with the Egyptian government and public institutions.

While such a move might feel morally right to some in the EU, it is arguable whether cutting aid would make much difference.

In November 2012, a 5bn-euro (£4.3bn; $6.6bn) package of aid for Egypt was agreed - including 1bn from the EU, with the rest made up of loans from the International Monetary Fund and other global institutions.

But Egypt has not been meeting the conditions to receive such aid, so most of it is already frozen. The EU will not release it unless there is progress in fighting corruption and boosting transparency in Egypt.

Projects under scrutiny

The EU says it has sent about 450m euros to Egypt in the last three years - but this is not going to the government, it is being spent on projects to improve sanitation and water supplies, and to help towards construction of the Cairo underground train system. That money is being paid, one source says, to two companies working on the project, not the public authorities.

While the EU is a major donor of development and economic assistance to Egypt, the US is the biggest donor of military aid.

According to the international economic think tank OECD, between 2009 and 2011 EU institutions gave on average around $140m a year to Egypt. France and Germany each gave comparable amounts in bilateral aid, while the UK gave around $20m.

Some EU countries may well decide that no money at all should be given to Egypt at this time. Sweden's Foreign Minister Carl Bildt said "we will have to look at the different EU programmes to see which ones are appropriate and which ones are not".

Even if it was decided to cut aid, that would probably have little immediate material effect on Egypt's rulers. Currently EU donations are small in comparison with the $12bn in aid pledged by Saudi Arabia, the United Arab Emirates and Kuwait recently.

Still, the calculation for Egypt now is whether it can afford to be increasingly isolated internationally. The IMF has already told Cairo that a proposed $4.8bn loan is off the table until the interim government gains international recognition.

Mr Bildt says the EU's "moral position is clear", but he questions whether economic sanctions would have much impact, and adds that it is important to keep channels of communication open with as wide a spectrum of Egyptian society as possible.

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