EU urges restraint over unresolved border dispute

The European Union (EU) expressed concern on Monday over "the recent military build-up" by Ethiopia and Eritrea and urged both sides not to ignite another war in the Horn of Africa.

The Dutch ambassador, Rob Vermaas, whose country currently holds the EU presidency, said the 25-nation body was "particularly concerned" about the build-up near the border.

"The EU is particularly concerned about the recent military build-up on both sides of the border and urges both sides to refrain from any action that could lead to a resumption of hostilities," he said in a statement read on behalf of the EU.

Vermaas added that development support to Ethiopia could be "directly influenced" by political and governance issues, citing the unresolved border dispute with neighbouring Eritrea.

"In this context, the EU would like to reiterate its firm commitment to assist Ethiopia and Eritrea in finding a way forward to implementing the decision of the Boundary Commission," he said.

His comments came as Prime Minister Meles Zenawi presented the government's annual economic progress report to donors and appealed for more aid to help reduce poverty.

In the second annual progress report on Ethiopia's three-year poverty reduction programme, Meles said the two most important challenges facing his country were the availability of resources and poor implementation of strategies to combat poverty.

"We are aware that because of the depth of poverty in Ethiopia and the complexity of the issues involved, two years of good performance is not enough to make a significant dent on the challenges we face," the prime minister said. "Indeed, we are convinced that unless we can overcome the bottlenecks that we have encountered and massively scale up our programmes, it will be difficult to sustain the good results of the past year or two."

Figures released in the progress report showed that defence spending had dropped and was now at 3.4 percent of gross domestic product - down from 13 percent at the end of the war with Eritrea.

Economic growth in 2003-2004 had also topped 11 percent as the country recovered from previous droughts. Inflation had also been brought down to 9 percent from 15 percent. However, the government also highlighted the massive excess liquidity in Ethiopia's banking system, totalling almost US $2 billion, which it said was hampering private sector growth.

The ministry of finance and economic development described the lack of use of the funds - which make up 44 percent of total bank deposits - as a "huge missed opportunity".

The EU and other donor countries welcomed the advances made by the government, but stressed more needs to be done and highlighted the importance of peace in the region.

"Sustainable peace between Ethiopia and Eritrea is fundamental for national development and for the enhancement of peace and security in the region," Vermaas said.

The EU is the largest donor to Ethiopia - contributing around €400 million a year to help build roads and improve health in the country - one of the poorest on earth.

Ethiopia and Eritrea fought a two and a half-year border war between May 1998 and December 2000, in which tens of thousands of people were killed. Although a peace deal was agreed, tensions remain over their still disputed common frontier.

The 3,800-strong UN peacekeeping force that has patrolled the border between the two countries for the last four years has said that recent troop movements were defensive in nature.