The Neighbourhood and the World? Assessing the EU’s proposal for financing development cooperation from 2021-2027

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The European Commission has published its proposal for the budgetary framework covering the period 2021-2027 (also referred to as the multi-annual financial framework, MFF). In so doing, it has nailed its colours to the mast: more money, despite Brexit; new sources of revenue; re-ordered priorities; and an accelerated timetable to get the future budget done and dusted before the European Parliament elections in 2019.

Judging by early political reactions, the upcoming negotiations could end up tougher than ever before and, as asserted in our research paper on the subject, highly unlikely to be concluded in less than half the time that the last negotiations took. Three prime ministers of net-paying member states already responded negatively on the day the proposals were presented, one of them doing so a few hours before their presentation. A smaller EU but a bigger budget, of €1.1 trillion? Revenue raised independently of Member States, for example via a levy on the emissions trading scheme? Smaller shares for agriculture and for transfers to poorer European countries and regions? Political conditionality? It is not hard to see where the debates are likely to focus.

There are plums in the pudding, too, of course, so perhaps the opposing forces will fight each other to a standstill. That is probably what Jean Claude Juncker and his budget Commissioner, Gunther Oettinger, are hoping for: that potential gains as diverse as free inter-rail travel, 10,000 border guards, more for action on climate change, more for common defence, border controls and migration, or more for research and innovation will overcome objections to other items.

International development issues run through the post-2020 EU budget proposal. For example, a commitment to spend 25% of resources on climate change-related initiatives is welcomed new for the promotion of global public goods. The proposal to allocate €35 bn for border control, migration and asylum will impact many developing countries, though probably not in a good way. There are various proposals for managing Eurozone crises and asymmetric financial shocks that will be important for developing country exporters. In addition, a dedicated heading of the future EU budget will continue to be the basis for financing EU development cooperation, for which proposals were summarised in a separate info sheet. There are three main points.

First and most prominently, a broad instrument is proposed to cover both neighbourhood cooperation and development cooperation around the world. It would merge several of the current external financing instruments, including the instrument financing cooperation with the neighbourhood, the Development Cooperation Instrument and the inter-governmental European Development Fund (EDF). While presented as a ‘broad instrument’, it will have separate pillars, one geographical, one thematic, and one for rapid response, plus a ‘flexibility cushion’ (i.e. reserve) and new arrangements to crowd in private investment.

Second, an increase is proposed in the volume of aid, including the EDF and humanitarian aid. The Commission claims a 26% increase, to €123bn, in current values. This is disingenuous, as in real terms, the increase is more like 13%: this takes into account estimates of future inflation so, in practice, the actual capacity to spend in the future. Still, this is a large increase that scales up the weight of external action in the EU budget, and is to be welcomed. However, a note of caution is required, as in the last EU budget negotiations external action suffered the largest cut between the proposal and the resulting budget for 2014-2020 allocations.

Third, as a result of incorporating the EDF into the budget, the future of the African Peace Facility needs to be considered since some security operations cannot be funded through the EU budget. To this end, this is the first time that a formal proposal for a European Peace Facility is made (see our ETTG blogs here and here).

The European Think Tanks Group has been outspoken that the EU impacts on developing countries not just through its external policies, but also by its internal actions, and not just through financial instruments, but also via regulation. The Sustainable Development Goals provide a framework. Should there be an SDG impact assessment of the current proposals and any proposed changes? How, otherwise, will we be able to judge the overall quality of the budget for such an important shared agenda?

As for development cooperation, it is noteworthy that poverty reduction, which the Lisbon treaty stipulates as the overall objective for EU development cooperation, does not get a prominent spot in the Commission’s budget proposal for external action. The risk exists that aid to the poorest countries will be sacrificed in the interests of the neighbourhood and those countries in sub-Saharan Africa that are home to, or transit countries for, large numbers of potential migrants.

The Commission briefing note says specifically that ‘budget allocation are ring-fenced for geographical regions, in particular the neighbourhood and Africa’. So the vision of a single, flexible instrument translates into a plethora of proposed pillars, cushions and other arrangements, with large-scale earmarking. That will take some negotiation. The temptation will be to write precise numbers into the MFF itself or the Regulations which implement the decisions made. That would be a mistake. Far better to preserve flexibility and specify SDG-related criteria rather than precise budget outcomes. For example, should the Commission, the member States and the parliament negotiate a results framework for EU development aid in the 2020s?

Our paper on the MFF concluded that streamlining of EU external financing instrument is a hard task. Many member states consider cooperation with the neighbourhood countries as fundamentally different from cooperation with other regions and wish to retain a separate instrument. When it comes to the EDF, member states are sensitive about budgetisation as they do not want to see their contributions rise or that their priorities are diminished.

The idea of a pillar for thematic issues of global importance is slightly separate, and corresponds well to the ETTG proposal of an instrument for global public goods. It is worrying, however, that the Commission Briefing Note describes this as a vehicle for global issues ‘and/or political flagship initiatives’. Whose flagships? How decided? And how governed? Could this be another opportunity to cement co-ownership with developing countries?

All in all, the Commission’s opening bid is rich in details on the design of the future external action financing, but raises as many questions on how it is going to work in practice – both of which need to be addressed with equal vigour in the negotiations. What is at stake is not just the financing of development cooperation for the next seven years, but also the narrative and prioritisation that will inform it. Given the strong stake the EU has taken in negotiating the 2030 Agenda, it would need to make a dedicated impact assessment of to what extent its next budget will make headway towards furthering this agenda and its sustainable development goals.

 

Authors: Simon Maxwell, Niels Keijzer, Mariella Di Ciommo and Clare Castillejo

Photo Courtesy Sea-Watch Org via Flickr

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