Setting the limits for Global Europe

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EU Leaders will discuss the EU’s next 7-year budget framework at their Informal Summit on 23 February 2018. Last week, the Commission put some of their proposals on the table[1]. On EU external action, development ministers should in particular note a plea for an increase in resources for development cooperation and a proposal to create a Union Reserve that could be used to tackle migration or humanitarian crises.

First and foremost, the Commission paper suggests an increase in the resources for external action, from Euro 97 billion (Budget + EDF resources together) to over Euro 100 billion. This may seem a very small increase, but these are absolute figures and if one also factors in a Brexit induced reduction of 10-13%, we are potentially talking about a 15% increase. However, the Commission also points out that were the EU to respect its international commitment to a 0.7% of GNI level for ODA, the increase would have to be substantially larger – assuming that the EU continues to manage a fixed proportion of collective EU ODA. If that were to be respected, another Euro 40 billion over seven years would be required – in total an increase more like 50% than 15% higher. The Commission’s proposal for an external action total of Euro 100 billion thus represents still a relatively modest increase for development cooperation. Surely, given the renewed commitment to achieving the 0.7% target by 2030 in the 2017 European Consensus for Development, the Commission should be arguing forcefully for a much more substantial increase, to take the EU well down that path by 2020?

The Commission paper also makes a strong plea for the simplification of the external instruments, by integrating the EDF in the budget. We’ve been here before, of course, with every new EDF over the last 20 years. In the past, the Member States have never agreed to this, often because they did not want to be seen to approve what might appear like a 3% increase to the EU budget. But it would seem the Commission senses an opportunity this time, as the context for an overall increase to the budget does look more promising: the EU economy is growing again, and the UK will not be at the table to block any overall increase. However, in proposing EDF ‘budgetisation’ in this paper, the Commission does not discuss the effect that such a move could potentially have on development outcomes. In particular, they do not explain how they would preserve the security of funds in the budget, which works on the principle of annuality; nor how they will ensure partner country ownership if the EDF principle of co-management is removed. As development effectiveness principles make clear, decreasing partner country ownership over funds can have a negative impact on development results.

The Commission is also advocating greater flexibility in the budget. This, of course, has to be balanced with the need for proper accountability to the Parliament and Council. While it is certainly important for these two institutions not to micro-manage the Commission, it is equally vital that they set certain priorities for spending that the Commission then has to follow. For external assistance, one approach to ‘flexibility’ has traditionally been to draw on unused funds in the DCI and EDF to create ‘facilities’ or ‘trust funds’ when new urgent political priorities, such as humanitarian or migration crises, emerge, as they inevitably do over such a long period. However, this note now proposes the creation of a new Union Reserve from decommitted funds rather than unused funds. In the past, decommitted funds were simply cancelled and in effect returned to Member States. The paper estimates that such an approach would create a reserve of some Euro 21-28 billion over the 7 years of the MFF. This idea is attractive for several reasons: first, it would mean more flexibility for sourcing funds for emergencies or crises. Second, these would not necessarily have to be found inside the external action chapter, so could represent new funds for development. At the same time, the reverse could also happen, decommitted external action funds could end up being used for an internal emergency.

There is also continued support for blending, with the Commission keen to encourage joint public-private investment with guarantees, loans or other financial instruments, where there is an interest. This would be facilitated by a simplification and rationalisation of the EU’s market based instruments, and the creation of a single investment support instrument.

Finally, the Commission paper proposes that the overall approach to the MFF should be shaped by the principle of European added value. To do so, it wishes to focus on delivering ‘public goods that national spending cannot’. However, this idea is then not developed further for external action. In an area where Member States retain the right to run their own national bilateral aid programmes, it is often hard to get a consensus on where the focus for the European level effort should really lie. There are some obvious options, such as projects requiring large scale investment. The EU’s extensive network of Delegations also means its coverage of particular groups of countries such as fragile states is better than for Member States. But this discussion would also benefit from clear statements by Member States on what they see as their own individual areas of value-added, and how the Commission can complement that. That was one of the commitments of the 2007 EU Code of Conduct on Division of Labour, which the member states have still not met.

Overall then, this Communication does not give much detail on what the Commission’s proposals for the MFF due in May are likely to hold for EU external action. But there are a couple of proposals development ministers need to address. The proposed increase in funds for development cooperation is particularly welcome, though it does not go far enough. The creation of a Union Reserve could provide access to more funds for dealing with external emergencies, which would be useful given the increase in external crises over the past few years. Finally, the debate on EU added value will only really advance if Member States are clear about what they see as the value-added of their individual national bilateral programmes, alongside the work of the Commission.

* Author: James Mackie (ECDPM)

[1] European Commission, A new modern Multiannual Financial Framework for a EU that delivers efficiently on its priorities post-2020, COM(2018)98 final, 14 February 2018

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