Development cooperation suffer the most in arm twisting around the EU budget

Tuesday, March 5, 2013 - 18:10

On February 8th, EU Heads of States reached an agreement on the EU budget 2014-2020. The agreement is the result of a long-winded negotiating process that gave way to resistance to more progressive options at the hands of two groupings: those in favour of budget cuts at EU level on economic basis, and those seeking to break the communitarian fabric and give more space to national ambitions as a matter of principle.

The result of this political struggle is that the total budget has fallen from the levels proposed by the Commission. Its proposal originally set the total spending at €1.026 bn whilst the Heads of States capped the budget at €959 bn, an overall reduction of 6,34%. This was the first time ever that the EU agreed on a lower budget than the previous one.

At the same time, resources for EU development cooperation suffered to a disproportionately large extent. The European Development Fund (EDF) dropped by 10.1% from the proposed €29,998bl and funds for the Development Cooperation Instrument (DCI) were slashed by 16% to €17,3 bn. It is estimated that, in practical terms, development funds will be frozen at the same level as those for the period 2007 – 2013, potentially dashing Europe’s ambitions to keep to its ODA commitment of achieving the 0,7% target by 2015. In reality this was out of reach even before the decision on the EU budget. The agreement on the MFF implies that the responsibility for bringing Europe back on the right track is more than ever in the hands of national governments. In fact, less money for the EU budget also means less money that the countries will be able to report to DAC as ODA through the EU. Governments will have to fill the gap out of their own budgets if they want to keep their promises.

The cuts also fail to take into account a new kid on the development block – the EEAS – which plays a role in development aid, and has the opportunity to play a much stronger role on keeping the impact of the EU’s non aid policies such as trade and energy in developing countries coherent with its development objectives for those same countries. But this would require allocating capacity which it currently does not have.

Of course, the MFF is not just about resources. It’s also about the way the EU operates internally and externally. In the coming months, it will be crucial to monitor the agreements on the regulatory frameworks that set down the actual priorities. In fact, this is the area where the most recent decisions on EU development policies (e.g. Agenda for Change) will be put to the test. The policy on ‘Differentiation’ is a clear case in point as it is in this budget that partner countries will ‘graduate’ - or not - to different types of support, from aid to financing on commercial terms.

So what are the next steps? For now, all eyes have turned to the European Parliament, which, since Lisbon, has more power over the budget and still has to have its say. A final position is due to be approved at the earliest in June. MEPs are expected to move quickly to outline “red lines” this March. At the same time, discussions have started on how the external funding of the budget is broken down into different instruments and what is included in them. Both of these processes are key to ensure that the EU’s commitment to fighting poverty globally stays intact.