The European Union’s budget is allocated in 7 year cycles, called Multi-Annual Financial Frameworks (MFF). This includes the money that the EU gives in development aid.
Although the next budget period doesn’t start until is 2014, decisions on how the money will be allocated are being made right now.
What is the MFF?
As the EU doesn’t raise money directly from taxpayers, the EU depends on member states’ contributions.
How much money the EU receives from each of the 27 member states, always makes for lively debate. The seven year framework, or budget, is negotiated by the EU’s member countries with the different EU institutions; the European Commission, the European Parliament and the European Council.
What is the MFF made up of?
There are 5 areas of spending in the MFF:
- Sustainable Development: 45% of the total budget and includes competiveness and cohesion for growth and employment
- Sustainable Management and Protection of Natural Resources: 42% of the total budget and includes the Common Agricultural Policy, rural development, fisheries and the environment
- Citizenship, Freedom, Security and Justice: 1% of the budget
- ‘The EU as a global player’: 6% of the budget
- Administration: 6% of the budget
‘The EU as a global player’ – or spending outside of the EU contains 10 different instruments, including development aid.
One of these instruments is the ‘Development Co-operation Initiative’ which includes aid given to thematic and geographical programmes in developing countries. Thematic aid might go to education. Geographical programmes focus on countries and regions.
Note that the European Development Fund which amounts to €32.27 billion, annually, for the 7 year period focuses on African, Pacific and Caribbean countries and is not part of the MFF. It is a separate pot of money and receives direct contributions from all EU member states. It is, however, not part of the EU’s official budget.
Why do we work on the MFF?
We want to see donors delivering real aid so that aid dependency can be ended in the long-term. Real aid is good quality aid that has poverty eradication as its central objective. It is predictable, transparent and untied aid.
Genuine aid can help countries to mobilise their own domestic resources, and to become independent of aid in the long term. That’s why we’re calling on the EU to improve the quality of the aid that it gives under the MFF.
What’s wrong with the current proposal?
ActionAid welcomes the increase in money proposed by the European Commission in the summer of 2011 for ‘the EU as a global player’ budget line. But it’s not yet clear if EU member states will respect that good recommendation or how the money will be spent.
For example, although the new EU development policy – also known as ‘The Agenda for Change’ – emphasises the importance of agriculture and smallholder farmers, there is still no clarity on how or if that will translate within the budget. There are no specific budget lines for women smallholder farmers, who currently produce 60-80% of food in most developing countries and are extremely vulnerable to food crises.
Another problem with the proposal is the near obsession with growth as a panacea. There is a strong focus on the private sector and growth as a driver of development. However research shows that growth alone does not lead to sustainable development, that goes beyond the economic sphere. Growth is only one ingredient in development, which will achieve nothing in isolation. In particular, if inequality is not tackled, the benefits of growth will not trickle down and wealth will remain concentrated on elite groups within society.
Why do we want to see aid given to the poorest people (instead of the poorest countries?)
In its new proposal on the DCI (see above), the European Commission proposes to differentiate between the countries it gives aid to. They want to stop giving development aid to 19 Upper Middle Income countries and emerging economies by 2014. The rationale behind this is that these emerging economies can pay to tackle poverty in their own countries.
The world is changing both economically and politically. In the long term we understand that the EU will not give aid to countries that switch from being a recipient to a donor of aid. But the differentiation approach hits many Middle Income Countries – where 75% of the world’s poorest people live – making their future less certain. Many Middle Income Countries have high levels of inequality and research shows that this is one of the main obstacles to tackling poverty.
At ActionAid, we believe that differentiation between countries in terms of aid is a good and logical idea. However, the devil is in the detail. A good aid differentiation approach should not focus on macro-economic indicators, but should look to indicators of inequality and the Human Development Index, where the reality of poverty is exposed.
Secondly, the EU should not turn off the taps over night. It needs to take the time to negotiate its partnership with other countries. Moving into a new type of partnership should take place in a gradual way, with clear strategies on how to replace lost development aid and ensure that people do not suffer. This cannot happen between now and 2014.
Third, the role of the partner countries themselves should not be forgotten. Decisions would seem to be about to take place unilaterally without consulting partner countries. This needs to be reversed if the EU is to retain its credibility.