Devex Invested: The EU advances its ‘Europe First’ plan

In a rare piece of good development finance news, the European Union’s first draft of its 2028-2034 budget reflects a significant increase in funding for external action, including development finance.

But the devil is in the details.

The €200 billion for the Global Europe instrument — the main tool for EU external action, including development finance — would be a “staggering 75% increase” and “shows that the EU wants to play a bigger role on the global stage,”  according to the European Centre for Development Policy Management’s Alexei Jones. But Jones warns that it’s far from a done deal and is historically prone to cuts during budget negotiations.

The draft shows a strong move toward realizing a “Europe First” ideology, which aims to align its political, economic, and security interests with its development agenda. It also gives European nations and companies priority when making development finance decisions, my colleague Jesse Chase-Lubitz writes.

The budget will not go through in its current form, however. Germany issued a strong objection to the plan the day after it was announced, saying that an increase in the EU budget when member countries are already strapped for cash is “unacceptable.”

And now for the details: A focus on European nations and companies in development finance decisions and more vague and flexible wording that lawmakers believe would streamline decision-making and allow them to act more swiftly. But some skeptics say that aspects of the plan could lead to confusion or a lack of accountability.

There is also language that proposes awarding grants to European countries without a competitive proposal process in areas where the EU has a strategic interest. Some procurement rules in the proposal also would explicitly restrict who can participate in procurement to protect EU companies from Chinese or other competitors especially when it comes to the large-scale Global Gateway infrastructure projects.

Read: EU seeks major boost to development in budget amid ‘Europe First’ shift

Related: Europe’s development leaders call for rethink on aid and partnerships (Pro) 

See also: Salvation or sellout? EU aid in spotlight over export credits (Pro)

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Going local

The EU is not alone in making procurement changes either implicitly or explicitly aimed at China: Last week, the World Bank announced a change to its procurement policy that it says will support its jobs agenda by requiring companies working on bank-funded projects to include local labor in civil works contracts.

Thirty percent of all labor costs must be local for companies bidding on construction, transportation, and energy infrastructure projects. These changes, which the bank said aim to “boost domestic job creation and skills development,” will apply to these contracts starting Sept. 1.

“This new requirement underpins our commitment to job creation,” Gallina A. Vincelette, vice president for operations policy and country services at the World Bank, said in a statement. You might recall that the bank said it was sharpening its focus on jobs at its Spring Meetings earlier this year.

While it may well align with that new policy emphasis, it also begs the question of why and whether the move is targeted at any specific bidders or countries. And reading between the lines, we wonder whether the U.S. was behind the change.

“I don’t have anything against more local involvement but I’m sorry to see it as a requirement rather than an option,” Charles Kenny, a senior fellow at the Center for Global Development, tells me, adding that countries have options to favor national bidders if they want so why not make local labor requirements an option rather than a requirement.

“Making it a requirement rather than an option suggests it is something being demanded by the U.S. as part of its policies aimed at limiting China’s role rather than by clients looking for greater development impact, at the expense both of the World Bank’s usual preference for letting global markets work and the Bank’s long-term effort to create greater flexibility for clients in procurement,” he adds.

ICYMI: The World Bank is focused on jobs. What does that mean? 

Rainy-day fund

That’s the amount of adults in developing economies that saved in a financial account in 2024, an increase of 16 percentage points from 2021, according to the World Bank’s 2025 Global Findex Database. About 10% of adults used mobile-money accounts to save, helping spur the surge, it reports. And in sub-Saharan Africa, formal savings increased by 12 percentage points to a total of 35% of adults. The data also shows another interesting trend: Digital financial services are narrowing the gender gap in account ownership. In low- and middle-income countries, women’s account ownership nearly doubled between 2021 and 2024.

Contentious climate

Bank Climate Advocates, or BCA, a legal advocacy group focused on holding public financial institutions accountable to their climate commitments, filed a lawsuit against the U.S. Treasury Department this month, demanding the release of climate impact analyses for nine natural gas plants and four other high-greenhouse-gas-emitting projects by the World Bank’s private sector arm, the International Finance Corporation, in global south countries.

The suit follows several months of requests issued to IFC and to the U.S. Treasury under the Freedom of Information Act. IFC responded to the group, declining to release the information due to its own commercial confidentiality disclosure rules. The U.S. Treasury responded to the original request, apologizing for the delay and asking for extra time to secure the information, but after more than 90 days of waiting, BCA decided to file the suit.

“These are documents that under the U.S. national environmental policy act are required to be included in, and are routinely included in, environmental impact assessments,” Jason Weiner, executive director and legal director at BCA, tells Devex. He says these assessments provide the necessary information to assess whether renewable energy sources were economically and technically feasible, and whether there were efforts that could be made to mitigate the “social and societal cost of each tonne of carbon emitted from a proposed fossil fuel project compared to renewables.”

IFC committed to aligning 85% of its new investment projects with the 2015 Paris climate agreement to keep global warming below 1.5 degrees Celsius. Weiner says that this case is necessary to make sure IFC is aligning its investments with that goal. “Securing routine public release of these documents is necessary for the IFC to achieve accountability,” Weiner says.

BCA filed the lawsuit on July 11. It hasn’t yet heard from the U.S. Treasury. Weiner expects the case to take at least one to two years.

Related: IFC watchdog calls on agency to revamp how it treats climate emissions 

Trade trials

Whether it's at an upcoming EU-China summit this week, or with ongoing U.S. policy, trade has been topping headlines, and it can have big impacts on bottom lines for countries as well.

In an opinion piece for Devex, Sahasranshu Dash, a senior economist and research partner at the South Asia Institute of Research and Development, writes that India’s trade strategy is “at a pivotal moment.”

“The development stakes are high: greater openness could unlock vital progress on employment, rural livelihoods, climate finance, and industrial upgrading — while delaying risks widening inequalities and undercutting India’s growth potential,” Dash writes.

Dash argues that India should seize the opportunity to make a trade deal with the U.S. before Aug. 1 when new U.S. tariffs would take effect if a deal isn’t reached. Negotiations are underway, though questions and pain points remain, but Dash argues that a narrow trade deal with the U.S. could yield significant development gains, especially as India plays a more central role in global supply chains. One of the remaining thorny issues is on agriculture and it could turn into a political issue in India, even provoking farmer protests as it has in the past.

Opinion: India’s trade caution risks undermining development goals

What we’re reading

China’s Belt and Road investment and construction activity hits record. [Financial Times]

IMF warns Ethiopia that reform momentum faces risks amid waning donor support. [Reuters]

Jesse Chase-Lubitz contributed to this edition of Devex Invested.