Exclusive: EU to shun ‘less performant’ countries under new strategy

The European Commission is using a midterm review of its aid budget to double down on its openly self-interested global investment strategy, while cutting funds to countries where it is not enjoying “performant partnerships,” according to documents seen by Devex. Tasked by European Union national leaders in February with cutting €2 billion from the bloc’s common development budget to free up funds for other priorities closer to home, the commission has crafted an approach which it admitted in one document will require “careful communication towards partner countries” around the world. That’s because rather than applying the €2 billion cut equally across all aid-receiving countries, the commission recently briefed EU member state officials that it will decide the reductions “on the basis of a stringent prioritisation, tailor-made for each region, based on shared interests and priorities, in particular Global Gateway and migration, while preserving the engagement to human development.” Launched in late 2021, the “Global Gateway” is the commission’s rebranding of its development work to counter China’s Belt and Road Initiative. It prioritizes what Brussels describes as “links not dependencies” — largely in the form of loans — with countries around the world on topics like green and digital infrastructure. Now, with a new attempt, reported here for the first time, to give itself more flexibility to pursue a private-sector-friendly approach in countries where it sees an interest of its own, the commission is likely to come under even more pressure from NGOs and some members of the European Parliament. Some aid advocates said the gateway goes too far in trying to forge business opportunities for European companies, at the expense of the EU’s treaty obligation to make poverty eradication the primary aim of its development work. The commission’s response to that at a committee meeting in the Parliament last week was that generosity and self-interest are not mutually exclusive. The new approach is likely to be approved by the full commission by the end of October, however, the outgoing commissioner responsible for development, Jutta Urpilainen, said earlier this month that the EU executive would only publish details of the cuts once everything has been decided. All enveloping The commission’s plan, which takes account of the €2 billion cuts as part of the already-planned midterm review of the commission’s 2021-2027 foreign aid budget, will see the creation of one “investment envelope” each for sub-Saharan African, Asia-Pacific, and Latin America and the Caribbean. These envelopes will pool funds for technical assistance, blending, and budget guarantees. The latter refers to the commission’s attempt to use EU taxpayers’ money to de-risk mostly European development banks to try and get them to invest in companies and regions that are perceived as high-risk and high-impact. However, the European Court of Auditors and others have argued the guarantees idea is still unproven, slow, and failing to reach the most needy. Some 40 investment proposals from the banks were approved by the commission in December 2022, though as of last month just eight guarantee agreements had been concluded. The commission expects to reach 30 signatures next year, requiring around €3.1 billion to be budgeted to pay out the banks if the guarantees are called. The aim of the new investment envelopes, the commission wrote, is to gain “greater flexibility … to better pursue EU strategic interests in connection with the external dimension of internal policies,” citing topics like critical raw materials, energy, transport corridors, digital connectivity, vocational training, and health. Meanwhile, in each region, for countries where strained relations with the government make long-term development planning impossible — Burkina Faso, Mali, Niger, and Iran, plus Eritrea, Sudan, Afghanistan, Myanmar, and Yemen — the commission plans to create an envelope for “actions in countries in complex settings.” These are designed to let the commission “calibrate EU engagement as necessary,” while continuing to support the local population “and cooperating on migration where relevant.” The budget’s thematic headings will also see cuts, including €39 million from civil society organizations, particularly those working under the Development Education and Awareness Raising program, which tries to convince EU citizens of the benefits of foreign aid; €39 million from the human rights and democracy heading; €25.5 million from peace, stability, and conflict prevention; and €82.5 million from the broadstroke Global Challenges funding line, designed to support multilateralism — though pledges to global funds will be preserved. Talking the walk Devex reported last month on how the cuts would hit individual countries, with some of the biggest losers including least-developed countries such as Central African Republic, with funding down 73% for the 2025-2027 period compared to 2021-2024; Togo and Guinea-Bissau, whose funding are both down by 48%; and Madagascar, Malawi, and Mozambique, which will all see a 45% reduction in funding. The “cuts are proposed to be absorbed by 2025-27 country allocations, mainly in countries with a less performant partnership, and not by regional programmes, as they provide the necessary support to Global Gateway,” the commission told EU states, adding that it was “important to dialogue with partner countries on this changed approach.” The latest changes were informed by factors such as “outputs of cooperation” to date and “opportunities in Global Gateway investment priorities,” though the commission did not say how much weight it gave to each. The new approach also “translates into a stronger differentiation between countries and avoids spreading scarce resources too thinly,” the commission wrote. That reflects a long-held concern by some at the commission that it tries to deploy the world’s third-largest aid budget too broadly everywhere, preventing it from having a transformative impact anywhere. Also telling is what the commission plans not to cut. Support for its partnership with the Organisation of African, Caribbean, Pacific States remains untouched at €42 million for 2021-2027. That’s despite funding currently being frozen to the 79-member group’s scandal-plagued secretariat in Brussels, which owes the commission more than it can pay back. And public diplomacy and communications budgets are also preserved, with the €75 million foreseen in sub-Saharan Africa for 2021-2027, and €13 million in Latin America and the Caribbean both unaltered by the review. A commission spokesperson told Devex by email: “It is clear the overall agreement entailed difficult choices. In the current context of budgetary pressures, it is ever more important to build mutually beneficial, mutually owned partnerships that take into account the interests and values of both sides.” Update, Oct. 25, 2024: This story has been updated with comment from the European Commission.