How Does Europe Respond to the Shutdown of USAID?
The four M's in the US turnaround on foreign aid - and the European Union's response to the disruption.
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The turmoil sparked by the Trump administration’s dismantling of USAID (United States Agenc for International Development), withdrawing funding from multilateral, national and local organizations, and slashing its foreign assistance budget is a game-changer. It has broad implications not only for humanitarian and development outcomes affecting vulnerable people, but also for the future of the multilateral system and international aid architecture more globally. It carries deep consequences for the fast-evolving EU (European Union) foreign and development policy and aid spending.
This change can be categorised in four M's that have caught Europe and most of the world off guard.
Momentum – Western governments have often cut aid – this is not what sets the latest US moves apart. Indeed, many European countries are also cutting back, or will be in the coming years – quite significantly for some like Germany, France, the UK and the Netherlands. It is rather the sheer speed with which the Trump administration executes change that is staggering. Even seasoned observers who had read the Heritage Foundation’s Project 2025 chapter on USAID, intended to guide a future Trump administration, did not anticipate such rapid and sweeping change. Many are now left asking: What’s next?
While there has been some pushback in US courts, the US Congress has not intervened as some had hoped, and now appears unlikely to do so. Just a few months after the cuts were announced, the vast majority have already been implemented, with USAID and most of its staff now gone. The proposed US federal budget for 2026, currently under discussion, reinforces these cuts and structural changes, with Devex reporting the steepest cuts in 80 years. This represents a systemic shift unfolding at an almost unfathomable pace, leaving many to question whether the US has any real interest in international development at all.
Money – In global financial terms or within the US federal budget, foreign aid is relatively minor — usuallyrepresenting between 0.7% and 1.4% of the annual federal outlay. However, for the international development and humanitarian system, the US remains the largest single provider of Official Development Assistance (ODA), contributing $65 billion compared to the EU institutions’ $26 billion in 2023 and the EU as a whole (EU institutions and member states) with $92 billion. The speed of the US funding cuts and downsizing means that most programs just came to a sudden halt with no warning or possible adaptations. Many development programs and initiatives, aligned with partners’ goals and US and EU interests, will simply cease. As time passes, the sheer reliance of so many humanitarian and development organizations on US funding has become only more apparent. For most organizations in past receipt of US foreign aid, they must now rapidly plan for a future without it. As European governments are also cutting back, there is significantly less money around in 2025 – and for 2026, the funding situation looks even bleaker.
Mess – What is happening with USAID is not an orderly wind-down or even a messy merger (akin to the United Kingdom’s integration of the Department for International Development into the Foreign Office). Instead, it is an abrupt gutting of USAID that now seems complete. The remnants of USAID have been subsumed under the US State Department, but substantial uncertainty remains over how the drastically diminished aid budget will be administered. Many former USAID partners – some of whom also collaborate with European donor countries – remain in limbo. While most have already come to terms with the worst, they are now grappling with deep funding cuts, forced efficiency gains, or are shutting down. The full extent of the turmoil is still unfolding. Stories ofdirect impact on recipients of USAID are coming in as the money is withdrawn, fromGaza toSouth America, Uganda and Malawi.
Message – This shift signals that the US fundamentally questions the value and legitimacy of much of its foreign aid, international cooperation and the multilateral system connected to it. It also assumes that foreign aid, as administered in the past, has not brought economic or political benefits to the US. This view neglects the tight link between the promotion of US values, of markets for US companies and stability in the very same places that received US assistance.
Yet the message of the US cuts was not designed for international partners, but rather for domestic constituencies in the US, where the stated objective was cutting wasteful public expenditure that was antithetical to American interests. This did initially prove popular with much of the American public and particularly Trump supporters. Indeed, nuanced messages about foreign aid and humanitarian impact were lost in a chorus of criticism fueled and instigated by the world’s richest man, Elon Musk, who was previously at the helm of the Department of Government Efficiency (DOGE).
European Echo
The message and method will not go unnoticed in Europe, with a general downturn in foreign aid funding gathering pace and many European budget cuts predating the Trump administration’s assault. European politicians, too, are increasingly unwilling to speak up for the benefits of foreign aid in moral or altruistic terms. While European leaders avoid the blunt rhetoric of "America First," their approach to aid is increasingly shaped by national interests, with growing emphasis on mutual benefits, security and economic returns. Indeed, a new rationale and narrative for international cooperation more fit for the European political and geopolitical landscape looks increasingly necessary in the face of severe pressures on public spending across Europe. Demographic pressures, modest economic performance, and heightened spending on defense and Ukraine have complicated efforts to build public support for foreign aid spending in Europe.
A brighter future?
The recent shift in US and European development approaches has more to do with changing geopolitical and domestic political priorities than with reimagining fairer, more equitable systems to address global challenges and combat poverty. Yet viewed in the broader context of global finance, ODA makes a modest contribution. The total global ODA in 2024 stood at $212.1 billion – an amount dwarfed by the estimated $5.4 to $6.4 trillion needed annually to achieve the Sustainable Development Goals (SDGs) by 2030, according to the United Nations.
In the pursuit of sustainable and inclusive development, the role of international donors and foreign aid remains deeply contested. Critics have long argued that aid often perpetuates, rather than resolves, global inequalities. Many political leaders and intellectuals in the Global South express little admiration and plenty of trenchant criticism for the selective, often meagre generosity of wealthier nations. Few have openly defended the current international development architecture or pushed back on USAID cuts, and some have openly welcomed it. Indeed, some even think that this is merely another indicator of geopolitical shifts that will make for a more equitable world.
Yet, while domestic resource mobilisation in low-income countries is rightly seen as the long-term solution, this remains an immense challenge. For the poorest Least Developed Countries (LDCs), and for critical sectors such as health, food security and democratic governance often burdened with debt, it is far from clear where alternative resources will come from in the short term.
Some argue that the rapid decline of US funding has become the single most significant catalyst behind the renewed momentum in 2025 to fundamentally rethink the international development system and global aid architecture. While calls for radical reform have echoed for over two decades, the current withdrawal of US resources, coupled with declining European contributions, is now accelerating the push for change. Yet, many aid funded organisations face criticism from commentators, often from the Global South, for failing to embrace this opportunity. For example the leadership of many agencies in the UN system, instead of bold reimagining, they appear focused on self-preservation, cutting staff, scaling back programmes and pursuing incremental efficiency gains. A genuine system-wide rethink and process of change on the international development system, however, remains elusive.
A better European response?
While the challenges are considerable, a coordinated, strategic, and intelligent European approach could offer a vital counterbalance to US disengagement and China’s active engagement, helping the European Union carve out a distinctive and influential global role
However, expecting the EU to simply "fill the gap" left by the United States or compete in scale with China is both wishful thinking and unstrategic. A massive amount of European foreign assistance now goes understandably to Ukraine and similar trends of reducing foreign aid and redirecting it toward mutual benefit, national security, or economic self-interest are increasingly evident within Europe as well. Also the EU would do well to remember how it is really perceived by its partners in the Global South which in many cases is far from positive or as a benevolent provider of aid.
Nonetheless, the EU and its member states must urgently get their act together and reach at least a minimal consensus on a more effective collective response. For example the entire multilateral system and associated UN agencies are at risk. The European member states for example really need to have a collective coherent approach to current UN reform processes such as UN80 rather than picking pet agencies or concentrating on cuts and efficiency. Also the EU needs to have more collective outreach to the Global South on what kind of multilateral system can be designed and funded together. At the moment a more piecemeil approach to multilateral reform seems to be dominant, not only in Europe but globally.
There have been some encouraging signals from Europe recently. With early discussions and internal reviews beginning to focus on vulnerable sectors such as humanitarian assistance and health. Also a recent informal discussion amongst senior officials and development ministers from across Europe in on the impact of US aid cut, albeit these did not result in any formal policy conclusions. Indeed, a coherent and consolidated EU approach remains elusive, as is so often the case.
Europe’s new approach to international cooperation
At the heart of the EU’s current international posture is the Global Gateway, its flagship external investment strategy. This initiative aims to leverage additional financing, secure access to critical raw materials, and build strategic partnerships in the Global South. Many European leaders support this approach: large-scale, interest-based projects framed as mutually beneficial are simply easier to sell at home than traditional aid. Yet when it comes to the detail, European countries often want their private sector, their development finance institutions and their government Ministries in the lead rather than a collective European approach.
The Global South remains sceptical of the Global Gateway. While some appreciate what feels like a more honest and pragmatic European approach to cooperation, doubts linger, particularly around follow-through, consultation, how their organisations can plug in and frankly the finances available.
There is no denying that a more interest-based model of cooperation, at home and abroad, is necessary. But Europe's international engagement cannot rest on rebranded of shrinking Official Development Assistance (ODA). This neither represents a compelling offer, nor compensates for the absence of sustained US leadership and finance in many global arenas.
Getting the strategy and toolbox right
What's needed now is a broader suite of European tools that effectively connect internal and external policy, capabilities, and expertise in a fair and balanced way, especially in pivotal areas like energy, the green transition, and digital transformation. These domains hold significant promise because they are driven by mutual interdependence rather than outdated models of traditional development cooperation. Yet, even within this approach, important questions remain. How will Europe sustain its engagement with fragile states, conflict-affected regions, or least developed countries that lack strategic resources? Can equitable partnerships truly thrive without sustained commitment? Also where in this new approach is the poverty focus? It is likely that the EU will go for some kind of a mix of approaches, but a new policy framework for international cooperation (beyond the Global Gateway) while difficult to agree, is urgently needed.
Several upcoming milestones will signal which direction Europe is likely to take. Notably, on 16 July, the European Commission is set to present its first detailed proposals for the next Multiannual Financial Framework (MFF), the EU’s long-term budget running from 2028 until 2034. This includes the 'external action' heading, the bulk of which has historically been classified as ‘traditional’ ODA. It is expected that underpinning mutual interests will win out in the framing of the narrative.
Even with this new framing, there are growing concerns that, in the absence of a strong defence from member states, the European Parliament and wider society, this EU external budget and ODA more broadly, will be highly vulnerable to cuts. In the current geopolitical context, a less capable and underfunded European external engagement would be a serious strategic misstep for the EU. But unless voices both inside and outside of politics demand more ambition and commitment, such an outcome is not just possible, it is probable.
