The new financial framework of the EU

On 16 July, the EU Commission presented its proposals for the next multi-annual financial framework (MFF) - the EU’s budget plans for the years 2028-’34. (1) The Commission proudly announced an ‘ambitious and dynamic’ budget of almost EUR 2 trillion. A catchy figure, but only 1,15% of the EU’s estimated Gross National Income (GNI) after deduction of the reimbursement costs of the “Next Generation EU” loans taken under the post-COVID economic recovery package. This is marginally more than the 1,13% under the previous budget. Hardly the "ambitious and dynamic" budget which must prepare the EU for the multiple challenges ahead, including the green and digital transitions, the required economic competitiveness boost or the desired strategic autonomy, notably in defence.

Within this budget proposal, the relative share of "Global Europe" - the EU's external actions budget - increases significantly, from EUR 105 billion (8,7%) to EUR 200 billion (10,1%). A separate Ukraine reconstruction fund is proposed above the budget ceiling and shouldn’t crowd out the "Global Europe" budget.

At least 90% of those funds (against 93% under the previous budget) are earmarked as official development assistance (ODA). (2) This does not compensate for the significant cuts in bilateral ODA budgets in many core member states. Furthermore, if the primary objective of EU's development cooperation is to reduce poverty (article 208.1 of the TFEU, the Treaty on the Functioning of the EU), the proposal contains a number of potential pitfalls which will have to be clarified during the coming budget negotiations with the Council (member States) and the European Parliament.

Flexibility

Facing an increasingly chaotic and unpredictable environment, the master word of the budget proposal is "flexibility", the capacity to adapt the budget allocations to fast changing needs and newly emerging strategic priorities.

This results in the suppression of all spending targets adopted under the previous budget (climate and biodiversity, social inclusion and human development, migration or gender), except for the (slightly reduced) ODA target.

At the same time, the structure of the external instruments is being simplified. While humanitarian assistance will continue being managed under a specific regulation, its funding is no longer earmarked but is merged with the geographic envelopes that allocate funds to the various regions and countries of the Global South. The past thematic budget lines are no longer disaggregated. (3)

The rapid response mechanism and the cushion for emerging challenges and priorities are also merged. Paradoxically, instead of an increase in discretionary funds, the relative share of these merged reserves falls compared to the previous budget while such a cushion contributes to increased flexibility. 

The Commission asks for delegated powers to decide on the (re)allocation of funds, not only between humanitarian and development aid, the use of the thematic budget lines or the use of the reserves, but even to adjust the share of ODA in Global Europe. Instead of tightening transparency, governance and political steering of the Global Europe instrument, as recommended during the mid-term review of the 2021-’27 budget, the proposal implies less oversight in the name of flexibility.

"Geographisation"

While asking for more flexibility, the Commission sticks to an (enhanced) "geographisation" of its partnerships, i.e. cooperation on regional or national levels.  This results in a continued fragmentation of the EU’s approach to the "Global South", not based on clear developmental criteria but on (unclear) geopolitical ambitions to build "mutually beneficial" strategic partnerships.

While the first von der Leyen Commission identified Africa as a priority, adopting an Africa-wide agenda at the 2022 EU-Africa summit, the continent continues to be split into a North African part (regrouped with the Middle East and the Gulf in a "Southern Neighbourhood" region) and a Sub-Saharan part.

Figures are difficult to compare since humanitarian assistance and development funds are merged, but assuming – based on historic records – that less than 40% of humanitarian assistance goes to Sub-Saharan Africa, the region would face the lowest increase in funding compared to the rest of the Global South, despite having the highest needs in terms of poverty reduction and reaching the Sustainable Development Goals (SDGs).

The proposal also suggested that a larger (but so far unclear) share of funds is spent at regional level through more demand-driven instruments such as the European Facility for Sustainable Development (EFSD+) and less on national, programmed indicative programmes. The EFSD+ is an investment facility, and will primarily benefit larger, more diversified middle-income countries offering economic opportunities and having the institutional capacity to prepare a pipeline of „bankable“ projects.

It is therefore important to earmark sufficient funding for the low income, least-developed and fragile, conflict or post-conflict countries and to clarify how sectoral priorities will be decided. Again, this needs political steering and cannot be left entirely to the Commission in the name of flexibility. (4)

Global Gateway

Facing stagnating or shrinking ODA and questions about its impact, donors have increasingly been advocating alternative sources of development funding, shifting attention to domestic resource mobilisation, transparency in public expenditure and private sector investment, recognised as the engine of growth and job creation whereas ODA can only be the lubricant for that engine.

In this changing context, „Global Gateway“ became the EU's new „comprehensive“ development strategy. It has been defined in multiple ways, but can be summarised as “supporting fair and sustainable infrastructure worldwide”, enhancing connectivity, while boosting EU's competitiveness and security of global supply chains (5). The investments need to be impactful if not „transformational“.

This requires the creation of a more conducive business environment and investment climate and implies an increased emphasis on the consolidation of the rule of law and on governance issues.

Global Gateway therefore needs a „360° approach“, taking into account the institutional, economic, political but also social, environmental or security context of the investments envisaged. This translates into three pillars, one funding the infrastructure, one helping partner countries prepare eligible projects and one supporting policy dialogue to address sector-wide governance challenges.

But policy dialogue with whom, and what should be the sequence of governance reforms and investments?

The EFSD+ instrument is the operational arm of the Global Gateway strategy. It aims at leveraging private investors through „de-risking“ tools such as blending of grants and loans as well as investment guarantees. While such instruments reduce the cost of capital and insure the risks, they do not really de-risk, but only transfer the risks from the investor to the guarantor, who in addition pays a large part of the insurance premium. Real de-risking implies addressing the political, economic or environmental root causes of investment risk, mitigating exogenous climate-related risks, preventing conflicts and improving governance.  

While the instrument aims at leveraging additional funding and accelerating decision making, successful investments require ownership by the beneficiaries and remain conditioned by inclusive dialogue and commitment to reforms, falling back on traditional principles of aid effectiveness. 

Mutually beneficial partnerships

For the last 20 years, the Commission has been calling for more „policy coherence for development“ in the name of these aid effectiveness principles: the impact of internal policy decisions on developing countries needs to be assessed , and - after broad-based consultation and when needed - adjusted before adoption. This approach never fully materialised but at least the intention was there.

The Commission now proposes to “better align external action financing with the EU's strategic interests”. It presents this as a „paradigm shift“, in view of developing „mutually beneficial partnerships“, moving away from the traditional donor-recipient relationship. But as formulated, it means that we are no longer seeking coherence for development but development actions coherent with EU strategic priorities.

This approach takes us away from the Paris Declaration on aid effectiveness, which emphasises the donor alignment on the partners“ development strategy. When EU's priorities do not coincide with those of the partner country and are no longer „mutually beneficial“, the question becomes then how to arbitrate between conflicting interests. The EU proposes dialogue, but only “to the extent possible”.

The EU's interest in managing irregular migration is not necessarily compatible with the Global South's desire for increased legal pathways for migration. The EU's interest in increased strategic autonomy and access to clean energy and critical raw materials may conflict with the Global South's desire for local transformation and industrialisation.

The language used by the Commission suggests that the EU's geopolitical and geoeconomic interests will ultimately dictate the way forward. This seems confirmed by the Commission President's „State of the European Union“ address to the European Parliament on 10 September 2025. In 2018, president Jean-Claude Juncker had announced an „Africa-Europe alliance for sustainable investments and jobs“. This time, there was not a single reference to Africa and our collective responsibility in attaining the SDGs. Instead, the focus shifted to the need for strategic autonomy, competitiveness and security. The only mention of the Global Gateway was as part of a plea to incentivise buying European.

On the Right Side of History: Recommendations

• The EU's 2016 Global Strategy states that defending the EU's values and principles is in its strategic interest. The increasingly urbanised African youth is growing impatient with its authoritarian, corrupt leadership, while facing shrinking civic space and democratic backsliding. We have to stay on the right side of history, and stand firm on human rights, democracy and the rule of law, not only as common goods per se, but also as conditions for a conducive investment climate. The thematic budget lines in support of civil society, human rights and democracy, peace, stability and conflict prevention need to be protected.
• EFSD+ is conceived as a demand-driven, market-based instrument. It cannot be hijacked by short-term commercial interests and excessive bureaucratisation. Private sector support must remain untied, developmental and market-creating rather than market-distorting.
• Underdevelopment is a major cause of instability, irregular migration and environmental degradation. The EFSD+ instrument is a driver of geoeconomic interests. But this cannot be at the expense of investments in least-developed countries and regions facing situations of fragility, conflict or post-conflict where we have to remain fully engaged in our long term security and climate interests.
• Humanitarian aid has never been as underfunded as today while humanitarian needs explode as a result of natural catastrophes induced by climate change and of man-made conflicts in a crumbling rules-based multilateral order. Minimal earmarking of humanitarian aid must be reintroduced and political steering of the use of reserves guaranteed.
• The Commission wants a paradigm-shift, moving from a donor-recipient relation to (mutually beneficial), interests-driven partnerships. However, interests need to be decided at the political level. While flexibility may mean simplification and streamlining of bureaucratic processes for speedier decision-making and implementation, it cannot mean less political control. On the contrary, clearer decision-making processes and political arbitration increase mutual trust and allow more delegation at the implementation level.

Conclusions: Being a credible partner

In the past, the External Actions heading of the EU budget has often been used as the adjustment variable at the end of a long budget negotiations process. It therefore remains important to stress how important the external projection of the EU remains for its internal policies and geopolitical and geoeconomic ambitions.

Europe's public opinion remains overwhelming supportive of European development cooperation that strengthens security, reduces poverty and ensures social development through investments in human capital formation (6). Europe's credibility and image as a „reliable power for good“ in its partner countries depends to a large extent on the effectiveness of this commitment to sustainable development. Human-rights driven development cooperation remains the best public diplomacy tool and the best argument for maintaining a sizeable „Global Europe“ heading under the next MFF.

Philippe Van Damme is a former diplomat who has served as the European Union Ambassador to several African countries. While in Brussels headquarters he worked on renewed aid-for-trade policies and strategic programming issues, and was policy adviser at the Africa department in the European External Action Service. He is now a fellow at the thinktank ECDPM.

Footnotes:

_{1) EU budget 2028-2034 and A companion guide to the Global Europe instrument proposal – ECDPM Briefing Note 198}

_{2) The balance of funds is spent on support measures and public diplomacy activities, including in high-income partner countries.}

_{3) Civil society; human rights and democracy; peace, stability and conflict prevention; global challenges. These thematic budget lines are conceived as complementary and subsidiary to the geographic allocations for initiatives of a trans-regional or global nature or for initiatives at national or regional level that cannot be programmed locally for specific political reasons (repression of civil society, regional conflicts…).}

_{4) See Philippe Van Damme, Effective aid programming in the next MFF (Part 1): Graduation and differentiation – ECDPM, and Effective aid programming in the next MFF (Part 2): Simplification and governance – ECDPM.}

_{5) Global Europe - European Commission. The Commission website focuses more on the connectivity dimension of Global Gateway, “that works for people and the planet”. The targeted infrastructure covers not only „hard“ transport or digital infrastructure, but also investment in education and health or climate and biodiversity, bringing people together.}

_{6) EU citizens and development cooperation - September 2023 - - Eurobarometer survey.}