What the EU recovery fund means for Europe and international development

European Union flags in Brussels. Photo: Thijs ter Haar (CC BY 2.0)

“Deal!”, tweeted President of the European Council Charles Michel on Tuesday after four long days and even longer nights of intense negotiations. There was relief all round in Brussels and in all European capitals. Only a few months ago, this looked very unlikely, and that is putting it politely.

It comes after EU leaders reached a landmark deal on a €750 billion plan to support the recovery from Covid-19 in all members states. This recovery fund was negotiated alongside the new EU €1,824.3 billion budget spanning seven years, known as the Multiannual Financial Framework (MFF).

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Like most deals, it is a compromise and it could have been better. Not enough on the ‘modernisation’ agenda (climate, digitalisation, research, health), where the Commission asked for more resources. And while it paves the way for deeper fiscal integration, it is not explicit enough on the governance reforms required to implement it, and on the rules that will regulate conditionality. It will also need to be approved by the EU Parliament, and the proof will be in the pudding of implementation from January 2021.

Still. In the face of the total absence of global leadership and international cooperation in the wake of Covid-19, there is no doubt that this is a significant step in the right direction. It is a political triumph for Macron and Merkel, a sign that the European project is alive and kicking. And most importantly, it is a signal that even with the looming nationalists’ threats, it remains in the interest of most countries to cooperate in the face of adversity.

But does the deal deliver on international development?

Not everyone is happy though. The deal risks not delivering to ‘third countries’ and specifically the recipients of EU aid. Aid campaigners are angry. It is a bad deal they say, because the €70.8 billion allocated to overseas aid represents a cut of €2.3 billion compared to current financing levels and excluding the UK contributions. It is also 17% less than what the Commission proposed in May 2020 taking Covid-19 into account.

Interestingly this is far from an isolated occurrence. Across the world aid budgets are shrinking with ‘rich’ countries increasingly stingy when it comes to their development spending. Another area of potential concern is that the European Development Fund will be discontinued and replaced by a new financial instrument, the Neighbourhood, Development and International Cooperation Instrument (NDICI). This will be integrated into the main EU budget, the MFF. While this could allow more flexibility and efficiency in spending, it may not be as responsive to the priorities of the recipient countries.

Whether or not the new EU budget will deliver on its international commitments remains to be seen. For now, there is a contrasting narrative emerging on international cooperation and solidarity: the same deal seen by most people across Europe as a success is considered a failure by the aid community.

Supporting our collective future

This tension is, I think, a problem that goes far beyond the reduction in EU aid. In fact this is the problem at the heart of international development.

A lot of what the EU members states have been negotiating and what the EU Parliament will now need to approve is fundamentally a matter of development in the universal sense espoused by the Sustainable Development Goals. The agreement aims to foster decent work and economic growth (goal 8), reduce inequality (goal 10), and invest in a more sustainable future (goal 13) through international cooperation (goal 17).

The main difference with international development is that these negotiations took place amongst rich, and as such ‘equal’ countries. While some are more frugal than others, keener to impose conditionality and restrictions, the EU is a political and economic partnership of equals, which will thrive or fail depending on the mutual interests of its members. All members give, and all members take.

International development on the other hand, is a policy area determined by rich, donor countries that ‘give’, or aid, the poor. As such aid budgets are determined by the givers, with variable degrees of adaptation to the priorities of the takers. Aid is a matter of solidarity rather than equality: a moral choice for those who can, to give to those who need.

Two problems with international development as ‘global solidarity’

On the face of it, such global solidarity is a good thing, a laudable aim. And yet I increasingly see two fundamental problems with it. The first relates the vocabulary and DNA of international development. By structuring budgets, organisations, careers, policies and programmes on the notion that some countries are rich and others are poor, that some are givers, others takers, that some are developed while others developing, it just risks perpetuating the very inequalities that it seeks to reduce.

Think of it this way. Since the fall of the Berlin Wall, we no longer consider the world as divided into a Western democratic bloc and an Eastern autocratic one. We now understand all the nuances and typologies in between. So why do we continue to refer to the Global North and the Global South in the face of so much change, the rise of new economic powers and the fall of old ones?

The second problem is a consequence of the first.

International development has evolved into a very specific and separate form of global cooperation, one that affects developing countries as a special case, often in isolation from the rest of the world.

Covid-19 has brought this to the fore like never before. While EU leaders were negotiating their collective future in Brussels, the G20 finance ministers discussed debt relief and additional aid financing for poorer nations. Yet lower income countries were excluded from G20 negotiations about ‘international support to countries in need’. It therefore may come as no surprise that just over half of countries have signed up to the G20’s flagship support measure (PDF), a debt service standstill, with no progress made on an increase in allocation of special drawing rights that would best allow countries to help themselves.

These calls for action are happening separately from the broader, global conversation on what forms of international cooperation and leadership are needed to recover from Covid-19, everywhere. Which is of course what was at play at the European Council this week.

The problem here is not just the very likely reduction of aid budgets as a result of the economic downturn. It is that we perpetuate a narrative of ‘us and them’, our problems being different from theirs, that in the long run has not helped foster stronger and more equal international relations and genuine global solidarity. Until international development becomes a matter for OUR collective future, not theirs, we will not make progress.

Thanks to Mark Miller for his comments and suggestions on this blog.

Authors

Director ODI Europe
Marta is the Director of ODI Europe and she also leads our Human Mobility Initiative, managing the [...]