Disagreements over aid spending threaten to derail aid in 2014

Mikaela Gavas and Simon Maxwell
17 October 2013
Comment

The European Union (EU) is the biggest aid provider in the world: donating US$60 billion in 2012 (more than half of the global total). Aid managed by the European Commission accounted for as much as $18 billion in 2012.  However, the European Parliament, on the one hand, and the European Commission and the Member States, on the other, are in disagreement over the rules on aid spending which is threatening to derail EU aid disbursements. And there is very little time left to solve the problem. This means that there is a real risk that, in 2014, spending by the EU institutions may crash.


EU aid spending in deadlock

The MFF – a seven-year multi-annual financial frameworksets the spending ceilings for the overall aid budget, as well as the various policy-specific budgets. Although it is supposed to come into force on 1 January 2014, the details of the next MFF (which will run from 2014 to 2020) are still being negotiated by the European institutions. They are still agreeing on legal regulations governing EU spending instruments – such as the Development Cooperation Instrument. Commitments to spending can only be agreed once these regulations have been agreed, even though the legal bases of the current regulations expire on 31 December 2013.

Yet, coming to an agreement on the MFF and the regulations will only provide part of the solution. Next, there will be a detailed programming exercise that requires further consultation with the European Parliament on allocating aid to individual countries. So, altogether, this might take several months to conclude.

Plus, the European Parliament will effectively close down in March to prepare for elections in May 2014. When it reconvenes, there will be much else on the agenda, including the approval of a new set of EU Commissioners.

European Parliament wants to shift balance of power in Brussels

One of the current disagreements over the aid regulations concerns how much control Parliament has over the country programming process and spending.

The Lisbon Treaty, through its Delegated Acts, allow the Commission to make secondary legislation and minor changes to primary legislation without having to go through the the Council (Member States) and Parliament (although they can veto the Commission, within a set period). Currently, aid programmes are agreed by the Member States. Parliament has now demanded a veto right over individual country programmes.  

And therein lies the rub: the Commission and the Council regard this as micromanagement and suspect the Parliament is trying to upset the balance of power in Brussels, beyond aid. No national legislature has been granted a similar degree of administrative and management control. If Parliament is successful, will a mere veto on specific country programmes really give it extra oversight? How will its workers find the time to examine the quantity of documentation involved? What will be the opportunity cost?

EU aid in 2014

Aid will not quite dry up altogether. The European Development Fund (EDF), which falls outside the budget and accounts for about a third of EU aid, is free of the budget framework and would not be subject to parliamentary accountability. However, the new 11th EDF is not quite ready either: the aid allocation model still needs to be agreed, the programming must be completed, and then the package has to be ratified by the national parliaments of all 28 Member States.

As for the budget instruments, funds for programmes agreed between 2011 and 2013 will continue to be implemented, but no new commitments to funding can be made.

These delays mean EU aid spending in 2014 will be seriously disrupted. Planned poverty-reduction programmes, as well as urgent actions (such as responding to crises) could go unfunded. These are serious consequences for countries expecting to receive aid, and for donor budget planners trying to finalise aid allocations. If the delay drags on beyond the European Parliament elections in May, this could mean that no new commitments are made in 2014.

EU aid delays: a developing-country crisis in the making

The Commission is considering temporary contingency measures to fill the aid gap until a formal agreement has been reached, including the use of the so-called ‘provisional twelfths’, by which it can spend the equivalent of 1/12th of the 2013 budget each month, until the MFF and the budget for 2014 have been decided.

The Commission has recently presented the Council with a proposal for transitional EDF management measures from 1 January 2014. A ‘bridging facility’ is being considered to ensure the availability of funds for African, Caribbean and Pacific countries until all the Member State parliaments have ratified the 11th EDF, which is likely to be well into 2014. The money would come from balances and funds carried over from the current and previous EDFs. The amount of this aid is still unclear.

These delays in Brussels are a crisis in the making; no country programme has been finalised to date and no published drafts are available. If its own aid has stalled, the EU will lose credibility in pursuing its agenda on Financing for Development, and in engaging in the negotiations on the post-2015 sustainable development agenda. Aid recipients have planned for this money, and should not have their poverty-reduction programmes put at risk.

Mikaela Gavas and Simon Maxwell