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The EU budget proposal for external action: How much, what for, and what we still don’t know

07-05-2018

Andrew Sherriff and Mariella Di Ciommo, ECDPM blog, 7 May 2018

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After reading last week’s proposal by the European Commission for the next EU budget and, in particular, the details related to external action, we have put together the key points on how much will be spent on what, and a list of important elements to watch out for in the proposal.


How much?


  • The Commission has been bold in its opening proposal in relation to financing the EU’s engagement with the rest of the world – both in the new Heading 6 (Neighbourhood and the World) and in the additional Heading 5 on Security & Defence, and in a new off-budget European Peace Facility. The proposed Heading 6 represents a 13% real increase (€12.14 billion) of the current spending for external action (Heading 4 and the European Development Fund). This is significant, considering that the overall proposed budget increases by 2% the current one in real terms and in the wake of reduced resources due to Brexit.
  • Brexit has not impacted the Commission’s appetite to engage with the rest of the world, contrary to what some feared. Yet, the key drivers beyond this increase are mostly migration, instability and geopolitical change. All this has led to a proposal where the share for external action has increased to 10%, compared with the roughly 9% of the current budget (plus the European Development Fund), while important areas such as agriculture have been cut.
  • The same political drivers have led to the creation of two new headings, Heading 4 on Migration & Border Management, and Heading 5 on Security & Defence which, together, have had a threefold increase in real terms compared to the Heading Security and Citizenship in the current budget.
  • The proposed headings and instruments strike a careful balance between the ambitions and the interests of the negotiating parties (EU member states and European Commission and the Parliament). Despite the inevitable heated reactions from a number of powerful actors, nothing seems wildly out of proportion. The final budget will obviously look different from the proposal, but the Commission is not likely to be sent back to the drawing board to start from scratch.

What for?


  • Although the Sustainable Development Goals (SDGs) are strategically mentioned in various sections of the proposal, instability, security and geopolitical change are among the predominant drivers behind the Commission’s rationale to increase the amount spent on external action. The development sector has already made statements against the securitisation of aid and an increased focus on migration governance. But it is unlikely that the SDGs and climate change alone would have been enough to interest top EU decision-makers, despite international commitments.
  • This political narrative carries the risk of jeopardising efforts for development and poverty eradication in different ways under the newly proposed broad Neighbourhood, Development and International Cooperation Instrument. If and how this risk materialises will depend primarily on how the programming will be dealt with and, to a lesser extent, on the ring fencing of the funds. The governance arrangements of the broad instrument will also need to be carefully assessed.
  • The proposal has a global outlook but a clear geographic preference for the neighbourhood and Africa, in line with recent pronouncements by the Commission and the European External Action Service. Despite the proposal on the European Development Fund budgetisation and the soon-to-start negotiations for the post-Cotonou Agreement, there is no special or dedicated provision for the African, Caribbean and Pacific states in the proposal at this stage.
  • The neighbourhood phraseology in Heading 6 and the consolidated instrument accommodate a number of influential stakeholders demand to prioritise and protect the spending in the neighbourhood. Yet sub-Saharan African countries will probably be the largest beneficiaries overall. But, admittedly, the pie will need to be shared among many more countries where the development needs are greater.
  • The geographical envelopes would still get the largest amounts under the broad instrument, with much smaller amounts for thematic and rapid response envelopes. The ‘cushion’ pillar is likely to be quite significant, also considering that this is a pot of funds not destined to predetermined geographies or thematic priorities.
  • The rise of the share of earmarked funds for climate change-related action from 20% to 25% of the EU budget is welcome news for development. Domestic expenditure on this front is important for emissions reduction, but the EU and its members need to take further action on production and consumption patterns. So far, the EU Commission has opted for a good balance between resources to be used for adaptation and those for mitigation.


The nine things that we still don’t know


  • This proposal is an opening gambit from the Commission. Amounts and focus will evolve between the current proposal and the final agreement, but the probability for a serious unravelling seems limited. The negotiating parties will have to decide what they want to prioritise in the discussions going forward. Will the 1.114% of GNI suggested by Commissioner Oettinger hold throughout the negotiations? And, if not, where will the cut fall? And will it affect the Neighbourhood and the World heading?
  • How will the proposal stand up in the negotiations? Traditionally, the external action lobby groups amongst EU member states and the European Parliament have been weaker and more fragmented (for example amongst development, foreign policy and defence communities, and those with different geographical preferences) compared to other lobbies active in other areas such as cohesion, research and agriculture. But the world has changed since the last negotiations, and the external heading may resist major cuts this time.
  • At this stage, we still don’t know exactly how the €89,5 billion of the Neighbourhood, Development and International Cooperation Instrument will be distributed among its different pillars, including through geographical allocations. Similarly, there is little detail on thematic spending and sectors. This will be clearer by mid-June, when the legislative proposals will be out.
  • It is not clear what kind of doors are still open for the UK to pay-in. The proposal does not give away much. The off-budget European Peace Facility and the External Assigned Revenues offer some opportunities. The question is still three-fold, though: will the EU keep those doors open? Will the UK be willing to walk through them and at what level? And when and at a price or a win-win?
  • The percentage of EU external resources that will qualify as official development assistance (ODA) is still unclear. It is unlikely that it will be less than 90% of the external spending in Heading 6. However, the quality of ODA is at risk and its criteria are struggling to protect public international development resources. One example is the inclusion of the costs for hosting refugees for the first year in European countries as an eligible expenditure of ODA.
  • The theme of flexibility, as predicted by ECDPM, is a cross-cutting consideration in the entire budget and under Heading 6. Significant ambiguity still exists within the broad instrument about how the ‘cushion’ would be accessed and governed, and what it could be spent on beyond migration.
  • The proposed broad instrument would require a significant shake-up of the governance, oversight and implementation mechanisms for the EU’s external action. This will likely be carried forward by the future Commission, if at all.
  • Another element to monitor is how much the Commission will be willing to negotiate on the proposal to maintain the relatively high flexibility of the European Development Fund and expand it to the newly proposed Neighbourhood, Development and International Cooperation Instrument.
  • Least developed, conflict-affected and fragile countries are mentioned, but how meaningful will the commitments towards them be? Will these be spelt out in the instruments regulations? This is especially important for countries where the European Union’s strategic interests are low. More advanced developing countries are also mentioned. The Commission acknowledges the need for innovative forms of engagement. Which will these be and will they address the demands of EU partner countries?

What’s next?



Our dossier on the EU budget


If you want to read more ECDPM analyses on the EU budget, visit our dossier.


The views are those of the authors and not necessarily those of ECDPM.

Photo courtesy of the European Parliament via Flickr.

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Comments

Andrew Sherriff-ECDPM

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2018-05-08 17:20:02

Dear Bernard, Thanks for you comment and interest. The logic of the "broad" instrument would be significantly undermined if the EDF is left out, so that is something else the Commission would have to contend with if they were forced to go down this route. Indeed there are a number of issues associated with the budgetisation of the EDF that we will explore in a separate short article in the coming weeks.

bernard PETIT

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2018-05-08 11:50:37

Good analysis. I would add that if the Member States disagree on the new ceiling of own resources or on the savings for the Cap or the Cohesion Funds, there will not be enough financial space in the Budget to integrate the EDF. In such a situation, it will be better to keep the EDF outside the Budget, as it is the case to-day.

European external affairsEU Development Policy and PracticeExternal Action in Global RegionsMultiannual Financial FrameworkEurope