The EU’s Misplaced Foreign Aid

Europe, it seems, has little sense of how to prioritize its overseas spending. Although it was faced with civil wars or state failures in Iraq, Libya, Syria, and in parts of the Sahel, the EU did not focus enough on assisting its immediate neighbors, and instead, took on a global development role, even though it currently faces budget constraints.

According to the latest available data and reports from the European Commission, which was for the year 2014, the European Commission has poured vast sums into aid and other projects in developing countries, as well as into integrating its eastern and southern neighbors into the union. It earmarked close to $68 billion to cover such programs between 2014 and 2020. And that's without counting the $32 billion budgeted over that same period by the European Development Fund (EDF), the EU’s main aid arm, and the average of $9 billion in loans and grants that the European Investment Bank distributes to non-EU countries every year. This assistance is only surpassed by the United States: the EU spent approximately 63 percent of what USAID did in 2014.

A closer look at how the EU spends that money reveals there is an obvious lack of unity in its efforts around the globe, especially when it comes to the EDF: the United Kingdom prefers to support the Commonwealth countries, France rallies for Francophone nations and military operations in the Sahel, and Spain pushes for funds to go toward Latin America, for example. Further, at a time when the continent is struggling to manage migration and security, there seems to be little effort to send resources to where those problems originate. The Commission’s Development Cooperation Instrument, a body within the European Commission charged with reducing global poverty, will spend some $21 billion between 2014 and 2020, and is a good example of Europe’s confused priorities. It has allocated 30.1 percent for South Asia, 22.7 percent for North and South East Asia, 19.8 percent for Latin America, 8.5 percent for Central Asia—and only 6.6 percent for Africa and 4.3 percent for the Middle East.

According to 2014 reports, EU’s external spending largely followed the United Nations’ 2000 Millennium Development Goals whose stated aim is “the promotion of democracy, the rule of law, good governance and the respect of human rights with the primary aim at eradicating poverty.” Typhoons in South Asia, earthquakes in Latin America, the impact of sea level rise on the Pacific islands, have all caught Brussels’ attention. And although the EU has sought to contribute some funds closer to home, it has not been enough. In early 2015, some NGO and UN workers who had traveled to Jordan, Lebanon, and Turkey, were warning of a potential refugee crisis—this was before it escalated in the spring of 2015. Today, Brussels is still adapting its geographic priorities too slowly.

The European Investment Bank, too, shows similar geographic patterns with the $9 billion worth of non-EU loans it granted in 2014: 28 percent went to pre-EU accession countries and EFTA (Norway, Switzerland, and Lichtenstein); 21.5 percent went to its southern periphery; 18 percent went to Asia and Latin America; 15 percent went to African, Caribbean and Pacific countries; and 15 percent went to Europe’s eastern neighbors. That is no surprise as the EIB, while “preserving its independence and its own decision-making procedures,” bolsters the EU Commission’s external spending efforts.

In other words, Europe’s criteria to finance projects are based mainly on UN-inspired needs and poverty goals and not on a political strategy tied to the current economic, migration, and security challenges. Although some aid is needed, the amount the EU has budgeted towards these efforts shows that the EU is stuck thinking about developing countries through the outdated “Third World” framework: treating developing countries as charity rather than cooperating partners. Yet, if inequalities within developed countries are rising, inequalities between developed and less developed countries have diminished since the 1990s, according to OECD economists.

To enable Europe to redirect its focus on problems closer to home, the European parliament should call for a new allocation formula with increased attention to Eastern Europe and the Balkans, as well as Africa and the Middle East. Despite the security risks, the EU could invest much more heavily in stabilizing its eastern and southern neighborhoods.

EU member countries and the European Commission should also reduce spending for aid and development and increase funds for economic cooperation. Helping companies leverage themselves in the Middle East and Africa, through the European Investment Bank and others, should be a priority. This is about seizing business opportunities, particularly in the energy, water treatment, and transport sector.

Risk-averse European companies should be encouraged to do business in these emerging markets, where China and Russia are venturing. Take Algeria, for instance, which has increased its military cooperation with Russia and where China is building a new harbor, west of Algiers. Guarding against radicalization among European, Arab, and African youth requires creating sustainable job opportunities; it is not about providing short-term handouts.

Increasing funds for security in its overseas spending, currently at a mere four percent of the EU budget, should also become a priority. The EU’s Common Security and Defense Policy, which facilitates peacekeeping and conflict prevention, is currently one of the least financed foreign policy tools in Brussels. And overall, defense spending fell by 14.5 percent across Europe between 2007 and 2015.

Pushing for business opportunities abroad while investing more in the military may appear contradictory at first glance. But only by engaging on an equal footing in its close neighborhood, while simultaneously sending strong deterrence signals to those who threaten its interests, can Europe begin to address the root sources of its current ills.