Fact Sheet: The EU’s budget for Development and Humanitarian Aid

08/11/2012 at 11:41 am Leave a comment

EU Member States have started negotiations on how to finance “Europe” for the next number of years – and the future of EU aid is in the balance.

Every seven years, the EU overhauls its own spending priorities, and negotiates a new agreement with the Member States about the overall budget available to the EU institutions and to all of the major EU policy areas. Known as the “Multiannual Financial Framework” (MFF), this agreement establishes a dual ceiling on expenditure: one for total expenditure and one for each category of expenditure.

The negotiations are decided by EU member countries, but are kicked off – like all EU decision-making processes – by a ‘Communication’ on the Multi-Annual Financial Framework by the Commission. This Communication contained a proposal on the structure and priorities for the EU budget from 2014 to 2020 and proposed an increase in external spending from €56 billion to €70 billion (something Dóchas has publicly welcomed)

Some figures will illustrate the importance of these negotiations:

  • The total EU budget is €147 billion per year. (90% of this money is given back to EU Member States in one form or another).
  • 44 billion (30%) is spent on the Common Agricultural Policy.
  • 6.3% of the EU budget goes on “The EU as a global player” (the EU’s foreign policy).
    Of this, €2.6 billion is spent on the Development Cooperation instrument, and €800 million on humanitarian aid.

Timeline and decision making process

Following the release of the European Commission’s Communication on the MFF, the Council and the European Parliament will start discussing the proposal and negotiating an agreement. The process should draw to a close by the end of 2012 for the MFF to be implemented from 1 January 2014.

The MFF will be adopted unanimously by the Council after receiving consent by the European Parliament. This also means that, once agreement on the MFF has been reached, the Irish EU Presidency will be tasked with building agreement on the “Programming” of the Instruments. Key issues The discussion on the next MFF will take place at three different levels:

Key issues

The discussion on the next MFF will take place at three different levels:

  1. The first big question will be around the level of the Member States’ contribution to the EU Budget. The own resources ceiling for the current Financial Perspectives is set at 1.24% of GNI. It is likely that most Member States will want to lower the percentage significantly with the risk that the EU might not have enough resources to deliver on its commitments, including development ones.
  2. The second level of discussion will be around EU priorities and how to distribute resources among the different headings.
  3. The third level will be on the way the expenditure for external actions is managed and about the financial instruments that will be put in place.

The main political priorities for the next MFF are likely to include sustainable growth and jobs within the EU, climate and energy, the Common Agricultural Policy (CAP) reform and the role of the EU in the world. From a development perspective the MFF negotiations are a crucial opportunity to influence the discussion around the amount of resources that will be available for development.

We would want to look at the percentage of the total budget allocated to Heading 4 and within that at the amount allocated to development, as well as quantity and quality of EC aid and the possibility of using freed up CAP funds for development.

Another key point relates to the coherence between different elements of expenditure in the EU’s budget to ensure that expenditures in one category (eg. CAP or fisheries) does not undermine expenditure in another category (eg. development) and to climate change financing and the development, security and foreign policy nexus. Finally we would want to influence the discussion around the development financial instruments that will emerge from the MFF negotiations.

The EU’s aid budget

In December 2011, the European Commission published its opening bid for the negotiations about the EU’s budget for foreign policy (dubbed “External Action” in EU speak). You can read the Commission’s proposals here.

The ‘Communication’ outlines the Commission’s proposal for EU spending on all EU external action and for the external action “instruments” (funding mechanisms), for the period 2014-2020, based on the Commission’s Agenda for Change Communication launched in October 2011. The Communication includes a list of 19 countries to which the EU will stop its bilateral aid but which will remain eligible for thematic and regional cooperation programmes. In addition, the EU will engage in new types of partnership with these countries, in particular through the Partnership Instrument.

EU Aid – the figures

  • The commitment ceiling proposed for the 2014-2020 MFF by the Commission amounts to 1.08% of EU gross national income (GNI) compared to 1.12% for the 2007-2013 MFF. So in this sense, the budget proposed was already downsized. In absolute terms, the commitment ceiling for 2007- 2013 was €975.777 billion. The Commission’s proposal for 2014-2020 is €1033.235 billion.

How much of its total budget does the EU spend on aid?

  • The European Commission aid commitments for 2011 amounted to €11.3 billion, making it the largest multilateral donor in the world.
  • At EU level, this aid is delivered through various external action instruments such as the Development Cooperation Instrument (DCI), the European Development Fund (EDF, managed by the European Commission but technically not part of the EU budget), the European Neighbourhood Instrument (ENI), the European Instrument for Democracy and Human Rights (EIDHR), the Instrument for Stability (IfS) and the Humanitarian Aid Instrument, which, apart from the EDF, are all part of heading 4 of the MFF.
    • DCI: The overarching objective of this EU instrument for external cooperation is to eradicate poverty by means of sustainable development, partly by working towards the millennium development goals. For the 2014-2014 DCI, the EU proposed €23.295 billion (current prices).
    • EDF: formally outside the EU budget and financed directly by Member States’ contributions, is the main instrument for providing EU aid to African, Caribbean and Pacific States. The EDF consists of grants managed by the European Commission and the European Investment Bank (EIB) under the Investment Facility. For the 2014-2014 EDF, the EU proposed €34.276 billion (current prices).

While no figure has yet been proposed on the DCI, the Cyprus Presidency has already suggested including the EDF in reduction efforts.

EU response to more frequent natural disasters and conflicts

Beside the Humanitarian Aid Instrument, ECHO can use the Emergency Aid Reserve in cases of humanitarian crises.

The Cyprus Presidency is suggesting including the Emergency Aid Reserve in the EU budget (when it sits outside the MFF in the EC’s proposal) for a total budget of €279 mil when the EC recommends €2,5 bn.

In practice the Reserve has been consistently used over the last few years by the Commission to address humanitarian needs in major unforeseen disasters such as Haiti and Pakistan in 2010, Libya in 2011 and most recently Syria. As these crises are impossible to predict, the flexibility provided by the Reserve is crucial.

Over the coming years, humanitarian needs and the related costs will continue to increase due to factors such as climate change, population growth, and pressure on scarce resources, which together lead to more devastating natural disasters and conflicts. The EU has a moral duty to respond to these needs and help populations unable to make themselves heard in these budgetary debates.

This requires maintaining the Emergency Aid Reserve in addition to the Commission’s humanitarian aid budget line.

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