EU plans to review distribution of multibillion-dollar foreign aid - Bloomberg

The European Union will review its multibillion-dollar foreign aid to better align the bloc's funding allocation with its foreign policy interests in a challenging international environment, Bloomberg reports, according to UNN.

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The move comes as the European Commission faces a growing list of priorities, including defense, amid the war in Ukraine, now in its third year, and the stance of U.S. President Donald Trump in his first weeks in office.

According to a draft document seen by Bloomberg, the European Commission, the EU's executive body, wants to become more transactional by restructuring foreign aid and making it more "targeted to our partners.

The bloc is seeking to restructure its foreign aid to serve its strategic interests, including strengthening alliances with like-minded countries, securing access to raw materials, and curbing the influx of migrants.

The draft document, which is still subject to change before submission, states that the EU's common fund, which traditionally accounts for about 1% of the bloc's GDP, is overburdened given the range of demands, from the "green transition" to defense. In the coming weeks, the European Commission will set out ideas for improving its next seven-year budget, from 2028 to 2034.

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The European Commission's plan, as noted, coincides with Trump's decision to eliminate the U.S. Agency for International Development (USAID), which annually distributes tens of billions of dollars in aid abroad. On the very first day, the US president announced the suspension of almost all foreign aid for 90 days.

The EU and its member states together are the largest donor of international aid in the world, providing almost 96 billion euros ($99 billion) in 2023, while the US spent almost $72 billion on foreign aid.

The two largest donors are competing with China for influence in resource-rich regions, including Africa and South America.

The EU wants to capitalize on the growing perception of the bloc as a reliable partner compared to Beijing or the Trump administration, while avoiding the role of "donor of last resort.

"The momentum is right for the EU to offer the right incentives to its partners," said European Commissioner for International Partnerships Josef Sikela in early February.

The EU's trillion-euro long-term budget, one of the most controversial discussions in the bloc, will be more difficult this time around, the publication notes, as €30 billion of debt from the pandemic recovery fund needs to be paid back every year and most member states also want significant defense funding.

The draft document is said to set out some ideas for solutions to the bloc's priorities, including key reforms and investments for each member state, a competitiveness fund to support strategic technologies, and robust guarantees to protect the rule of law. The European Commission intends to present its next long-term budget proposal in July to allow sufficient time for consultations.

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