When the EU adopted its seven-year budget in 2020, few predicted the eruption of a full-scale war two years later at its borders. By the end of 2023, the EU will have provided military, economic and humanitarian support to Ukraine to the tune of EUR35.2 billion since Russia’s invasion. But with spiralling costs and a constrained budget, the European Commission has proposed a EUR100 billion top up to the budget as part of the mid-term review of the EU’s Multiannual Financial Framework (2021-2027).
Of course, the European Parliament and the 27 Member States will need to jointly agree on this, and history tells us that it is unlikely to fly in its current form. Here, we examine implications of the proposed changes to the budget for EU development spending. The headlines? More money for Ukraine and for curbing migration, but a missed opportunity to allocate additional funds to places in need further away from its borders.
Replenishing the EU budget
Since its adoption in 2020, the budget for 2021-2027 has been used to respond to multiple challenges with billions reallocated to supporting Ukraine, hosting refugees fleeing the war and investments to reduce Europe’s energy dependence on Russia. And the spike in interest rates has meant that the EU has been spending more than planned on repaying its COVID-19 recovery plan, NextGenerationEU.
In response, the European Commission has proposed increasing the budget in three areas: Ukraine (EUR 50 billion), migration and global challenges (EUR 15 billion), and strategic technologies (EUR 10 billion). In addition, “technical adjustments” worth around EUR23 billion are factored in because of increased borrowing and personnel costs.
Figure 1: EU expenditures 2021-2027, Adopted and Review proposal, Commitments, EUR billion (current prices)
Source: European Commission.
Funding for Ukraine
The European Commission has proposed the creation of a new facility for Ukraine with an overall capacity of EUR50 billion from 2024 until 2027, and composed of three pillars: budget support in the form of grants and loans, an Investment Framework to mobilise investments for reconstruction, and a technical assistance pillar. The EU estimates the total amount required for the facility at EUR17 billion in grants and EUR33 billion in loans, to be guaranteed by the “headroom” of the EU budget, i.e., the difference between the own resources ceiling and the expenses foreseen by the budget.
The good news is that the EU’s development budget—the Neighbourhood, Development and International Cooperation - Global Europe (NDICI)—has been spared. This is significant as the risk of reallocation of EU development funding to Ukraine at the expense of some of the poorest regions in the world is very real.
Curbing migration from developing countries
Two parallel trends have posed significant challenges to the EU’s asylum system since the adoption of the multiannual budget in 2020. Firstly, following the end of COVID-19 restrictions in 2022, there was a marked increase in asylum applications to the EU. In March 2022, applications reached 85,000, a level not seen since the refugee crisis of 2015-2016 (see Figure 2). Close to forty percent of all first-time applicants come from only five countries: Syria, Afghanistan, Venezuela, Colombian and Turkey. And following the recent earthquakes in Syria and Turkey, numbers from these two countries are expected to continue to grow in the EU.
Figure 2: First-time asylum applications, monthly figures, 2014-2023
Source: Eurostat.
Secondly, as of March 2022, the EU put in place a temporary protection mechanism for Ukrainians fleeing the war. In April 2023, close to four million Ukrainians benefited from the scheme which is expected to continue until the war comes to an end.
In response, the European Commission is asking for a total of EUR12.5 billion for spending on internal migration and border management (EUR2 billion), and external spending in the Neighbourhood and the World (EUR8.5 billion for NDICI-Global Europe and EUR2 billion for the Western Balkans). However, out of the EUR8.5 billion for NDICI-Global Europe, EUR5.2 billion would be set aside for Syrian refugees in Jordan, Lebanon, Syria and Turkey, EUR300 million for the southern migration route (Libya and Tunisia), and EUR3billion to replenish the cushion for emerging challenges and priorities (see Figure 3). Indeed, 80 percent of the original EUR9 billion cushion has already been disbursed or committed for Ukraine (EUR2.6 billion), and for the supply of COVID-19 vaccines for developing countries (EUR1.3 billion). Thus, more than half of the total replenishment has been earmarked to curb migration from the EU’s neighbourhood.
Figure 3: NDICI adopted in 2021 and 2023 MFF review proposal, commitments, EUR billion (current prices)
Source: NDICI Regulation and Communication from the EC on Mid-term Revision of the MFF 2021-2027.
Whither EU development funding?
There are two major risks on the horizon for the EU’s development spending. Firstly, reduced fiscal space in the 27 Member States means that reaching decisions on EU priorities will be a challenge. Previous budgetary negotiations have shown that increasing spending on international development often doesn’t make the cut when margins are small and choices have to be made. During the negotiations in 2020 on the EU budget and NextGenerationEU, external spending was slashed from EUR 118 billion to 98 billion.
Secondly, the shift that is occurring in the use of development aid as a lever of hard power, and in this case, to deter migration, has been cemented in the European Commission’s proposals. The February 2023 Council Conclusions referred to the use of development funds to “quickly alleviate the pressure on the Member States most affected and effectively preventing irregular migrations.” More recently, the EU proposed a EUR1 billion aid package to Tunisia in exchange for the country’s help in stemming the flow of irregular migrant arrivals to the EU.
The review of the budget shows a clear direction of travel for the EU’s external priorities: providing sustained financial support for Ukraine and curbing migration flows.
While additional resources for Ukraine may prevent the EU’s development budget from being raided, the top up focused on preventing migrants from reaching the EU’s shores, reinforces the sense of a ‘fortress Europe,’ shying away from burning challenges across the globe.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
