Reading between the lines. Is EU aid in trouble?

This blog is an excerpt from a longer background paper. If you are interested in finding out more about the issues, and reading more from the papers I mention, I encourage you to read my background paper too.

The EU Council meeting on 19 and 20 June represents an important marker in this year of the Call to Action on the Millennium Development Goals (MDGs). Unusually, the main European Council itself will have the MDGs on the agenda. That’s just as well. There are some serious issues to consider, including the failure of European donors to meet their commitments on aid, both in terms of the levels of funding and in delivering harmonisation and alignment. Most importantly, however, the future of the MDG project itself will be debated.

Development ministers paved the way for heads of government at their meeting at the end of May, in the excitingly-named General Affairs and External Relations Council, the forum in which development is now discussed in Brussels. The conclusions of the meeting illustrate some important tensions in the discussion about Europe’s contribution to the MDGs.

A press release summarises the outcome of the meeting of development ministers. They also adopted a long (37 page) set of conclusions, which may be the most comprehensive statement on development since the adoption of the European Consensus on Development, the single statement of policy adopted by all members states in 2005. It discusses topics on which ODI has carried out a great deal of work. This includes aid volume and aid effectiveness, and other topics such as aid for trade, aid architecture, reform of the international financial institutions, climate change and food prices.

If you read between the lines, the document seems to confirm three things:

• first, the world is off-track on the MDGs;
• second, European donors have failed to meet their aid pledges; and
• third, there is a mountain to climb on harmonisation and alignment.

On aid volume, EU member states committed to meet 0.51% of GNP by 2010. With 2006 as the base year, Italian aid needs to increase by 179% by 2010 to meet the EU pledge, Spanish aid by 108%, German aid by 57%, and French and British aid by about 19%. Some smaller donors have even larger deficits in proportional terms. Collectively, the deficit amounts to nearly $US26bn a year in 2006 money.

It is obvious that there will be plenty for the council to discuss – and to do. In fact, there’s more, because the whole MDG project needs another look. This task has been entrusted to a group of academic researchers, led by Francois Bourguignon, formerly Chief Economist of the World Bank and now running the new Paris School of Economics. Bourguignon’s group, of which I am a member, has been tasked to produce a report on the MDGs, which will be a precursor to next year’s first European Development Report.

It is too early to say what the report will contain, but an outline has been published to coincide with the council meeting. It ends with a summary of the likely conclusion of the paper. This is consistent with the thrust of the development ministers’ conclusions, but emphasises the urgency and perhaps also the need for more attention to, especially, the problem of fragile states:

‘The recent global boom has been good for poverty reduction and the achievement of the Millennium Development Goals - but storms are breaking and progress is threatened. Furthermore, fragile states have been left behind in the past decade. With the credit crunch still working its way through the global economy and with oil and food price rises adding to global risks, progress in international development will be under risk unless the governments of countries both rich and poor redouble their efforts.’

Read my background paper for more detailed analysis and commentary.