A potential overhaul of the EU’s external financing instruments under its next long-term budget – the multiannual financial framework (MFF) – requires careful evaluation, as it presents both benefits and drawbacks. Amid a tumultuous time for Europe and international cooperation, any changes call for a steady approach and ambition. Yet, the challenge may lie less in the instruments themselves and more in reaching agreement and clarity on the overarching policy direction they should serve and how the EU institutions implement them.
Rethinking the EU budget for external action
In its communication on the next MFF, the European Commission expresses the need to rethink the EU budget to better align financial instruments with its strategic goals. Economic competitiveness, migration, security and defence in particular have gained prominence on the EU agenda and will shape budget allocation discussions. The recent push to strengthen spending for European defence, while enhancing security, risks diverting funds from global development. In this context, one way for the EU to safeguard its global role is to recognise global inequalities and the climate crisis as security threats, ensuring they remain a funding priority. The upcoming MFF negotiations present an opportunity to rethink the EU’s budget for external action.
The European Commission emphasises the need for ambitious changes to both the design and size of the budget. As the document states: “In light of the policy and budgetary challenges, the status quo is not an option.” EU external financing is unlikely to be an exception, based on current rumours and informal proposals to restructure the current ‘Heading 6 – Neighbourhood and the World’. There is growing debate on how the next generation of EU external financing instruments can become more flexible, streamlined and aligned with EU domestic priorities while increasing their responsiveness to a growingly unpredictable and challenging external environment.
One idea that is currently circulating is to further consolidate existing instruments, combining the neighbourhood, development and international cooperation (NDICI-Global Europe), pre-accession (IPA) and humanitarian assistance (HUMA) instruments. Some argue that EU external financing must address an increasingly diverse and expanding set of objectives, which means different financing pillars should cater to distinct policy goals.
For example, a non-paper circulated by one EU member state outlines distinct mechanisms for investment partnerships and the Global Gateway strategy, development cooperation for fragile countries and human development, and a framework for the Mediterranean region, which addresses migration and mobility among other things. This proposal suggests maintaining separate instruments for humanitarian aid and for pre-accession.
Reformulating the existing architecture could bring gains
The merger of all external financing instruments is explored primarily as a way to streamline budgetary management and increase the Commission’s flexibility. Proponents argue that this would enable the EU to better address unforeseen challenges and crises while facilitating the reallocation of funds to new policy priorities.
But rather than a major overhaul, others advocate for a more nuanced adaptation of the existing architecture, introducing essential adjustments and bringing greater clarity to the various dimensions of EU external action. This would help the EU navigate its distinct objectives and ease the ‘trilemma’ of balancing its interests, values and the priorities of partner countries.
Some argue that distinct instruments or mechanisms would be easier to explain to European constituencies. For example, some might support the idea of an EU backing European businesses abroad while meeting the investment needs of emerging economies and developing countries. Others might sympathise with an EU that remains committed to supporting sustainable development, poverty reduction, climate action and peace.
The potential drawbacks of a merger must be carefully considered
While further consolidation of the EU’s external financing instruments could streamline procedures, it also risks increasing complexity and confusion. The objectives and principles guiding the pre-accession, humanitarian assistance and neighbourhood, development and international cooperation instruments are fundamentally different. IPA supports future EU membership, HUMA is a principled, needs-based instrument – supposedly independent from political considerations – and NDICI-Global Europe is the EU’s main financial tool for funding global development, neighbourhood policy and international partnerships. The distinctiveness of IPA and HUMA was the main reason for keeping them separate during the major consolidation of ten former external financing instruments into NDICI-Global Europe in 2021.
Merging all instruments into a single pot could create tensions and trade-offs that may undermine the effectiveness of EU external action overall while weakening protection for pre-accession and humanitarian aid funds. In addition, there are real risks of complicating and slowing down internal decision-making, weakening the EU’s reputation and geopolitical clout, and fueling the argument that interests trump fundamental humanitarian values in a changing EU.
Political steering and governance also present a challenge. It needs to be clarified which EU institutions would take the lead on such a large instrument and under which overarching policy. EU member states and the European Parliament, co-legislators of the MFF, are unlikely to agree to a blank check. It will also complicate the evaluation of actual results, which should be a key consideration for taxpayer-funded resources.
Refining the current instruments
Another option could also be explored, building on the recommendations of the mid-term evaluation of the external financial instruments carried out in 2024 – to which ECDPM contributed. Rather than adding more instruments to an already complex framework, the focus should be on consolidating and improving the existing architecture, while recognising the profound shifts in the global landscape and EU external action.
The efforts made previously to merge ten instruments into NDICI-Global Europe should be strengthened by addressing trade-offs, strategic gaps and operational challenges. These include effectively supporting the rollout of the Global Gateway strategy, providing adequate financing for global public goods, promoting comprehensive responses to fragility and conflict, as well as some aspects of EU foreign policy, while preserving the core objectives of development policy.
Rather than a radical overhaul, civil society organisations advocate for continuity of the current framework, emphasising the centrality of development outcomes and official development assistancein EU external financing. Indeed, a balanced approach should still have a strong focus on promoting sustainable development and poverty reduction under the 2030 Agenda while highlighting interdependencies and shared goals with partners. An excessive focus on Europe’s geostrategic interests without considering the benefits for partners risks sidelining the EU globally and undermining the international partnerships the EU needs more than ever.
Clarifying the strategic framework and ways of working
More fundamentally, the overarching strategic framework that guides EU external financing must be updated and clarified. EU external financing needs to address a diverse and growing set of objectives, spanning both internal and external policies. A clearer distinction between different policy objectives – such as promoting investment, fostering sustainable development and enhancing peace and security – would help ensure that financing instruments remain fit for purpose and prevent confusion over priorities.
One of the key lessons of recent years is that no instrument can achieve ambitious policy objectives on its own. What is needed is an appropriate institutional set-up that clarifies how the EU institutions operate individually and together. This requires addressing inconsistencies across multiple objectives, resolving overlaps in mandates and encouraging new ways of working.
Another lesson from past MFF negotiations is that the EU institutions are prone to path dependencies, often favouring incremental change rather than radical reforms. Past attempts at merging external instruments have not always gone the Commission’s way. For instance, its 2004 proposal for a new development and economic cooperation instrument failed to pass during MFF negotiations, facing resistance in both the Council and Parliament. Similarly, it took multiple negotiation rounds to incorporate the now-extinct European Development Fund (EDF) into the EU budget.
This time, things may be different due to unprecedented domestic and external pressures for change. However, any change must consider the pros and cons of the existing structure as well as lessons from the past. Policymakers must candidly assess what financing instruments can and cannot deliver, avoiding the misconception that they are a solution to broader EU political challenges. Any future architecture will require clear political steering, policy guidance and strong, accountable institutions.
About the Authors
Mariella Di Ciommo is the associate director of ECDPM’s Europe and Africa in the world cluster. She is also a member of the management team. Mariella’s work focuses on EU foreign and development policy, Africa-Europe relations, finance and gender.
Alexei Jones is the head of ECDPM’s European foreign and development policy team.