The European Union (EU) finds itself between a rock and a hard place. The war on its soil has naturally unsettled its development policy from different quarters. As one of the largest development providers, the EU, along with its member states, has consistently maintained its political and economic heft over critical policy issues such as climate, energy, migration, governance, and maritime. However, balancing its aid policy with larger strategic imperatives has remained elusive. Tensions of maintaining shared competence, policy (in)coherence, conflicting interests, and limited financial resources outline only a modicum of the bottlenecks faced by the EU’s development policy. Furthermore, owing to rising trade protectionism following the Trump administration’s withdrawal from the official development assistance (ODA) landscape, Brussels has now landed in a vulnerable situation.
Tensions of maintaining shared competence, policy (in)coherence, conflicting interests, and limited financial resources outline only a modicum of the bottlenecks faced by the EU’s development policy.
ODA still operates as an integral funding arm for several developing economies. According to the 2025 United Nations Trade and Development (UNCTAD) report, bilateral ODA is critical for funding essential sectors such as health, emergency relief, education, and creating viable economic opportunities. Here, the EU accounted for about a quarter of the total ODA disbursed to the developing countries in 2023 (Figure 1). It should be noted that the ODA provided by the EU includes contributions from the EU institutions, Development Assistance Committee (DAC) members and non-DAC bilateral donors.
Figure 1: ODA by the EU in 2023, as per calculations in US$ billion at constant 2022 prices
In 2023, ODA from EU members amounted to US$28 billion, combined with disbursements from EU institutions totalling US$12 billion, which together accounted for 25 percent of the total ODA contributed by Brussels. This was followed by the US at 17 percent (US$27 billion) and Japan at 10 percent (US$17 billion). Nevertheless, the ODA levels are projected to prune by 9 to 17 percent in 2025, standing somewhere between US$186-170 billion, according to the Organisation for Economic Cooperation and Development (OECD). The concerning aspect is that these figures could regress to pandemic levels seen in 2020 if the anticipated ODA cuts are implemented, estimated between 10 to 19 percent from 2024 to 2027. This rigmarole of challenges puts forth two options for the EU: to survive or to thrive.
Rebranded as ‘international partnerships’ in 2021, the revision of the Commission’s Directorate General for Development Cooperation (DG DEVCO) name to the Directorate General for International Partnerships (DG INTPA) underpins its geopolitical awakening. This strategic reorientation marks the beginning of its survival policy under the leadership of the EU Commissioner President Ursula von der Leyen. Introducing its Indo-Pacific Strategy in April 2021 and subsequently launching its Global Gateway initiative in December 2021 marked strategic shifts in its development policy. Brussels was now looking at harnessing the policy as an instrument not to eradicate poverty but to advance its strategic interests in the broader geopolitical theatre. The conventional practice of offering aid to developing countries, punctuated by the colonial nexus, was being replaced by partnerships and alliances that are intertwined with geopolitical and geoeconomic agendas.
Conventional practice of offering aid to developing countries, punctuated by the colonial nexus, was being replaced by partnerships and alliances that are intertwined with geopolitical and geoeconomic agendas.
China’s rising geopolitical footprint through the Belt and Road Initiative (BRI) compelled the EU to introduce its own version of an infrastructural connectivity project to advance its development diplomacy with economic undercurrents. However, limited finances, irregularities in institutional mechanisms of the initiative, implementation bottlenecks, diversion of resources towards Ukraine, and pressing sustainability challenges are heavily weighing down on the EU.
In July 2025, the Commission announced its ‘ambitious’ proposal for the EU budget, a total of €1.9 trillion, with €215.2 billion allocated for Global Europe- a newly created funding instrument by merging several tools meant for external action with developing countries. This can be understood in the light of the Chinese BRI reaching US$1.3 trillion since 2013, of which US$775 billion is in construction and US$533 billion in investments (Figure 2).
Although ‘ambitious’ in its approach, critics find that the EU’s proposal merely occupies 1.26 percent of its Gross National Income (GNI), a notch higher than 1.1 percent in its previous budget. Financing for external action, especially for the Global South, in sectors such as climate, energy transition, health, debt sustainability, and financing for sustainable development, has been recognised. Detailed fact sheets are awaited on the terms, conditions, and modalities of the funding. Yet scepticism is rife that funding via Global Europe might get seeped in short-term political gains for the EU rather than focusing on eradicating poverty, hunger, inequalities, and building resilience.
It is pivotal for the EU to enhance its outreach to the Global South to establish issue-based partnerships that can drive mutual benefits for both actors.
In this sense, it is pivotal for the EU to enhance its outreach to the Global South to establish issue-based partnerships that can drive mutual benefits for both actors. As a longstanding development provider, the EU and its member states enjoy significant acceptance and consistency derived from their normative power. Countering internal fragmentation, differing priorities and leveraging collective impact is fundamental for the EU. Team Europe’s approach is a recent example where the Union attempted to unite against a common threat. This approach needs to be diversified and linked with its external outreach and representation to Global South countries, particularly India, which has agency but lacks the requisite resources. The EU should consider collaborating with India and initiate short-term development projects on a pilot basis in a third country of the Global South to understand their concerns better. Surviving can only be translated into thriving if Brussels fosters partnerships with ownership, accountability and agility in an unprecedented world.
Swati Prabhu is a Fellow with the Centre for New Economic Diplomacy (CNED) at the Observer Research Foundation.
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