The European Commission adopted a roadmap to ensure a more impactful, efficient, coordinated and inclusive European financial architecture for development.
Amidst ongoing global geopolitical challenges, such as the COVID-19 pandemic and the invasion of Ukraine by Russia, a new approach to EU’s cooperation with partner countries is needed, promoting EU political, economic and security interests around the world.
While the EU and its Members States are the world’s biggest development donor, public resources are not sufficient to address the magnitude of financing gaps for our partner countries to achieve the Sustainable Development Goals (SDGs), estimated at €3.7 trillion.
In this context, the EU and its Member States commit to increasingly working in partnership with financial institutions and leveraging additional funding. Working together as Team Europe is more critical than ever to avoid fragmented actions and ensure better synergies. This includes better capitalising on the long-standing experience of all actors for higher impact and greater mobilisation of private sectors’ investment.
European Commissioner for International Partnerships Jutta Urpilainen said: “The COVID-19 pandemic, current conflicts, not least the war in Ukraine, are threatening the progress towards the Sustainable Development Goals. The need to maximise the impact and scale of our development financing is therefore more critical than ever. The roadmap for an improved European financial architecture for development is the Commission’s plan to do just that. It leads to better complementarity between assistance, sustainable investment and reform agenda, thereby accelerating financial flows and increasing development impact. Working with Member States in a Team Europe approach promote an inclusive approach, to achieve greater cooperation and synergies, so that the EU support makes a transformational impact on the ground.”
European Commissioner for Neighbourhood and Enlargement Olivér Várhelyi said: “Both the COVID-19 pandemic as well as the ongoing war in Ukraine due to the Russian aggression have reaffirmed the importance of a strong cooperation with international financial institutions. They contribute to the implementation of our global objectives, be it when it comes to economic recovery, investments or when dealing with the impact of the conflict on our partners, starting with our direct neighbourhood. It is crucial that we build on their respective expertise, resources and value.”
The roadmap presents actions to achieve the following objectives:
- Affirming a strong EU policy steer: The coherence of financial institutions’ activities with EU external policy objectives needs to be reinforced so as to ensure the alignment of activities in third countries with EU strategic interests.
- Promoting enhanced coordination: The European financial architecture for development will be based on increased coordination, drawing on the diversity of all its actors so as to “deliver as one” for greater efficiency and transformational development impact, while crowding in private investors.
- Building a more inclusive financial architecture: The European financial architecture for development will enable the participation of all interested development finance institutions, including smaller and medium-sized partners.
- Ensuring increased visibility and influence for EU and Member States actions in a Team Europe approach: Increased visibility is needed to ensure that the EU’s perceived role in the world matches the magnitude of its support. The sizeable EU shareholding in international financing institutions calls for a more coherent EU voice to defend the EU’s strategic interests more efficiently.
Background
The European development financial architecture (EFAD) plays a crucial role in achieving the Sustainable Development Goals and the Paris Agreement objectives to tackle climate change. It encompasses a multiplicity of actors as well as financial instruments.
The Commission’s roadmap is an important milestone in inter-institutional discussions that started in the early 2010s on how the European financial architecture for development could be best articulated. In October 2019, a High-level Group of Wise Persons, established by the Council, published a report, providing a system-wide perspective on the challenges and opportunities for improving and rationalising EFAD, looking in particular at the respective roles of the EIB and EBRD, as well as a number of steps to be taken immediately.
Following the report, a study concluded that an improved version of the current institutional set-up with the relevant institutions working more systematically together was the most suitable scenario (Status Quo+) to make the EFAD stronger and more responsive to policy priorities and development challenges. The June 2021 Council conclusions highlighted the importance of enhancing and improving the European financial architecture for development and invited the Commission to present a set of actions to ensure the current financial architecture for development is effectively improved.