The trillion dollar question — what next for EU financing for development?

EU member states are feeling the heat to come up with a credible offer for the UN Financing for Development Conference, set to take place in Seville at the end of June.

The EU is under pressure to honour its commitments to multilateralism and stand up against attacks on sustainable development within the UN’s system. 

The question is whether the EU will demonstrate the political will to do so, and whether Spain, as host country, can move the bloc forward. The EU’s current stance will become clearer when European foreign affairs ministers publish their council conclusions on financing for development next Monday (26 May). 

Back in 2002, the EU played a crucial role in the successful negotiation of the first UN Conference on Financing for Development, the Monterrey Consensus.

Governments collectively agreed to raise national revenues through fair taxation, fulfil their aid commitments and tackle the obstacles posed by Global South debt, and the financial system itself.

So far, the EU’s ambition for Seville is a shadow of the political will shown in 2002. Global economic uncertainty, rising inequalities, and a debt crisis, exacerbated by development and climate emergencies, coupled with drastic aid budget cuts, make international cooperation more urgent than ever. 

Debt is the biggest stumbling block in the negotiations. All parties at the table recognise that something needs to be done to address the acute and growing debt crisis. Many countries in the Global South face a financial dead end, with no viable path compatible with achieving the Sustainable Development Goals (SDGs), pursuing gender equality or fighting the climate emergency.

In 2023 alone, lower-income countries spent $138bn [€121.8bn] to service their debt — $40bn more than what is needed to cover all education financing from 2023 to 2030. 

Using the promising blueprint of the UN Framework Convention on International Tax Cooperation, many African countries, small island states and civil society groups want the Seville outcome to lay the foundations for rewriting global debt rules. 

The proposed intergovernmental process towards a debt convention, which gained public support this week from both the European Parliament's development committee and the African Union, would facilitate a democratic process to govern debt restructuring and prevent future crises.

Yet, the 'half-way' offer from within the EU ranks, to create an annual meeting in the UN with the current players, is not the inclusive and comprehensive process that Global South countries need and want, where debtors and creditors would negotiate on an equal footing.

The canary in the coal mine

Another contentious issue is reforming Official Development Assistance (ODA) or aid, the canary in the coal mine of development finance.

The 2024 ODA figures show a 7.1 percent drop in foreign aid compared to 2023. But this is just the tip of the iceberg.

In 2025, wealthy countries have continued to double down on cuts to their aid budgets, with OECD estimates indicating a further drop of between 9 - 17 percent. This places human rights in peril. 

For too long, countries failing on their ODA commitments have faced no accountability. This is because wealthy countries both set and monitor the rules that govern aid and development cooperation more broadly through the Organization for Economic Cooperation and Development (OECD).

Current negotiations include a proposal for a UN-led process which would provide all countries with equal footing in governance and accountability for ODA. This could track all commitments and provide a universally understood and airtight definition of ODA. To hold rich countries accountable, it could take the already agreed-upon UN target of 0.7 percent GNI as the baseline for ODA. 

Here again, Europe’s position in the negotiations will determine the extent to which the aid agenda can shed the critique of its colonial legacies, unpredictability and paternalism and instead actually deliver on its original promise — poverty reduction and reducing inequalities.   

The EU could also build up some goodwill in the negotiations by endorsing the terms of reference — the mandate — of the ongoing UN tax convention negotiations.

Spearheaded by the Africa Group, the UN General Assembly decided to negotiate a new convention by 2027.

International tax cooperation is a cornerstone of the current effort to shore up finance for development and climate. It remains the most sustainable source of funding for public services such as healthcare, education and environmental protection.

However, the current global tax system is littered with loopholes and undermined by tax havens. It also disproportionately benefits the home countries of investors and corporations.

As a result, multinational corporations and wealthy individuals can reap financial rewards from developing countries without paying much — if any — tax, neither in these countries, or globally.

And when wealthy individuals and corporations use tax havens to dodge their fair share of tax, governments often shift the burden onto the poorest through higher taxes on consumers and workers. These regressive tax systems exacerbate inequalities.

Like aid, this system has been largely designed through the OECD, where countries from the Global South lack an equal footing. It also demands a rethink to ensure a fair tax system. 

The key to progress is global political will.

Across aid, tax, debt, and many other issues, the cost of inaction is unfathomable: not only for the 1.1 billion people living in poverty, but also for the strength of the global economic system.

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