Luxembourg defies EU austerity trend in foreign aid

Women filling buckets with water from a well. [F. Lefebvre/ UNICEF]

Women filling buckets with water from a well. [F. Lefebvre/ UNICEF]

Luxembourg exceeded European Union targets for international development assistance last year, a new analysis shows, bucking an austerity trend that could see Europe fail to meet its long-standing commitments to the world’s poorest nations.

The tiny country spent the least of the EU’s major donor nations, $413.4 million (€316.2 million) and just 0.48% of overall EU development aid in 2011.

But at 0.97% of gross national income, Luxembourg was well ahead of the EU’s overall 0.7% target and second only to Sweden in aid as a percentage of GNI, Organisation for Economic Co-operation and Development (OECD) data show.

The EU is collectively the largest aid donor, providing $86 billion (€66 billion) from national governments and EU institutions – or 55% of the world total in 2011, according to OECD figures.

European leaders have traditionally seen overseas aid as an extension of their “soft power,” agreeing to provide annual development aid equivalent to 0.7% of gross national income by 2015.

Criticism of austerity

But austerity measures could cost the EU’s aid budget nearly €10 billion for the seven-year period running from 2014 to 2020 under the latest proposals being discussed by EU leaders at their November summit in Brussels.

This has drawn criticism from anti-poverty groups that fought for years for heftier aid budgets. Several countries, including debt-plagued Spain, Portugal, Greece and Ireland, have backslided on their aid spending, OECD data show.

“Cutting aid to the world’s poorest countries by almost 10% is a damaging attempt to balance the EU’s budget on the backs of the world’s poor,” Natalia Alonso, who heads Oxfam International's EU office, said in a recent statement.

After an inconclusive meeting, national leaders postponed the tough budgetary decisions until early 2013. Concord, the European confederation of relief and development organisations, has urged EU leaders to use the delay to rethink looming cuts to overseas aid.

And in its new AidWatch report, Concord calls for better coordination to improve financial efficiency.

“The 27 EU states and the European Commission each have their own aid programmes, a situation which this report shows is creating expensive bureaucracy and unnecessary duplication increasing the costs of administration for recipient countries,” Luca De Fraia, member of AidWatch and ActionAid Italy, said in a statement. “Better coordination between the Commission and member states could greatly improve aid quality.”

Luxembourg spent €603 for each of its 517,000 residents in 2011. The country’s aid spending rose from $402.7 million (€308 million) in 2010 to $413.4 million (€316.2 million) in 2011, but as a percentage of national income, it actually declined from the 1.05% to 0.97%.

Sub-Saharan African nations were the biggest beneficiary of Luxembourg’s aid though Vietnam, Nicaragua and El Salvador were also recipients. Overall, Sub-Saharan Africa received nearly $120 million (€92 million), or 29% of aid, followed by Asia and Oceania at 10% or $42 million (€32.1 million), and Latin America and the Caribbean, 8% or $35 million (€26.8 million).

The OECD analysis of Luxembourg, released on Monday (3 December), praised the country’s commitment to aid, but also recommended that it improve its concentration in specific areas and countries to get more impact for its money. The recommendations are in line with proposals made by the European Commission’s Agenda for Change development programme that would reduce aid to middle-income countries while strengthening funds for the most impoverished nations.

EU’s main donors

The EU’s main donor nations have committed to providing 0.7% of gross national income to development assistance by 2015. Four have exceeded the target, OECD figures show. Here is a rundown of where they stand in 2011, ranked by total contribution:






% of GNI

Germany $14.5 billion €11 billion 0.40%  
United Kingdom $13.7 billion €10.5 billion 0.56%  
France $12.9 billion €9.9 billion 0.46%  
Netherlands $6.3 billion €4.8 billion 0.75%  
Sweden $5.6 billion €4.3 billion 1.02%  
Spain $4.2 billion €3.2 billion 0.29%  
Italy $4.2 billion €3.2 billion 0.19%  
Denmark $2.9 billion €2.22 billion 0.86%  
Belgium $2.8 billion €2.1 billion 0.53  
Finland $1.4 billion €1.1 billion 0.52%  
Austria $1.1 billion €842 million 0.27%  
Ireland $904 million €692 million 0.52%  
Portugal $707.8 million €541.5 million 0.29%  
Greece $424.8 million €328 million 0.11%  
Luxembourg $413.4 million €316.2 million 0.97%  

Eloise Todd, who heads the Brussels office of the ONE anti-poverty group, said of recent proposals to pare aid spending in the EU's long-term budget:

“People across Europe will expect their leaders to do better than this. Despite the tough times, 85% of Europeans still support development aid.  And in recent weeks, a number of governments including France, Denmark and the UK have spoken out in favour of protecting the aid budget. There have also been positive signals from Germany. Now is the time for these countries to stand up and fight to keep Europe’s promises to the world’s poorest. It will be up to EU leaders to make sure all lifesaving aid is protected: cuts cost lives."

Development Commissioner Andris Piebalgs unveiled the Agenda for Change in October 2011, saying it would give more attention to the poorest countries as well as the former Soviet countries on the EU's Eastern flank – reflecting a policy priority of Poland, which held the rotating EU presidency at the time.

But in doing so, emerging countries like India and Brazil could see the gradual loss of development assistance, nations with robust economies but serious poverty. Aid campaigners welcomed the agenda’s focus on the least developed countries, but also fear it could undermine efforts to improve livelihoods in emerging countries that still have large pockets of poverty.

The United Nations has estimated that up to $60 billion is needed annually for the poorest countries if they are to achieve the Millennium Development Goals to reduce poverty by 2015.

  • Organisation for Economic Cooperation and Development: Aid statistics

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