Europe is undergoing a quiet revolution in how it supports developing nations. From London to Berlin, officials are replacing the language of charity with the language of commerce. Traditional foreign aid — long delivered as grants to alleviate poverty — gives way to investment-driven models touted as “win-win” partnerships. “International solidarity and cooperation remain essential, but the concept of ‘aid’ belongs to the past,” says Rémy Rioux, CEO of the French Development Agency, arguing that the old donor-recipient paradigm must be rethought. Instead of one-sided generosity, European governments now emphasise strategic investments to yield mutual benefits at home and abroad.

Security, Migration, and Budget Pressures

A confluence of political and fiscal forces is accelerating this shift. Europe’s strategic priorities have evolved, driven by concerns ranging from war and migration to domestic economic strains. Many governments feel pressure to divert funds toward defence and security amid Russia’s war in Ukraine and other threats. In Britain, for example, leaders explicitly tied an aid rollback to military needs: Prime Minister Keir Starmer vowed to boost defence spending to 2.5% of GDP and fund it by cutting the aid budget from 0.5% to 0.3% of national income. “National security must always come first,” Starmer said, framing the cut as a painful necessity in a “dangerous new era”.

Curbing immigration is another powerful motivator. Italy’s Prime Minister Giorgia Meloni, elected on a hard-right platform, has bluntly rejected the notion of altruistic aid in favour of deals that keep migrants from leaving Africa. “What needs to be done in Africa is not charity,” she declares. “What needs to be done in Africa is to build cooperation and serious strategic relationships as equals, not predators”. For Rome, that means investing in African infrastructure and economies (dubbed the “Mattei Plan”) to create jobs in migrants’ home countries — and securing Italian energy and business interests — rather than simply writing checks. Other governments in Europe’s north echo this tougher line: the Netherlands’ new ruling coalition plans to trim aid by 2029 while “prioritising the interests of the Netherlands,” shifting funds toward domestic migration control and trade promotion.

At the same time, budget constraints and surging nationalist politics have made foreign aid a prime target for cuts. The populist refrain of “charity begins at home” has grown louder amid economic uncertainty, pandemic debts, and inflation. Even in France — historically a champion of development aid — the government quietly backtracked on a legally enshrined promise to reach the U.N.’s 0.7% aid spending target by 2025. Facing pressure to reduce deficits, President Emmanuel Macron’s administration postponed the 0.7% goal to 2030 and slashed next year’s aid budget by over one-third. A €742 million reduction in 2024 was followed by plans for a further 37% cut (more than €2 billion) in 2025. Such steep cuts, unprecedented in modern French policy, were justified as tough choices in a tight fiscal environment — though critics called it a betrayal of France’s global commitments. Likewise, aid has been swept up in a broader fiscal odyssey in Germany. After a constitutional court ruling forced Berlin to reallocate spending, the development ministry’s 2024 budget was pared down by about 8% (roughly €940 million) compared to the previous year. Germany’s humanitarian relief budget also dropped about 10%. These reductions make it unlikely Germany will maintain its recent 0.7% GNI aid level.

European Aid Budgets in Retreat

The result of these pressures is a marked pullback in many European aid budgets — a trend that spans both EU member states and neighbours like the UK and Switzerland. Recent moves include:

• United Kingdom — Once a leader in aid, the UK has reversed course. It first lowered its long-held 0.7% of GNI aid commitment to 0.5% in 2021 and now plans to sink to just 0.3% by 2027 to free up billions for defence. Aid groups warn this will drag UK assistance to its lowest share of national income in generations, a “short-sighted and appalling move” that will “undoubtedly risk lives,” according to UNICEF.
• France — After years of incremental increases, France is making an abrupt U-turn. The 2025 budget envisions a 35% cut in official development assistance, delaying ambitions to scale up programmes. Lawmakers in Paris concede domestic needs and security priorities are eclipsing foreign aid — a stark change for the world’s fourth-largest donor, which in 2023 still spent €13.9 billion (0.48% of GNI) on development.
• Germany — The eurozone’s largest economy is trimming aid amid belt-tightening. Germany’s 2024 federal budget reduced core development spending to €11.2 billion, about 7–8% lower than in 2023. Humanitarian and crisis aid saw even sharper declines. Further cuts are on the table for 2025 as Berlin prioritises energy price relief and defence.
• Belgium — A new coalition government in Brussels has agreed to cut development cooperation funding by 25% over five years. Belgium’s aid agency has sounded the alarm, with Enabel CEO Jean Van Wetter warning that “disinvestment in international cooperation is a poor decision in our interconnected world” and will undermine Belgium’s global influence.
• Switzerland — Historically, Switzerland has been a steady donor, but the Swiss government is also scaling back. It approved a CHF 110 million reduction in its aid budget and plans to shut down or hand off development programmes in at least three countries (Albania, Bangladesh, and Zambia) by 2028. Swiss officials argue that resources must be focused on fewer priorities as part of a wider cost-cutting drive.
• Italy — Italy’s aid budget has not seen dramatic cuts, but its focus has pivoted under Meloni’s leadership. Rome is redirecting funds toward projects that dovetail with Italy’s geopolitical agenda — chiefly stemming migration. Italian ministers talk of “investment, not charity” and have struck deals, for instance, to finance development projects in Tunisia in exchange for cooperation on keeping migrants from crossing the Mediterranean.

Notably, this contraction is Europe-wide. A recent review tallied seven European donor governments announcing major aid reductions or reallocations in the past year. The collective EU aid effort is sliding: EU institutions and member states gave 0.51% of GNI as aid in 2023, down from 0.56% the year before. In a mid-2024 budget review, the EU reallocated €2 billion of its external aid fund into migration and refugee support — effectively a 7.5% pro-rata cut to other development programmes. As one analyst bluntly summed up, “The door is just closing on aid everywhere we look.”

From Grants to “Blended” Finance

Beyond budget cuts, Europe is fundamentally changing how it delivers whatever aid remains. Rather than simply funding government budgets or health clinics in poor countries, European donors are channelling money into financial instruments — loans, equity stakes, guarantees — that attract co-investors and, ideally, pay for themselves. The buzzword is “blended finance,” which means using a small amount of public or aid money to unlock a larger pool of private capital for development projects. In theory, everyone wins: poor countries get more investment than aid alone could provide, while investors (including European development banks) get risk cushioned by public funds.

All across Europe, aid agencies have been refashioned as mini-development banks. The UK’s famous aid department has been folded into the Foreign Office, and its once grant-focused bilateral programmes are diminished. Instead, Britain is leaning on British International Investment — a government-owned DFI (development finance institution) — to finance projects from renewable energy in India to tech start-ups in Africa, expecting modest returns. France’s Agence Française de Développement (AFD) has likewise expanded its lending, often via its private-sector arm Proparco, under what President Macron calls a “policy of results” approach. “The ambition of this strategic plan is [for AFD] to become a platform for development policy,” Rémy Rioux has said, describing AFD’s evolution beyond traditional aid. AFD now provides billions in low-interest loans for infrastructure and climate programmes, blending French funds with multilateral and private money.

Germany’s KfW Development Bank and its investment subsidiary DEG follow a similar model, financing everything from solar parks to microfinance institutions in developing markets. Even smaller donors have set up investment vehicles — Switzerland’s SIFEM fund, for instance, takes equity stakes in emerging market SMEs. Increasingly, European aid is less about writing checks than structuring deals. As Rioux explains, “Development financing is undergoing a major transformation… Investment has another advantage: it’s built for the long term. It creates lasting partnerships, allows us to track tangible impacts, and demonstrates returns… far more effective and convincing than traditional public aid”. In his view, and that of many peers, mobilising “sustainable resources” through investment is the only way to meet 21st-century challenges as government grants stagnate.

Critically, Europe’s new approach isn’t just about altruism — it’s about mutual gain. Donor governments are so unabashed that they expect strategic payoffs. “International cooperation is not just an act of global solidarity,” says Enabel chief Jean Van Wetter, whose Belgian agency increasingly ties aid to domestic interests. “It is a strategic investment that will bring numerous benefits to Belgium, its businesses and its citizens… By encouraging stability, growth and sustainability in partner countries, Belgium strengthens its own security, economy and international reputation”. This “good for them, good for us” philosophy now permeates European development strategy. Nowhere is it clearer than the European Union’s flagship Global Gateway initiative — a €300 billion plan unveiled in 2021 to fund infrastructure in Africa, Asia, and Latin America. Billed as Europe’s answer to China’s Belt and Road, Global Gateway explicitly seeks “mutually beneficial partnerships” that serve development needs and boost the EU’s strategic autonomy. Projects range from African internet connectivity (benefiting EU telecom firms) to renewable energy grids that could one day supply Europe. “We are moving away from traditional development to mutually beneficial partnerships,” the EU’s development commissioner’s office said, underscoring that the old donor-recipient dynamic is being replaced with joint ventures.

Ripple Effects on Poor Countries

Europe’s pivot has profound implications for countries on the receiving end. In the short term, budget cuts are already being felt in vulnerable communities. Programmes that tackle poverty and disease — but yield no financial return — face an uncertain future. Global health initiatives, in particular, are reeling. Several of Europe’s biggest aid donors have been mainstays of funding for vaccines, HIV treatment, and health systems in Africa. Now, those budgets are shrinking just as need remains high. “Some of Europe’s biggest global health funders are slashing their aid budgets, which health groups fear could spell catastrophe for countries reliant on foreign cash to combat malaria, HIV, tuberculosis,” reports Euronews. Because Europeans are turning inward, health programmes that saved millions of lives may lose support. In 2023, about 10% of European ODA went to global health. Still, going forward, that share must compete with climate projects and private-sector loans for a “shrinking pot of money”. “Many lives are at stake,” warns Dr Michael Charles, head of a major anti-malaria partnership, describing the situation as “quite dire” in countries where donor-backed health services are now at risk.

Lower-income countries could also struggle to attract the kind of private investment Europe is now favouring. The pivot to loans and equity tends to favour middle-income states or commercially viable ventures — where investors see a reasonable chance of returns. Poorer nations, or social sectors like basic education, may be left behind because they offer little profit. Aid advocates note that European funds are flowing increasingly to regions of strategic interest (for example, North Africa for migration control or Ukraine, which alone absorbed nearly €19 billion of EU institutions’ aid in 2023 (Donor Profile: EUI)). Meanwhile, the share going to the least-developed countries has been “trending downward since 2017”. If this continues, the world’s poorest countries may face a double blow: less grant money and limited access to investment capital. Those who do take on more loans could risk new debt burdens down the line. “We have to ensure no one is left behind as we shift to finance and investment,” cautions one development official, noting that purely market-driven aid could bypass fragile states that need help most.

On the other hand, some developing nation leaders welcome the rhetoric of partnership over patronage. African governments have long bristled at the demeaning connotations of “aid” and have called for “trade, not aid” for decades. They see opportunity in Europe’s investment pivot — if it delivers real infrastructure and business growth. In their view, being treated as an investment destination, not a charity case, is a step toward equality. However, they also emphasise that partnerships must be genuine. At a recent EU-Africa forum, several African presidents pointedly rejected mere “EU charity”, saying Europe should address structural imbalances in trade and invest in African value chains rather than offer handouts as a way to buy political favours. In practice, the jury is still out on whether Europe’s new model will benefit developing nations or mainly serve Europe’s interests.

A New Hybrid Model — End of Aid as We Know It?

Is this the end of traditional aid? In many respects, yes. Europe’s development assistance is becoming inseparable from its economic and geopolitical strategy. Whereas 20th-century aid often aimed to foster development for its own sake — rooted in post-colonial moral duty or Cold War diplomacy — 21st-century aid from Europe is increasingly transactional. Grants with no strings attached give way to loans, equity investments, and deals tied to policy conditions (migration management, economic reforms, climate goals). The old model of wealthy nations simply donating money is fading. “The old model of public development aid is disappearing and must be replaced by sustainable and inclusive investment,” says AFD’s Rémy Rioux, who argues that virtually all stakeholders now “agree that we need to rethink the model”. European officials often bristle at the word “aid” altogether. They prefer terms like “cooperation,” “partnership,” and “investment.”

Yet this is not so much an end as an evolution into a hybrid model. Europe isn’t abandoning poorer countries; it is just engaging on different terms. In place of one-way charity, it envisions joint ventures — what one Belgian policy paper calls “reciprocity-based development”. Even as budgets tighten, Europe is leveraging other tools to stay involved abroad: development banks, venture funds, risk guarantees, and diplomatic agreements linking aid to trade. In effect, official development assistance is blended with foreign and commercial policies. It’s no coincidence that the UK merged its aid agency into its diplomatic service or that the EU’s development projects now fall under a strategy explicitly tied to European industrial and security interests. As the European Council concluded its next budget, the goal is to “ensure the [aid] budget advances the EU’s strategic priorities, which are increasingly shaped by domestic interests such as competitiveness, access to raw materials, migration, and security.” This signals a permanent change in mindset.

Whether this new approach can deliver positive results for developing nations remains an open question. Optimists argue that by making development cooperation more about business and mutual gain, Europe will sustain political support and unlock larger pools of money than stagnant aid budgets could. They point to initiatives like Global Gateway and say that if Europe invests smartly in emerging economies, it can help build sustainable industries (from African solar farms to Southeast Asian supply chains) that benefit everyone. Sceptics, however, worry that something fundamental is lost when self-interest justifies aid. There are fears that vital but unprofitable work — fighting extreme poverty, tackling malnutrition, bolstering primary healthcare — will fall by the wayside. They note that global pandemics or climate change require outright grants and global solidarity, not investments that expect a financial return.

European officials insist they are not retreating from global development, just modernising their approach. “France is not stepping back from its international role,” Rioux insists, citing Europe’s $150 billion collective development contribution — roughly three times the U.S. level. But he and others acknowledge the need to “build a more resilient and efficient model” that can withstand domestic political winds. That model increasingly blurs the line between aid and business. It treats poorer countries less as beneficiaries and more as partners — or, in some cases, markets. The Wall Street Journal once dubbed this trend “aid as investment”, and today it’s an apt description of Europe’s new paradigm. Traditional aid may not be entirely dead, but it has undeniably been subsumed into a broader strategy of strategic partnerships.

As Europe resets its development playbook, the world is watching to see if this grand experiment produces genuine development — or if “mutual benefit” mostly benefits the donor. For millions in Africa, Asia, and beyond who have depended on European aid, the hope is that this new era will bring a different rhetoric and tangible progress. If Europe’s investments can drive growth and stability in poorer nations while satisfying European taxpayers, it could herald a new global development model for the 21st century. If not, retreating from traditional aid could leave a void that other powers — or crises — will fill. The only certainty is that Europe’s role in international development is changing profoundly, in real-time, trading in the old charity mindset for something more hard-nosed and, it believes, sustainable for the long haul.