Reclaim the future Global Europe instrument: Blended finance and the illusion of development

As the EU prepares its next external budget, one idea is being treated as the obvious answer: if ODA is under pressure, Europe should “mobilise” private finance through guarantees and blended finance and make external action do more with less. 

This debate is not only about instruments. It is about what kind of partnerships Europe is building in a world where crises don’t stay “outside”. Climate impacts, debt stress, food insecurity, instability and displacement cannot be fenced off. Europe’s interests are tied to whether partner countries can meet core needs, build resilience, and shape their own development pathways. That is why shared challenges require shared solutions—and shared solutions require partnerships built on fair terms, not on what is easiest to finance. 

Our briefing shows why the current “mobilisation” logic is illusionary from a development and partners’ perspective. Not because blended finance or investments have no place, but because when it becomes the default, it changes the terms of partnership—and pulls the budget away from what still sits at its core: poverty eradication as the pursuit of the Sustainable Development Goals, defined by the UN as a blueprint for shared “peace and prosperity for people and the planet”. 

Three corrections should anchor the debate. 

1) Refocus on shared priorities — and fund them with the right tools 

If Europe is serious about partnership, it has to start from what partner countries repeatedly say they need: the ability to meet basic needs, protect people from shocks, and invest in resilience. These are not “local problems.” They shape regional stability, economic prospects, and the prospects for cooperation in a world of shared crises. 

This is precisely why the EU’s development mandate matters: poverty eradication and a focus on the most vulnerable are not charity—they are the foundations of sustainable development and long-term resilience. But they are also the priorities least compatible with de-risking logic. Human development, public services, social protection, climate adaptation, gender equality, resilience in fragile contexts—these aren’t reliably “bankable.” They require predictable, grant-based support and proven public modalities. 

And this is also where the EU gains credibility: partners value cooperation that responds to real needs on the ground, not what fits investment pipelines or geopolitical rivalry. If Global Europe wants durable partnerships, it must protect these core objectives—and ringfence the instruments that can actually deliver them. 

• Create a dedicated and predictable EU international climate finance mechanism—ringfencing a multi-annual envelope, especially for adaptation and loss and damage, delivered through grant-based, non-debt-inducing finance on top of climate mainstreaming. 

2) Limit blending — it doesn’t deliver fair partnerships 

Fair partnerships aren’t defined by the word “partnership”. They’re defined by the terms: who sets priorities, who carries risk, and who captures the benefits—whether cooperation strengthens broad-based local economic development and partners’ needs (local enterprises, jobs and supply chains) or primarily serves Euro-centric investment pipelines. 

Our briefing underlines that blended finance follows risk–return logic. When it becomes the default, it skews Global Europe toward large, investment-driven projects that fit investor requirements—often export-oriented in design and aligned with Europe’s competitiveness agenda—rather than partner-led priorities and inclusive local spillovers. That’s not a fair partnership; it’s a partnership shaped by what is financeable and profitable for outsiders. 

And the briefing references a telling finding from a European Parliament report: reporting on beneficiaries and results cannot distinguish clearly between genuinely locally embedded firms that lack access to international capital markets and “local” firms that are already plugged into them. When you cannot even see whether locally embedded SMEs and domestic value chains are being prioritised, it becomes hard to claim that inclusive local development is a driving objective. That is why blended finance must be limited and disciplined, not mainstreamed as the organising logic of the budget. 

• Set a binding ceiling on blended finance operations—including (investment) grants, guarantees, direct awards and loan components—so only a capped share of ODA can be channelled through leverage-oriented tools. 

3) Make blending accountable — prove additionality, end opacity 

If blending is used, its legitimacy rests on one condition: additionality—proof that EU support unlocks investments and development outcomes that would not happen otherwise. But the briefing shows this remains hard to verify in practice when methodologies are unclear, results frameworks are not public, and performance data is insufficient for meaningful scrutiny. 

That is not a technical detail. It is a governance problem. Without proof and transparency, “leverage” becomes a story that replaces accountability—while public resources absorb risk and political choices move further away from democratic oversight. 

So the line is clear: blending must come with demonstrable additionality, transparent reporting and results frameworks, strong safeguards and complaint mechanisms—and strengthened scrutiny powers for the European Parliament so oversight is continuous, not an afterthought. 

• Establish a European Parliament Standing Rapporteur on blending and financial instruments for the Global Europe Instrument.
• Integrate the inequality marker across all stages of blended finance project cycles. 

Blended finance can have a role. But it cannot be allowed to redefine EU’s international partnerships. 

The choice is simple: either the EU safeguards an external budget that delivers on shared priorities through fair terms, or it drifts into a default de-risking model that struggles to target core needs, blurs who benefits, and weakens accountability—at the exact moment when shared challenges demand credible partnerships. 

Refocus on core needs. Limit blending. Make it accountable.