Blended finance and the illusion of development: Lessons from the EFSD+ for the next EU budget

The proposed Global Europe Instrument (GEI) for the EU’s 2028–2034 budget signals a major shift in EU external action. Rather than reinforcing poverty reduction and inequality as core objectives, it risks deepening the move towards investment-driven approaches that prioritise private finance and EU economic interests.

Drawing lessons from the current European Fund for Sustainable Development Plus (EFSD+), this report finds limited evidence that expanded use of blending and guarantees delivers meaningful sustainable development outcomes. The proposed GEI would further mainstream these tools, reduce the share of grant-based aid, and expand guarantees — raising concerns about transparency, accountability, and alignment with the SDGs and development effectiveness principles.

As negotiations begin, the report calls on co-legislators to safeguard grant-based funding, regulate investment instruments, strengthen transparency, and ensure EU development finance remains focused on sustainable development outcomes.