German Development Policy – Between Global Needs and National Debates

By Sven Grimm / Part of the European Development Policy Outlook Series

The global crises are numerous and the requirements for international engagement are increasing for Europe – and eyes are turning to Germany, the largest country in the EU. Multiple crises require a wide range of measures: from climate policy and the closely related energy transition to securing trade routes in the Gulf of Aden, from responding to diplomatic and humanitarian needs in the Middle East and the Sahel to providing financial and military support for Ukraine. How does all this shape the context for German development policy change? What political developments are likely to drive German global engagement?

Motives for German development policy

Development policy, until the 1980s, was a popular instrument of a partially sovereign middle power in the systemic competition between West and East, with the respective two German states being at its centre. Since the 1960s, it was also partly a resource-rich “secondary foreign policy”, sometimes decried as German “chequebook diplomacy”. Traditionally located in an independent federal ministry, in German coalition governments, development is often headed by a different party than the foreign office. This system with dedicated agencies for technical cooperation and development finance, though bulky, has a reputation of being a globally committed and technically adept “honest broker”. This was and is an investment in the future: Partners’ domestic progress and geopolitics have boosted their self-confidence, which proportionally diminishes what “aid” money can buy.

German development policy has consciously been more than poverty reduction policy. Keywords such as “global structural policy” or “preventive security policy” are a German tradition, also resulting in relatively strong engagement in middle-income countries, not unlike the EU. Nevertheless, parts of the German public still discuss development policy as “aid policy”, as a kind of “’hand-outs’ when there is plenty”. Others overburden development policy with a latent “omnicompetence assumption”: whichever crisis, development money will be the answer. Both simplistic views are not living up to challenges.

Development financing – discussions about apples and pears

With 35.64 billion US dollars in 2022, Germany is the second largest provider of OECD-defined Official Development Assistance (ODA, vulgo: aid). This corresponds to an ODA ratio (ODA as a percentage of gross national income) of 0.85 per cent. These are impressive, realised by various government constellations within the last decade only. Multitudes of crisis, though, have the unfortunate effect that engagement risks spreading too thin to be effective.

At the same time, current debate is on about the level of development policy spending in Germany, with an often implicit message that money should rather be spent “at home” or on different priorities. New major necessities have an impact: Russia’s aggressive policy requires reactions. Germany is the largest European supporter of Ukraine, requiring (and binding) budgets. Military spending squeezes the federal budget, as arms and equipment are necessary and expensive. On top comes support to Ukraine’s society and physical reconstruction, which is equally important.

The calculation of ODA, however, contains distortions. For instance, the costs for the care of refugees in Germany, primarily borne by the federal states and municipalities, are included. Furthermore, the ODA figure comprises (calculated) costs for students from ODA recipient countries. The internationalisation of universities is having an impact here, increasing “contributions” from the federal states: Between 2016 and 2021, the sums almost doubled, also explaining, by the way, why countries like China and India are still “major recipient countries” of German ODA, even though bilateral aid to China discontinued already in 2009. The number of students from these populous countries in Germany is relatively high. In addition, German institutions provide large development loans to India and others. This is not “wasted money”, as populists would call it. Loans help to shape transitions – including public transport systems in middle-income countries. And they are being repaid.

Secondly, global interconnectedness increases challenges of policy coordination. While ODA figures increased steeply, the share of the Federal Ministry for Economic Cooperation and Development (BMZ) has shrunk. The BMZ’s relatively low share is an illustration of new complexities and new challenges in foreign relations. In particular, climate financing has multiplied, just as the German share in the Global Alliance for Vaccination and Immunisation (GAVI) has sharply increased by 2022. In 2022, BMZ was responsible for a bit less than half (47.8%) of German ODA, the foreign office, in charge of humanitarian assistance, for 14.5%, the federal states for around 6%. Other federal ministries – climate, health, interior, etc. – account for the rest, which puts a major challenge on policy coordination among non-hierarchically operating ministries, specifically in coalition governments.

Tight financial leeway, political polarisation

The fact that foreign-oriented expenditure is in Germany’s long-term self-interest must be emphasised. In the politically stretched coalition, the finance minister calls for greater austerity, and his party, the smallest coalition partner in the federal government, puts the brakes on a state co-financed transition in energy and transport policy. The constitution puts a break on funding the federal budget by debts, and liberals as well as the conservative opposition are unwilling to relax the restrictive rules.

In view of public disputes between a three-party coalition and the electoral success of the right-wing populist party “Alternative for Germany” (AfD), the political discourse in Germany is currently shifting to the right. The CDU/CSU opposition  also features voices to cut spending abroad, presumably in an attempt to steal a march on the AfD. Currently under discussion are “Peruvian cycle paths”, which are allegedly financed by German taxpayers while German infrastructure requires investment (and, implicitly: does not receive enough). Priorities – defended as cost-efficient funding for climate mitigation – can certainly be questioned. Yet, the critical point is twisted, as this project is based on refundable loans.

Outlook – Development policy under expectation and finance pressure

National sustainability and international development policy thus find themselves in a difficult situation: As in other parts of the OECD world, there is undisputable need for international engagement in an interconnected world. In small but far growing parts of the population, it triggers the feeling that foreign engagement increasingly spends scarce resource – both finance and political attention – that’d be better used “at home”, not least after an exhausting COVID pandemic with lasting effects on social cohesion.

At the same time, the need for Germany to engage globally clearly increases, while all engagement comes with the limitation of a middle-power. Politics for the global common good is rhetorically always potentially an excessive challenge for a middle power. This applies to a value-based policy that will inevitably come up against global power constellations. However, it also applies to an interest-based policy “of old” that comes up against financial limits, particularly strained by strong geopolitical rivalries and the increasing effects of climate change and the rise in natural disasters. This is despite the strong growth in budgetary resources in recent years. A key concern thus is on which countries (and themes) to focus. Attempts to categorise (and focus) partner countries was already begun under the previous administration, yet, in some instances was overtaken by crises.   

Ultimately, Germany needs to work in concert with partners, with the EU as a decisive “domestic” factor, and other global partners seen as more difficult. In many cases, cooperating in global clubs or multilateral formats also means engaging with otherwise not-so-like-minded partners for the greater good. This seemingly “muddy” politics puts extra demand on communication skills of political leaders: they need to explain. An already difficult constellation may become more pronounced in 2024 after elections to the European Parliament and in the federal states in the East of Germany – not to mention the US. The continuing need for coalition governments in Germany is likely. However, for German development policy, this is only mildly reassuring.

Sven Grimm is Head of Research Programme on “Inter- and Transnational Cooperation” at the German Institute on Development and Sustainability, IDOS (formerly: Deutsches Institut für Entwicklungspolitik, DIE) in Bonn, Germany, and is leading the team on knowledge cooperation and training at the institute. Sven is a political scientist. He has conducted research e.g. on Chinese African ventures and their implications for European international cooperation, and has published widely on both the European Union and on China’s Africa relations. Sven is Extraordinary Professor of Stellenbosch University, where he was director of the Centre for Chinese Studies between 2010 and 2014. Knowledge cooperation, work on emerging global powers as well as the science-policy-interface are topics in his research programme.

Image: beasternchen on Pixabay

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