An Africa-Europe Grand Bargain on the Future of Finance

This Op-Ed was first published by the Eu Observer. Read it here.

This month marks twenty-five years since African and European leaders met in Cairo for the first Africa-Europe Summit. It was a time when much of the world was embracing multilateralism and globalisation. The African Union was established soon after, China joined the World Trade Organization, and the European Union was expanding. While it had its imperfections, this era of multilateralism underpinned significant efforts to lift millions of people out of poverty, protect nature and fight climate change.

Fast forward a quarter of a century, the multilateral architecture is creaking and globalisation is reversing. Increased isolationism, spiralling debts and rising insecurity has seen many high-income countries cut development aid, favouring defence spending and domestic interests. With each geopolitical shift, financing has also shifted. And it is the world’s most vulnerable who are left to pay the price.

The reality is that multilateralism now faces a dual crisis - one of trust and one of financing. If the system cannot meet people’s needs, trust in its viability will erode.
We need a fundamental shift - a ‘Grand Bargain’ to transform the global financial landscape to deliver shared prosperity. The Africa-Europe Partnership is well positioned to champion such a Grand Bargain through ‘win-win’ multilateralism rather than a zero-sum approach to global economic and environmental governance.
Increased competition does not have to equal increased isolationism. Instead, Africa and Europe together could rethink traditional financing models and lean into innovative solutions that bring real change—moving away from outdated models that push developing nations further into debt.

Globally, 3.3 billion people live in countries whose debt payments exceed spending on health or education. The debt crisis has become an investment crisis, and by extension a security one, limiting country capacity to ensure critical economic, social and environmental safety nets. This is neither fair nor sustainable.

With G20 Finance Ministers, the IMF, and the World Bank Group gatherings this week, we have an opportunity to set in motion the required paradigm shift, underpinned by three core actions.

First: Addressing the flow of funds. Too often, financing from international institutions is being used to service debts to private creditors and non-Paris Club lenders. In 2024, half of the $102 billion in debt service paid by African countries went to private creditors.

The Financing for Development Lab’s Bridge Proposal offers a potential solution to empower countries to break free from the debt trap and grow their economies. It’s a three-pronged approach where debtor countries develop an ambitious national investment push; multilaterals scale up their support; and all other creditors refrain from withdrawing capital prematurely.

Second: Putting in place global solidarity levies. Adopting internationally coordinated levies on heavy emitters and polluters - sectors benefitting from globalisation and yet undertaxed - would raise essential funds and increase tax fairness.

The IMF recently estimated that taxes on international shipping and aviation could raise up to $200 billion a year in revenues by 2035. Achieving global consensus is, however, increasingly difficult in the current context. A pragmatic ‘coalition of the willing’ approach is needed, whereby a group of countries can lead the way in implementing coordinated levies at domestic level and commit to use the proceeds to invest in resilience and global public goods.

But 14 is not enough. Other nations need to follow suit and align on how to establish such levies across multiple industries without exacerbating inequalities. Safeguards to protect developing countries and their citizens could include designing levies in the most progressive way, factoring per capita emission intensity and development stages, alongside dedicating a fair share of revenues to the most climate-vulnerable nations, channelling proceeds toward green investment and adaptation.

Third: Tackling illicit financial flows. Africa is haemorrhaging money from illicit outflows to the tune of at least $88 billion annually, equivalent to losing 3.7% of its annual GDP.
A more coordinated Africa-Europe approach to curbing illicit financial flows is needed. This means enhancing accurate trade invoicing, tax compliance, corporate responsibility, and information sharing by leveraging advanced technologies and capacity building to track flows and generate innovative asset repatriation methods.
These three shifts are by no means the only actions needed, but they can advance an Africa-Europe partnership that is built on shared respect, equity and ambition. And, critically, they can help steady a creaking multilateral financial system that, as a precondition for resilience, must address imbalances in representation and amplify the Global South’s voice.

With the world undergoing rapid geopolitical shifts, we must avoid dynamics that threaten our planetary future, fuel inequality, and undermine win-win multilateralism. Now is the time to choose bold, innovative ideas that unite us in our shared pursuit of a peaceful, prosperous, and sustainable future.

Background information:

• The Africa-Europe Foundation’s Women Leaders Network (WLN) provides a platform for eminent and strong-minded women to debate some of the world’s greatest challenges and to advocate for joint actions by Africa and Europe. They focus on tasks which require urgent attention and offer a frank assessment of what needs to be done to achieve progress for our mutual benefits as partners.
• Institutionally, the first Africa-Europe Summit took place in Cairo on 3-4 April 2000, followed by the 2nd Summit that took place in Lisbon, Portugal, in December 2007, which adopted an Africa-EU Joint Strategy (JAES) and its Action Plan. The most recent 6th EU-AU Summit took place in Brussels in February 2022, where partners adopted a “Joint Vision for 2030”. The upcoming 7th Summit is set to take place in late 2025 under the Angolan and Danish respective AU and EU presidencies.
• “An updated bridge proposal: Towards a solution to the current sovereign debt crises and to restore growth” by Ishac Diwan, Martin Kessler, Vera Songwe, Martin Guzman, Joseph E. Stiglitz. Vera Songwe is a member of the Africa-Europe Foundation Women Leaders Network.
• The [Global Solidarity Levies Task Force: For People and the Planet](https://solidaritylevies.org/https://solidaritylevies.org/ brings together countries from around the world to advance options for international levies that will raise much needed revenue to fight against climate change and support development and nature. It complements other initiatives including the call for a UN Tax Convention and the OECD’s two-pillar global tax reform. The task force will conclude its work at COP30 in 2025, with the objective of bringing together a coalition of the willing ready to implement progressive international levies (incl. levies on fossil fuels, financial transactions and aviation) and use the proceeds to invest into climate and development. Laurence Tubiana, CEO of the European Climate Foundation and member of the Africa-Europe Foundation Women Leaders Network is a Secretariat Co-lead, together with Ismael Momoniat, formerly Acting Director-General of South Africa’s National Treasury. Below data from November 2024 Progress report.

Signatories
Africa-Europe Foundation Women Leaders Network Members, including:
• Mary Robinson, Honorary President of the Africa-Europe Foundation, member of the Elders and former President of Ireland
• Ellen Johnson Sirleaf, Honorary President of the Africa-Europe Foundation, Former President of the Republic of Liberia, Nobel Laureate
• Abla Abdel Latif, Executive Director and Director of Research at the Egyptian Center for Economic Studies
• Hanan Morsy, Deputy Executive Secretary and Chief Economist of the UN Economic Commission for Africa;
• Leah Seligmann, CEO of The B Team
• Gunhild Stordalen, Co-Founder & Executive Chair EAT
• Laurence Tubiana, CEO of the European Climate Foundation