EU DEVELOPMENT POLICY

THE CASE OF DEBT RELIEF

Supervisor: F. Arab
N. Kwanjai K. Diakidis
T. Krume
C. Tonne
Pigeonhole 501
Date: May 28, 2009
2E Making a European Market
Version: Final Draft
Words: 4953
Outline

Abbreviations……………………………………………………………………...x

1. Introduction……………………………………………………………………1

2. History of the EU Development Policy………………………………………..1

3. Debt Relief under the HIPC Initiative…………………………………………3

4. Economics Behind EU Development Policy…………………………………..4

5. Case Study: HIPC in Ghana…………………………………………………...9

6. Debt Relief - Shortcomings and Recommendations……………..…………..12

7. Conclusion……………………………………………………………………13

8. References……………………………………………………………………15

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Abbreviations

ACP African, Caribbean and Pacific countries

CA Cotonou Agreement
CAP Common Agricultural Policy
EDF European Development Fund
HIPC Heavily-Indebted Poor Countries Initiative
IMF International Monetary Fund
MDGs Millennium Development Goals

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1. Introduction

The European Union regards development as a crucial component in its external

actions. In order to eradicate poverty, which is its main objective, EU development
policy in a broader context is framed in accordance with the United Nation‟s
Millennium Development Goals (MDGs) of 2000 (EC, 2009a).
As most of the EU‟s member states used to possess former colonies in the
African, Caribbean and Pacific (ACP) area, its foreign aid and development measures
are primarily aimed at assisting economic trade and development of those countries
situated there. Taken policy measures are based on the currently valid „Cotonou
Agreement‟, established in 2000. Alongside this, the EU follows specific programs,
such as the „Heavily-Indebted Poor Countries‟ (HIPC) Initiative, which aims to
diminish the external debt of the world‟s most indebted and economically
underdeveloped countries to sustainable levels (EC, 2009b). Nevertheless, scholarly
circles repeatedly argue that debt relief does support short-term economic
development but evokes financial dependence in the long run.
In the light of these developments, this paper aims to answer the following
question: To what extent does the EU‟s debt relief policy enhance economic growth
and development in developing countries? This is asked in order to obtain a clearer
picture of development policy, particularly EU development policy. To answer this
question, this essay will cover both theoretical concepts of development policy and
debt relief, as well as an application of these to a concrete case study. First, it tackles
the general evolution of EU Development Policy and debt relief in particular. Second,
debt relief is analyzed from an economic point of view. Subsequently, the case study
on Ghana, a country that has received debt relief, is entailed in order to widen the
essay‟s analysis from a purely theoretical scope to a more reliable practical
insight. Finally, this paper evaluates potential disadvantages of debt relief measures
and gives recommendations for future policy actions.

2. History of the EU Development Policy

The EU‟s development policy can be traced back to the Schuman Declaration of
1950, in which the topic of development assistance to Africa was emphasized as an

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essential objective of the former European Community (EC). The subsequent Treaty
of Rome formally introduced development aid into the EC‟s framework and
constituted the basis for the creation of the European Development Fund (EDF),
which since then is responsible for coordinating and allocating financial development
assistance (Smith in Cini, 2007, p. 299).
The first legal basis for trade cooperation between the EC and African
countries was created by the 1963 Yaoundé Convention in Cameroon and the
following second Convention in 1969 after the former‟s expiration (EC, 2008). The
main emphasis of these Conventions was the cooperation with Sub-Sahara African
states. More precisely, the Yaoundé Conventions confirmed to respect the national
sovereignty of all participants, thus promoting a partnership of equals (Smith in Cini,
2007, pp. 229-230).
In the following decades, the EC continuously increased its developmental
policy, both with regards to geographical and strategic enlargement. This resulted in
the Lomé Convention of 1974, which – on a geographical level extended the EC
development assistance from African to also Caribbean and Pacific (ACP) countries.
One of the reasons for this geographical expansion was the accession of the UK (EC,
2009). Because of the UK‟s colonial history in both the Caribbean, as well as the
Pacific area, EC (or later EEC) developmental aid strategies had to be widened to
countries in these two regions. In structural matters, the following Lomé Conventions
mainly focused on trade and political aspects. In addition, it defined three guiding
principles, namely, 1) the abolishment of non-reciprocal trade preferences for the
majority of exports from ACP countries to the EEC; 2) the recognition of equality
between partners, sovereignty, “mutual interests and interdependence”; 3) the freedom
of every state to possess and make its own policies, in the framework of the
Conventions (EC, 2009). Particularly non-reciprocal trade preferences were regarded
as crucial cause for failed development aid within economic cooperation (ibid.).
In 2000, the European Union tried to compensate major shortcomings of the
previous agreements through adopting the Cotonou Agreement (CA) which widened
the scope of EU Development Policy to the promotion of human rights, democratic
principles and the rule of law. This implies a degree of conditionality as countries risk
a repossession of the funds allocated to it by the EU (CA, 2005). As the CA is being
revised every five years, the latest change of 2005 introduced the principle of
conditionally (EC, 2009). It involves a new sanction instrument with which

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development aid can be suspended in cases of breaching the CA‟s conditions. Thus,
the CA profoundly amended the EU-ACP developmental partnership and constitutes
its current framework of EU external action in this area (Santiso, 2002, p. 16).
In a nutshell, it becomes clear that EU development policy is cross cutting as
economic assistance is linked to issues of human rights and good governance.
Consequently, to the EU, financial assistance is dependent on both above mentioned
areas in order to be able to achieve long-term sustainability within the respective
developing country (EC, 2009).
As the EU development policy aims to achieve the MDGs, including poverty
reduction, debt relief can be regarded as one instrument to accomplish these goals
faster. Therefore, the following section will examine debt relief and the initiative as
such as well the EU‟s role in it.

3. Debt Relief under the HIPC Initiative

Worldwide, countries are confronted with enormous debt burdens towards various
multilateral and bilateral institutions that they cannot manage. It additionally hinders
their economic growth as well as their fight against poverty. Launched in 1996 and
enhanced in 1999, the World Bank and International Monetary Fund (IMF)
established the Heavily-Indebted Poor Countries (HIPC) Initiative, which is “a
comprehensive approach to debt reduction” (IMF, 2009). It stems from the Lyon G8
summit in France in 1996, where the G8 decided to strengthen joint efforts in the field
of development policy (G8 Information Centre, 1996). By the end of 2007, $51 billion
as debt reduction packages in total were given to eligible countries (IMF, 2009). Thus
the aim of the HIPC initiative is to lower the external debt burden of the “poorest and
most indebted countries” to “sustainable levels” (EC, 2009c). The initiative includes
multilateral and bilateral public creditors as well as commercial creditors (ibid.).
The EU has financially supported the program since its beginning in 1996, and
acts as “creditor as well as donor” (ibid.). As a donor, the EU assists through the
HIPC Trust Fund, run by the World Bank with special focus on the ACP countries
(EC, 2002). In total, €1.6 billion have been given so far, with €934million to the Trust
Fund and €680 million given beyond HIPC. EU debt relief to the Trust Fund is
financed by the EDF (EC, 2009c).

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 Currently, 41 countries are entitled for the HIPC, most of them situated in
Sub-Saharan Africa. There are three groups of countries within the HIPC program. 24
countries, among them Ghana, have reached the completion point, thus been given
irrevocable debt relief from the IMF and additional creditors. Eleven countries have
attained the decision point, with several of them already obtaining interim HIPC
Initiative debt relief. Six countries are classified as eligible but have not yet reached
the decision point (IMF, 2009). It furthermore needs to be noted that debt relief is
only granted by the IMF Executive board and the International Development
Association (IDA) under certain conditions. A country eligible for debt relief has to
prove a “track record of reform and sound policies through IMF and the IDA–
supported programs” (ibid.); it also has to develop a Poverty Reduction Strategy Paper
(PRSP). Thus, countries being given debt relief support are partly being guided
through the process.
This section gave a brief overview of the HIPC initiative as well as the EU‟s
role in it. The basis is now set to turn to the economics behind EU development policy
on a broader scale in the following section.

4. Economics Behind EU Development Policy

In order to investigate the impact of debt relief for both the giver and the donor, in this
case the ACP countries and the European Union, it is crucial to define economic
development. Economic growth and development are often confused, because some
people use them as synonymous. But they have distinct differences. Whereas growth
is quantitative and "refers to the increase in an economy's real gross domestic product
(GDP) and income over time" (Ezeala-Harrison, 1996, p. 3), economic development
is much more qualitative in nature. It “involves the process through which a country
or region achieves economic growth in addition to structural transformation of its
economy” (Ezeala-Harrison, 1996, p. 10). Accordingly, development policies are
aimed not only to improve economic growth, but also to covers humanitarian aspects,
such as to prevent crises.
EU development policy is very controversial, because of the lack of
effectiveness. Although the CA for instance, set out debt relief for HIPC countries, it
is insufficient from an economics perspective. The ACP countries are highly
dependent on capital accumulation, because sustainable economic growth in these

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countries can only be fostered by investments and savings. Therefore, this chapter
demonstrates EU‟s development policy from an economic point of view. Is EU
development aid effective?

Table 1 – The vicious circle of poverty1

In order to create new trade-partnership agreements with developing countries,

stability and growth are essential. Ragnar Nurkse, an Estonian-descended economist,
argued for the existence of the so-called vicious circle of poverty. In Table 1 one can
see that, according to him, “the most important circular relationships of this kind are
those that afflict the problem of capital formation in economically underdeveloped
countries.” The main problem of economic development is accordingly “a problem of
capital accumulation”. (Nurkse, 1952, pp. 1-3).
The vicious circle of poverty demonstrates his concept, because low income
leads to low savings, which lowers the investments. Because of low investments, there
is less productivity, which will decrease the income, which then leads to low
consumption. Thus, in order to overcome this vicious circle of poverty, “the low-
income economies require progress on a broad front, with simultaneous expansion of

1
Source: reproduced from The World Bank (2009). Poverty. Retrieved May 5, 2009, from:
http://www.worldbank.org/depweb/beyond/beyondbw/begbw_06.pdf

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industries that support each other and increase the chances of success” (Grant & Brue,
2007, p. 482).
As a result, EU development policy is aimed to break countries out of this
circle. Several instruments are, according to Nurkse, helpful to break them out of the
circle. Firstly, better educational systems increase incomes. Secondly, technological
capabilities improve productivity. Thirdly, direct foreign investments increase the
amount of capital accumulation and finally, financial deepening increases savings.
The main problem, however, is the lack of capital, which is fostered by instability
within the regions. Debt Relief is one instrument of the EU, in terms of development
aid, which should enhance capital accumulation.
Chenery and Strout (1964) came up with the Dual-Gap Model in
macroeconomics, which presents an analysis of low growth concerning savings as
well as foreign exchange limitations. It is based on the Harrod-Domar growth model
and basically claims that investments, public expenditures and exports must equalize
savings, taxes and imports, if a country wants to achieve balanced growth. So, that
means two things for underdeveloped countries. Because they have low incomes, they
do not have marginal propensity to save. Accordingly, because S=I, there is too little
investment to achieve the target growth rate. This is very similar to Nurkse‟s circle of
poverty. Moreover, a negative trade balance decreases the GDP, which will lessen Y
(GDP). Because Y is equal to C+G+I+X-M, a second gap is established. This is called
the Dual Gap. In order to fill in these gaps, foreign investments are needed, so that the
savings ration goes up. In addition, foreign aid which can be regard as investment will
also close this gap. The Harrod-Domar formula (g=s/c  s=I) provides insight in the
amount of investments needed to outbalance the gap. Thus, the amount of investment
is marginal, because it demonstrates how much to invest, so that Y (GDP) increases.
Thus, the marginal propensity to save has to be increased, so that the savings ratio and
investments rise. As a result, foreign investments are needed, because otherwise
underdeveloped countries will suffer from their current account (trade deficit),
because it will hinder sustainable growth. Khan emphasized the need for aid, because
he argues that “within the dual gap formulation, it is also usually the case that aid is
more productive when the foreign exchange constraint rather than the savings gap is
binding” (Khan, 1998).

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Table 2 – Dual Gap Analysis
I+G+X=Y=S+T+M I = Investment
(I + S) + (G – T) = (M – X) G = Public Expenditure
X = Exports
(I+S) = Investments + Savings S = Savings
(G – T) = Budget deficit T = Taxes
(M – X) = Trade imbalance M = Imports

The dual-gap analysis is a static model in how to calculate growth. However, it

reveals limitations. Turnovsky (2005) argues that “one of the main purposes of
directing the foreign aid to public investment is to stimulate private investment and
capital accumulation, which is inherently a dynamic process. This suggests that the
role of foreign aid in the development process can be studied satisfactorily only by
embedding it in a carefully articulated dynamic framework” (ibid.). As a result, for
the receiver, foreign aid is essential to break out of the circle of poverty and to close
their gaps. It does not matter whether they receive aid from bilateral, multilateral or
commercial sources, as long as they are able to foster sustainable development.
The giver, however, has a different perspective on development aid. For the giving
countries efficiency and the success of aid is crucial, because development aid is very
controversial among EU member states So, the question arises in how far aid, debt
relief specifically, is an effective instrument to promote growth & sustainable
development and reduce poverty? According to the implications of the dual-gap
analysis and the vicious circle of poverty, the gain in overall welfare should be vast.
However, the reality shows that foreign aid is ineffective. Alesina and Dollar (2005)
highlight the fact that development policies have no significant influence on the
recipient‟s macroeconomic policies and their growth (ibid.). Furthermore, G.W.
Gunning argues also for wasted aid, meaning that if a country does not have
admittance to capital markets, it is often for reasons, which would make aid
ineffective. Thus, aid can be often insufficient. Nonetheless, he also mentions “aid can
be effective after shocks” (2005, p. 22). Thus, although aid is effective under certain
circumstances, it is often wasted.
One reason for the ineffectiveness of aid is “the poor performance of the
bureaucracies of the receiving countries“(Alesina & Dollar, 2000, p. 55). In addition,

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Alisina & Dollar argue that the receiver does not get aid because of characteristics of
maintaining democratic and/or open values, but rather on a colonial basis. These
characteristics are essential for sustainable growth, because stability and good
governance is needed (Epstein, Gent, 2009). Alesina & Dollar (2005) claim that the
pattern of flows of foreign aid is inadequate. They argue that “the allocation of
bilateral aid across recipient countries provides evidence as to why it is not more
effective in promoting growth and poverty reduction” (p. 55).

Table 3 – Foreign Aid & Development Distribution2

Table 3 demonstrates clearly that the reasons for distributing foreign aid are rather
colonial ties instead of the necessity of stability through democratic values. But
because stability is an important factor for foreign investments and capital
accumulation, new firms will not enter the market or make investments in that
country. As a result, development policies are not efficient, because of bad judgments,
bad infrastructure and misallocation of savings (see Alesina & Dollar, Gunning). They
still have positive effects on growth and sustainable development in stable countries
with good governance (see Epstein & Gent, 2009).
To conclude, the receiver benefits from foreign aid in terms of foreign
investment and savings, as well as, decreasing poverty. Receiving countries cannot
have sustainable growth without foreign aid. Therefore, it is needed to increase the

2
Source: reproduced from Alesina & Dollar (2000) p. 42.

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total welfare of the underdeveloped country. But because of instability and incorrect
allocation of policies, it is ineffective. So if aid should work as a solution to market
imperfections, development policies have to be more conditional, fungible and
implemented in stable and open countries. As a result, the CA introduced the principle
of conditionality, demonstrating that the EU is aware of the fact that false allocation
of resources does not help countries out of poverty. The following section now turns
at a concrete case study to analyze EU development policy regarding Ghana in
general and the HIPC initiative in particular.

5. Case Study: HIPC in Ghana

After having covered both theoretical concepts of development policy and debt relief,
it is now appropriate to turn to a real world example in order to realistically illustrate
the outlined concepts. In order to do so successfully this section provides a case study
on Ghana. This case study mainly pursues the goal of establishing whether the EU‟s
debt relief policy has really helped Ghana enhance economic growth and development
or not. Evidence for this case shall be brought forward in terms of concrete facts and
figures as well as a broad socioeconomic analysis, serving to provide a general
overview.
Economic analysis quickly reveals what a high economic potential Ghana
possesses. Despite this fact, Ghana‟s unfavourable economic structure has remained
the same for decades. Up until 1983 barely any successful efforts were made to move
away from the sole exportation of primary products such as cocoa, bauxite, timber as
well as gold (European Commission, 2006). As it is generally known, high
dependency on primary, mostly unprocessed, products may be very harmful to the
economy as the terms of trade are constantly worsening for unprocessed raw/primary
products. However, since 1983 Ghana has been devoted to change this situation by
means of committing to strict economic reform projects. With the support of
international donors Ghana has been able to curb economic growth between 1991 and
2002 by 4.2 percent per annum (European Commission, 2006).
As part of Ghana‟s initiative to revive economic growth in 2002 it applied for
the HIPC programme. The main thought behind doing so was to free itself from the
enormous fiscal burden which accumulated together with external foreign debt.

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Accumulating interest rates and only minimal effective government revenue made it
almost impossible for Ghana to invest in education, infrastructure and health care
(IMF, 2005). Before reaching the HIPC completion point in 2004, Ghana went
through massive restructuring of its administration, practices and more. The debt
relief has been steadily provided ever since 2004 and will continue to be provided for
decades to come. Present calculations for 2004-2011 show that as part of the HIPC
programme approximately $215 million USD of debt will be relieved each year
(European Commission, 2006).
In order for Ghana to reach the HIPC completion point it had to overcome
many obstacles, including poverty reduction, macroeconomic performance and public
expenditure management. All of which have been, according to Mrs. Alphecca
Muttardy, the IMF Resident Representative in Ghana, “overall satisfactory” (IMF,
2005). Furthermore, she states that “In particular, Ghana has enjoyed relatively strong
economic growth with significant reduction in the rate of inflation in the past three
years.” In general Ghana has managed to construct and keep a sufficiently good
record with regards to implementing Ghana Poverty Reduction Strategy (GPRS),
while at the same time improving its public expenditure management system. This
entire process of setting conditions, observing and assessing has made sure that Ghana
will be able to act under the right measures when receiving debt relief through the
Multilateral Debt Relief Initiative (IMF, 2005). Ghana has established a strict plan
outlining what will be done with the funds made available though the aforementioned
initiative. Up high on its priority list is the investment in health programmes,
education as well as improving infrastructure in rural areas (BBC News, 2002).
However, as with almost any plan envisaged on paper, there are problems in
real life and variables unaccounted for, which in turn inevitably results in losers. First
and foremost the trading agreements from all sides want (in the long-run) one thing
from Ghana (and other ACP countries): their removal of trade barriers. This removal
of trade barriers has proven to be an obstacle to the fight against poverty. Oftentimes
trade barriers are not removed on both sides, meaning: Ghana complies but the EU
keeps up barriers to trade and occasionally practices dumping, thereby completely
destroying local markets. Adjei Henaku, the Executive Secretary of the Ghana
Farmers‟ Association, put it like this: “It is extremely difficult to figure out how
the dumping of cheap poultry parts-like legs, wings, necks - that have no markets
in the EU anyway, could be permitted in the name of free trade that is supposed to

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promote competitiveness” (GAWU, 2004, p. 6). Another example is provided by the
EU‟s export restriction on Ghanaian cocoa using the chocolate directive. Considering
that cocoa is Ghana‟s main export product to the EU, the restriction is quite
devastating. Furthermore, bananas are prone to extremely strict regulations on size,
weight, colour and shape. Due to this barrier banana exports from Ghana to the EU
are severely restricted. Making matters worse is the fact that the banana farms in
Ghana employ a large part of the poorer segment of the population, which means that
the poor will become even poorer – which in turn further worsens the already less
than optimal Gini coefficient (GAWU, 2004, p. 5).
With regards to shortcomings and recommendations, it should be mentioned
that one sided removal of Ghanaian trade barriers will in the long-run only benefit the
European Union, which upholds its trade barriers and engages in the dumping of
goods in such markets. It is generally known that dumping destroys local markets by
means of providing certain agricultural products below the price of local farmers. This
way local farmers as well as business are forced out of business due to the fact that
they are unable to compete at such low prices. The main source of dumping has been
identified to be the Common Agricultural Policy (CAP) which the European Union
has been upholding for decades. Thus, while the EU is on one hand trying its best to
eradicate poverty by means of trade and aid, it is on the other hand an obstacle to
itself due to policies such as the CAP.
As a recommendation the trade barriers should be mutually removed and trade
shall flow in both directions rather than being one-sided. This is the only way for
Ghana to start being competitive on an international level. If the massive dumping in
Ghana comes to an end, farmers will be able to make an economic profit, which in
return enables them to further invest into land and machinery as well as labour. As
consequence Ghanaian farmers become more efficient and competitive on an
international scale, further increasing profits. As mentioned previously, in order to
escape the poverty cycle the accumulation of saving is crucial, as savings are
positively related to investment. In other words, an increase in savings will increase
investment due to the fact that there is spare currency now, not needed for life
sustaining purchases such as food. On a larger scale, investment then benefits locals
by means of the multiplier and accelerator effect. Closely related to this topic is the
Dual Gap Analysis, which basically states that low income gives rise to a lower
propensity to save. Hence, a lack of saving will result in a lack of investment, which

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would have been urgently needed to achieve the target growth rate and development.
Investment curbs employment, increases the GDP and improves amongst many other
things the local infrastructure.
Thus having applied the theoretical framework to the actual situation, the
outcome in Ghana reveals there is still room for improvement. However, it is not
constructive to shut such otherwise well-intended initiatives off, it is rather important
to base future efforts on previous experience and learn from mistakes. The following
section will come back to the bigger picture of EU development aid, outlining certain
shortcomings and recommendations based on the findings of this paper.

6. Debt Relief - Shortcomings and Recommendations

Having illustrated the EU‟s development policy and especially debt relief measures
in ACP countries a critical assessment of their effectiveness remains to be given. On
the basis of the illustrated economic theory behind debt relief measures, several
shortcomings become visible. As has been illustrated in a previous section debt relief
measures are highly controversial regarding the dependency between receiver and
donor states as regards to economic growth.
As previously stated, the European Union‟s foreign policy tries to drag
underdeveloped countries out of the vicious circle of poverty. Hence, it attempts to
increase the amount of capital within these countries in order increase income,
savings, investments and finally consumption. So why do the Unions development
measures and debt relief in particular often remain unsuccessful?
One major reason is the EU‟s exclusive focus on economic growth. As
previously illustrated foreign aid often creates colonial-like ties between the donor-
and receiver states and therewith makes the latter highly dependent on foreign
investments and resultant capital accumulation. As a result, a dependency in the form
of colonial ties between the donor and receiver states is created. Allesina and Dollar
argue that these colonial-like ties lead to an insufficient promotion of democratic
values and their institutionalization in the receiving countries (Allesina&Dollar,
2005). Often these countries governments mal-invest the given capital into measures
that do not enhance economic growth. Hence, the vicious circle of poverty cannot be

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overcome and foreign aid becomes ineffective, being „wasted aid‟ (Gunning, 2005, p.
22).
In order to decrease the dependency between the donor and receiver states, the
EU should increase the focus on good governance and stability in the aid-receiving
countries. Sustainable and independent growth can at best be achieved through
foreign investors allocation their forms in these countries. In case foreign investors
feel their investments to be threatened by political instability, they will retract their
investments and reallocate respective firms into a saver environment
(Alesina&Dollar, 2005). As a result, development policy should focus more on
promoting political stability within underdeveloped countries. With this critical
reflection in mind, the paper now turns to its concluding section evaluating the
analyzed in its entirety.

7. Conclusion

The paper set out to answer the following question: To what extent does the EU‟s
debt relief policy enhance economic growth and development in developing
countries? To answer this question the paper looked at both theoretical concepts of
development policy and debt relief as well as at a concrete case study of Ghana.
As has been shown, the EU development policy intends to help developing
countries to break out of the vicious circle of poverty, through multiple measures
including debt relief. Yet, what has become visible is that EU development policy is
often ineffective as it does not seem to have a significant positive effect on the
recipient‟s macroeconomic policy and growth. For one, this seems to be due to an
incorrect allocation of resources, such as through insufficient bureaucratic institutions
in the receiving countries. For two, it has been argued that EU often directs its
development aid rather to countries with colonial ties and thereby often disregards
political stability, such as democracy and human rights compliance.
In the case of Ghana it was shown that while Ghana has indeed enjoyed an
upheaval of economic growth in the framework of the HIPC initiative, EU
development policy action towards Ghana remains largely controversial. While
supporting the HIPC in Ghana, trade barriers for Ghanaian imports into the EU
remain thereby dramatically weaken Ghana‟s export ability. In addition, EU dumping

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practices do not enhance economic growth but rather destroy it as local farmer cannot
compete with these low prices. This stands in direct conflict to the aim of the HIPC
Initiative, which tries to help countries to break out of the vicious circle of poverty.
EU development policy is thus very ambiguous, trying to heal in one part, while at the
same time seriously injuring another. In how far the EU fosters economic growth and
development, through measures such as debt relief, can thus not per se be stated. Yet
the great ambiguity of EU development policy towards developing countries in
general certainly becomes visible.
There are certain limitations that need to be stated. Due to the limited scope of
the paper, it could only outline certain aspects of EU development policy and action
and could also only touch upon certain theoretical outlooks on the topic. Thus, the
paper could by no means achieve a holistic picture of EU development policy.
Second, the analyzed data might have had certain limitations during its conduction,
thereby distorting the outcome. Furthermore, the paper had to rely on reports as well
as secondary sources, as a first-hand investigation was not possible due to a limited
availability of resources and time. Also, due to the limited scope of the paper, it could
not touch upon the interrelatedness between economic fields and others such as the
political and social areas. Further country-specific research is needed here.
The economic perspective on development aid is crucial. Yet, it is only one
part of the bigger picture. Political, cultural and social perspectives certainly also play
an influential role regarding the welfare situation of a specific country. Thus, a
holistic approach to the improvement of the welfare situation of an economically
troubled country is needed. More so, the cooperation between the country aiding and
the country aided needs to be based on principles of respect, equality and mutually
benevolent attitudes on all levels. It must be ambiguous-free.

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8. References

Alesina, A., & Dollar, D

(2000). Who Gives Foreign Aid to Whom and Why? Journal of Economic
Growth, 5, 33–63.
BBC News.
(2002). Ghana gets debt relief. Retrieved May 13, 2009, from BBC News:
http://news.bbc.co.uk/2/hi/business/1843958.stm
Chenery, H. & Strout, A.
(1966). Foreign Assistance and Economic Development. American Economic
Review, 56 (4), 679-733.
Cini, M.
(2007). European Union Politics. Oxford: Oxford University Press.
Cotonou Agreement (CA)
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Maastricht University, European Studies Program, BA

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