EU country now world's largest foreign aid donor as US slashes funds

The world’s richest nations are withdrawing aid funds for poorer countries at a rate never seen before, according to a new study.

In 2025, the second consecutive year of decline, official development assistance (ODA) by member states dropped by 23.1% from 2024 to just over €149 billion, the OECD has reported.

Leading the retreat, the US led by President Donald Trump slashed its aid budget by an unprecedented 57%, accounting for the lion’s share of the global shortfall.

Together with cuts from other major donors, namely France (-10.9%), Germany (-17.4%), Japan (-5.6%) and the UK (-10.8%), they account for 96% of the total drop in funding, such as grants, loans or technical and logistical support.

The OECD forecast a further 5.8% contraction in 2026.

Who is the new largest international aid donor?

Following Washington’s funding drop, in 2025, Germany became the world’s largest ODA funder, with €24.89 billion.

The US is now second with €24.77 billion, followed by EU institutions (€22.29 billion) and the UK (€14.70 billion).

However, looking at ODA as a percentage of each country’s gross national income (GNI), Norway tops the list with 1.03%, followed by Luxembourg, Sweden and Denmark.

Why are many countries reducing their international aid budget?

Alexei Jones, senior EU external action specialist at the Maastricht-based think tank European Centre for Development Policy Management (ECDPM), told Europe in Motion that the 2025 drop in aid, albeit significant, can be partly explained by unexpected developments leading to increases in previous years.

“Exceptional factors, such as support to Ukraine and in-donor refugee costs,” he said. “As these evolve, some decline was expected.”

Driven by extraordinary crises like COVID-19 and the war in Ukraine, aid between 2020 and 2023 rose by a remarkable 35%, compared with just 22% over the 2015-2020 period.

Yet, the scale of the fall in 2025 — down to 0.26% of GNI — “points to a deeper trend”, Jones said.

“Development cooperation less central in national policy”

“Governments are facing tight public finances, slower growth, ageing populations, and rising spending needs, particularly on defence and domestic policies. In this context, development budgets are often among the first to be reduced.”

Jones believes the cuts also reflect a political shift, where development cooperation is becoming “less central in national policy agendas”

According to the expert, international development “remains a key investment in stability, partnerships and the capacity to respond to shared global challenges.”

“The risk is that repeated and deepening cuts -especially those affecting the most vulnerable – gradually weaken that role over time.”

Which European countries have increased their aid budget?

Globally, 26 out of 34 providers reduced their support, but some bucked the trend.

Spain and Hungary are among the few European countries that actually raised their contributions, by a sizeable 10.7% and 45.7% respectively.

The others were Italy (+0.03%), Iceland (+3.6%), Norway (+1.7%) and Denmark (3%).

On the other hand, EU institutions also slashed their budget by 13.8%.

“While this shift is politically understandable, it raises serious questions about the EU’s capacity to sustain long-term partnerships and deliver on its external action objectives”, says Jones.

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