The EU has pledged euros 30 million for the five-year initiative – known as a Social Cohesion Programme – which will focus on health, education, justice, employment and taxation policies.
EU Commissioner for External Affairs Chris Patten, said reducing the gap between rich and poor was a moral, economic and political obligation.
“Morally because we believe misery and social exclusion are contrary to human dignity and rights.
“Economically because social inequalities act as a break on economic growth as large sections of society are unable to contribute. And politically there?s a danger that people?s faith in democracy will be eroded if they consider that institutional and market reforms have failed to deliver a better quality of life,” Mr Pattern said.
The initiative is being supported by the Inter-American Development Bank (IADB), the United Nations Development Programme and the International Labour Organisation.
The EU said the IADB would be the chief actor, and while some of the funds would be channelled through the bank many would go directly to governments.