On Wednesday 2 May, the European Commission will be adopting its detailed proposals, with figures, on the EU’s multiannual financial framework (MFF) for 2021-2027.
Figures for the next MFF will be presented in current and constant prices, with the year 2018 as a reference (for constant prices). In addition, “horizontal conditionalities” will be presented.
Nearly every day as of 29 May, the Commission will adopt legislative proposals on the various sections of the EU budget, a process that is expected to last between two and three weeks.
Budget Commissioner Günther Oettinger has announced that €1 billion will be allocated to the military fund each year for developing military mobility infrastructures.
In addition, to enhanced protection of the EU’s external borders, the Commission wants a five-fold increase in the personnel of the Frontex agency after 2020, bringing their number from 1,200 to over 5,000 after 2020. During a visit to Slovenia, Oettinger said: “You will not find the next budgetary framework disappointing, I can tell you”.
The budgetary envelope for the current period (2014-2020) had been fixed at around €1 trillion, a figure which represents only 1% of the Gross National Income (GNI) of EU member states.
This time, the equation is far more complex with the UK’s departure from the EU. According to estimates, European finance will be reduced by €14 billion annually (€10 billion if the British rebate is taken into account).
The UK’s withdrawal, as a “net contributor”, comes at a time which is all the more difficult for the EU as it seeks to finance new policies on defence and migration in particular.
The solution, Oettinger advocates, is a cocktail of savings and new resources. He trusts that the budget may rise from 1% to a little over 1.1% of EU GNI over the period 2021-2027.
The Commission will be recommending reduction of below 10% (the budgets commissioner had spoken of 6%) in agricultural spending and expenditure devoted to cohesion policy – two areas which account for 37% and 35% of the EU budget respectively.
Eastern European countries are already facing a headwind when it comes to cuts in cohesion policy funding, which could be redirected towards countries suffering from high youth unemployment, such as Spain or Italy.
Some feel they are directly threatened by the proposal, confirmed by the Commission, to make the payment of European funds subject to compliance with rule of law. Poland, accused by Brussels of having flouted the independence of the justice system, and Hungary, which is also receiving criticism, have already gone on the defensive, saying they will be paying the cost of refusing to take part in the hosting of asylum seekers.
Rule of law mechanism. The Commission does not deem it necessary to provide an additional mechanism to Article 7 of the Treaty. This aims to protect the EU’s financial interests should the legal system fail. Although the Commission considers that the legal system no longer provides the legal guarantees to ensure equitable judgement, a proposal will be made to Council, upon which the Council will decide by “reverse qualified majority” to suspend all European funding.
Poland’s deputy minister for European affairs, Konrad Szymanski, said on a note of warning: “We shall not accept arbitrary mechanisms that, upon request, make the management of funds an instrument of political pressure”.
Furthermore, financial aid from the European Social Fund will decrease and henceforth there should be an obligation to “integrate migrants”.
Countries such as Austria or the Netherlands have, for their part, already rallied against the rise in national contributions requested by the Commission. France and Germany, which are the main contributors, are, on the other hand, willing to accept the increase.
The budgetary debate will finally bring an old running theme back to life: the creation of new own resources for the Union. In particular, the Commission wants the taxation of the trade in carbon quotas, toughened up from 2020 on, to be directed towards the EU budget rather than towards member states as it has been. The creation of a tax on plastics is also in the pipeline (see EUROPE 12010).
On one point at least, Brexit will provide an opportunity for making the rebate granted to London obsolete, rather than serve as grounds for other states to obtain a rebate in turn. The Commission will be proposing that all rebates be eliminated but the date for such elimination could cause considerable discussion.
EMU. Two instruments - which echo the proposals of 6 December last as part of the package on deepening the Economic and Monetary Union (see EUROPE 11920) - are expected to be tabled by the Commission.
A mechanism for supporting structural reforms should help member states anxious to strengthen their national economy. This tool, which could receive €20-30 billion over seven years, would allow member states to call for financial support retrospectively for the setting in place of structural reforms. The instrument should apply to the 28 member states and not just to members of the eurozone.
A more modest envelope should be specifically intended for the member states of the Union wishing to be a part of the eurozone.
A second tool is expected to be put forward. This would also be open to all EU member states and not just to the eurozone members, as France’s President Emmanuel Macron advocates – and will be called the investment stabilisation function.
By means of compliance with socio-economic criteria, a state hit by an asymmetrical shock to its economy could thus call upon this stabilisation instrument to compensate for the investment that it would have made under normal circumstances. Several tens of billions of euro would be available in the form of a guarantee, integrated into the European budget.
Tight timetable. The Commission nurtures the hope of winding up negotiations by the next European elections (May 2019). However, most experts consider it impossible to negotiate in just ten months. At the very most, it might be possible to reach a compromise on the broad lines of the next MFF, and to leave sector specific aspects till later. At best, a compromise might be reached end 2019. (Original version in French by Lionel Changeur, Lucas Tripoteau, Pascal Hansens)