The President of the European Council, Charles Michel, proposed, on Friday 14 February, an EU multiannual financial framework (MFF) amounting to 1.074% of EU gross national income (GNI) for 2021-2027, thus close to the Finnish compromise, but including the instruments to implement the European Green Deal.
The proposed negotiating box, which will be debated on Monday at the General Affairs Council with a view to preparing the European Council on 20 February, also provides for the creation of two new own resources and the maintenance for a certain period of time of budget rebate mechanisms.
This compromise is considered “balanced” by one European source, as this ‘negotiating box’ implements the European Green Deal, distributes cohesion policy funds more fairly and increases flexibility in the transfer of funds.
Mr Michel hopes that an agreement between the Member States will be reached as early as the European Council on 20 February, in particular thanks to the 10 days of consultations held recently with EU leaders (see EUROPE 12425/19).
The negotiating box presented by Mr Michel provides for a maximum total expenditure of €1,094 billion in commitment appropriations for the Twenty-Seven for the 2021-2027 period, or 1.074% of EU Gross National Income (GNI), of which 0.03% related to the integration of the European Development Fund (EDF) will go into the EU budget, and €1,084 billion in appropriations for payments, i.e., 1.06% of EU GNI.
This is a compromise between the requests of the net contributor countries (the Netherlands, Scandinavian countries, Austria) not to exceed 1.00% of GNI and the Commission’s proposal (1.14% of GNI). This proposal contains small differences with the Finnish proposal of December 2019, particularly as regards cohesion policy.
CAP down 14%. Compared to the Twenty-Seven’s current budget for the Common Agricultural Policy (CAP), appropriations for this policy are expected to fall by 13% to €329.3 billion. The Just Transition Fund gets €7.5 billion under item 3 of natural resources, which includes the CAP. Reference is made to a “reformed and modernised” Common Agricultural Policy (CAP), with external convergence of direct payments continuing and a cap on direct payments for large beneficiaries (at the level of €100,000).
It will be possible to transfer funds from the first to the second pillar of the CAP and vice versa.
A reduction, but a fairer distribution of the structural funds. As far as cohesion policy funds are concerned, the decrease amounts to 12% (total of €323.2 billion over 7 years), but Mr Michel’s team insists that the distribution of funds is fairer. The least developed regions would be entitled to €200 billion, compared to €195 billion in the Finnish compromise (€27 billion for the most developed regions, compared to €34 billion in the Finnish compromise). Compared to the Finnish framework, there is an upward adjustment of €6 billion, says one source.
The safety net is foreseen to be 24% (the maximum reduction borne by a country), compared to 27% in the Finnish framework. The richest Member States, those with a GDP above 120% of the average of the Twenty-Seven, may lose 20% of the funds (10% loss for a GDP between 110 and 120% of the EU average).
The framework also introduces a linear (rather than tiered) cap system, which is considered fairer.
It will be possible to transfer up to 10% from one fund to another cohesion policy fund.
Defence. A financial contribution of €7.014 billion is planned for the European Defence Fund (EDF), whereas the Commission proposed €13 billion, which is likely to be insufficient, particularly in France’s view.
A general cross-compliance regime would be introduced to address “clear generalised deficiencies in the good governance of Member States’ authorities with regard to the respect of the rule of law” where necessary to protect the proper execution of the EU budget. In case of deficiencies, the Commission will propose appropriate and proportionate measures to be approved by the EU Council by qualified majority.
New own resources. A batch of new own resources would be introduced, made up of a share of revenue from: – a national contribution calculated on the weight of non-recycled plastic packaging waste (with a call rate of €0.80 per kilogram); – any revenue generated by the EU Emissions Trading Scheme exceeding the average annual revenue per Member State generated by auctioning allowances over the 2016-2018 period (which could generate between €8-9 billion per year).
These two new own resources would make €14-15 billion per year available for the EU budget.
Discount. For the 2021-2027 period, ‘flat-rate corrections’ will reduce the annual GNI-based contribution of Denmark, Germany, the Netherlands, Austria and Sweden. They will be regressive. All Member States will participate in the financing of these gross reductions, the negotiating box specifies. Amounts will therefore be granted to the countries concerned. These are political elements that will be decided at the end of the negotiations, said one source.
EIB. The idea is to recapitalise the EIB to the tune of €10 billion in order to leverage and thus mobilise up to €500 billion for a green and digital economy.
See the negotiating box proposed by Charles Michel: http://bit.ly/2UTeRk6
See the table comparing the Michel proposal to the current MFF: http://bit.ly/2SqMtns (Original version in French by Lionel Changeur)