The European Commission adopted on Wednesday 27 May a modest proposal for a Multiannual Financial Framework (MFF) for the EU for 2021-2027, although Next Generation EU, the new temporary instrument for recovery (see EUROPE 12494/2), has an ambitious budget of €750 billion.
The revised MFF amounts to €1,100 billion in 2018 prices, compared to €1,279 billion in the Commission’s May 2018 proposal.
In total, the MFF together with the specific instrument for recovery would amount to €1,850 billion. Adding the €540 billion already approved through the three safety nets for States, workers affected by short-time working and companies, “the effort in favour of recovery would thus amount to €2,400 billion”, noted the President of the European Commission, Ursula von der Leyen, at the plenary session of the European Parliament.
Stick to the February ‘negotiating box’. The Commission suggests taking up, in broad terms, the compromise proposed in February by the President of the European Council. Charles Michel was expecting a total amount for 2021-2027 of €1,094 billion in commitment appropriations, i.e., 1.074% of the EU’s gross national income (GNI) (see EUROPE 12426/1).
“In this crisis, Member States will have to spend a lot, so there is a particular burden on them”, the Commission President said. “That is why we did not deviate too far from the proposal made in February”, she added.
On Tuesday, a European official said that, compared to Mr Michel’s plan, there would be “some strategic changes to ensure that our priorities are well reflected and that the budget is much more flexible, reinforcing the special instruments mobilised in times of crisis”.
Mr Michel hopes for an agreement before the summer. According to him, the Commission’s proposal is “an important step in the decision making process”. “It will help target support towards the sectors and regions most affected by the Covid-19 pandemic”, he said.
The analysis of the proposal on the Recovery Fund and the MFF will start immediately in the EU Council bodies. At the same time, the President of the European Council and his cabinet will consult the Member States.
The issue will be discussed at the European Council on 19 June 2020. “Everything should be done to reach an agreement before the summer break. Our citizens and businesses have been heavily impacted by the pandemic. They need targeted relief without delay”, said Mr Michel.
An agreement on these dossiers “will pave the way to Europe’s economic recovery and bolster the green and digital transitions”, according to the President of the European Council. Finally, he called on Member States to examine the proposal quickly and to “work constructively towards a compromise”.
Revision of the current MFF. Funds are urgently needed to restart the economy paralysed by the Covid-19 pandemic, starting in September, without waiting for the post-2020 MFF. The Commission is therefore proposing to revise the current MFF in order to mobilise €11.5 billion in 2020, including €5 billion for the REACT-EU initiative for cohesion policy, said EU Budget Commissioner Johannes Hahn.
Ms von der Leyen spoke of an immediate reinforcement of the current MFF and the 2020 budget “to complement cohesion spending and to accelerate support for recapitalisation and financing of external action, in particular for the Western Balkans”.
“We propose a transitional solution to have money in 2020. We are proposing an increase to the current MFF to free up space for some essential programmes. This would require unanimity in the EU Council and the agreement of the European Parliament and could enter into force on 1 September 2020”, explained another expert.
Raising the own resources ceiling. The funds raised under the Next Generation EU banner will be raised by temporarily raising the own resources ceiling “to allow the Commission to use its very strong credit rating to borrow money on the financial markets”, said Ms von der Leyen.
The Commission therefore proposes to raise the current own resources ceiling from 1.2% to 2% of EU27 gross national income (GNI). This decision requires a unanimous vote in the EU Council and a ratification procedure by national parliaments.
New revenue. In addition, the Commission will propose several new sources of own revenue: “These could be based on the planned expansion of the Emissions Trading Scheme, a carbon tax at the borders as a compensation mechanism for the import of cheap and climate-damaging products from abroad, or a new tax on digital services”, explained President von der Leyen.
“We have to be ambitious here”, she told MEPs, who are themselves very much in favour of the concept of own resources.
For Mr Hahn, the revenue from the ETS system could bring in €10 billion a year to the EU budget and the border adjustment mechanism between €5 and 14 billion. The Commission is also studying a new levy on large companies, which could bring in around €10 billion a year. In addition, a tax on large tech companies such as Facebook and Google could bring in around €1.3 billion a year.
But the new own resources tend to be very controversial within national governments and it is not certain that any of the proposed taxes will get the necessary political support in the EU Council.
Even a more limited proposal to impose a €7 billion tax on plastic waste had been opposed by several capitals during discussions between EU leaders in February.
“It is very clear that some of these proposals will not be simple for all Member States, but the alternative would be either to have a higher national contribution or to reduce spending on existing programmes. The time has come to look at these own resources. Reimbursement will not occur until after 2027, so there’s quite a bit of time to agree on this”, the senior official explained.
Rural development for recovery. The total proposed budget for the Common Agricultural Policy (CAP) in 2021-2027 is €333.2 billion (compared to €382.5 billion for 2014-2020, a decrease of 13%), but the Commission has planned for a reinforcement of €15 billion for the European Agricultural Fund for Rural Development (EAFRD), in order to “help rural areas to make the necessary structural changes in line with the European Green Deal and to achieve the ambitious objectives in line with the new biodiversity and ‘farm to fork’ strategies”, explains a statement. This brings the total for the CAP to €348.2 billion.
For cohesion, the proposal foresees a total of €323.1 billion under the 2021-2027 MFF (compared to €367.5 billion over the period 2014-2020, a decrease of 12%), plus €50 billion under the recovery plan, making a total of €373.1 billion.
The Horizon Europe programme will be increased to €94.4 billion over 7 years (of which €13.5 billion under the recovery plan) to “increase European support for research and innovation activities related to health and climate”, in addition to the funding provided for under the new EU4Health programme (see EUROPE 12494/5) and the rescEU programme (see EUROPE 12494/6). In its May 2018 proposal, the Commission had forecast €97.6 billion for Horizon Europe.
As regards the appropriations for external action, revised upwards, the Commission proposes a budget of €102.7 billion over 7 years (compared with €101.9 billion in Mr Michel’s draft and €123 billion in the May 2018 proposal), plus €15.5 billion under the recovery plan.
On the defence side, the Commission proposes to allocate €8 billion to the European Defence Fund. While this amount is well below his initial proposal of €13 billion, it is still higher than Mr Michel’s plan of €7.04 billion (see EUROPE 12426/1). Military mobility, for its part, is to be restored to the amount allocated in Mr Michel’s project, i.e., €1.5 billion. At the February summit, the Commission had proposed that it should no longer be financed from the European budget (see EUROPE 12431/1).
Link to the Communication on the EU budget: https://bit.ly/3esGKFR
Link to accompanying document: https://bit.ly/2MfFcDr
(Original version in French by Lionel Changeur, with Marion Fontana and Camille-Cerise Gessant)