The European Commission asked the EU Member States, on Tuesday 20 June, for a budget extension of €65.8 billion until 2027, as part of the revision of the 2021-2027 Multiannual Financial Framework (MFF), for which all the available flexibilities have been used in the context of the pandemic and the war in Ukraine and its consequences, such as inflation and the energy crisis.
“We are in a completely different world compared to 2020, when the MFF we are discussing today was negotiated”, said the President of the European Commission, Ursula von der Leyen.
She presented the three priorities of this reform of the MFF, namely aid to Ukraine, managing migration and preserving European competitiveness and economic sovereignty.
Aid to Ukraine
Concerning aid for Ukraine, the Commission has announced the creation of a financial reserve of €50 billion over the next four years, including loans (€33 billion) and grants (€17 billion) (see other news). According to a senior European Commission official, this reserve is the largest financial instrument ever created in the history of the EU for a third country.
Migration management
An increase of €15 billion has also been earmarked to support Member States in their management of external borders and challenges abroad. “We need an additional budget for Syrian refugees in Syria, Lebanon, Jordan and Turkey; for the southern migration route, for the Western Balkans, for the partners across the world”, summarised Ms von der Leyen.
The European Commissioner for Budget, Johannes Hahn, pointed out that the brand new ‘Pact on Migration and Asylum’ needed additional funding.
To support the EU’s capacity to react to crises and natural disasters, the Solidarity and Emergency Aid Reserve has been specifically increased by €2.5 billion.
Competitiveness
To promote the EU’s competitiveness, the European Commission is proposing a Strategic Technologies European Platform (‘STEP) to develop so-called ‘critical’ technologies, such as deep-tech, clean-tech and biotech (see other news).
To achieve this, the platform draws on existing instruments such as InvestEU, the Innovation Fund, the European Innovation Council (EIC) and the European Defence Fund.
“Here, we are asking for a limited reinforcement of €10 billion for some of those funds. We also want to leverage the funding capacity of cohesion funds in order to fund these projects even more”, explained Ursula von der Leyen.
The Commission hopes that with the incentives of cohesion policy and the Recovery and Resilience Facility, €160 billion of investment will be mobilised.
Interest rates and budget for administration
In order to meet the rising borrowing costs of the Next Generation EU recovery instrument, which Commissioner Johannes Hahn estimates at €15 billion, a new ‘EURI’ instrument has been proposed to cover exclusively the excess interest costs over the initial projections for 2020. According to a temporary estimate by the Commission, the cost of this initiative would be €19 billion.
" We also need to adjust our budget for administration, which is also massively affected – despite the savings measures – by inflation and the need to build capacity for the new tasks that the EU is legally obliged to perform”, explained the Commissioner for Budget. “The overall increase for the administration is a moderate €1.9 billion”.
The flexibility instrument will be increased by €3 billion.
Own resources
To cope with this rise in interest rates, the proposal updates three new own resources. These are revenues from the Emissions Trading System (ETS), resources generated by the Carbon Border Adjustment Mechanism and a contribution by Member States to the European budget from a statistical own resource based on company profits (see other news).
According to a senior European Commission official, “a revision of the MFF is not necessarily welcome in the Member States, and we know that national situations are complicated; that is why this is not a total reform, but a reform presented in a very targeted way”.
Johannes Hahn, for his part, justifies that “a total extension of 65.8 billion euros for the four remaining years will make it possible to compensate for the losses due to inflation and to bring us back to that famous 1% of GDP which is the size of the EU budget”.
Finally, he adds that “these are targeted, ambitious measures, adapted to the needs of the EU as a whole, without affecting certain programmes such as cohesion or agriculture, which are virtually national programmes”.
The revision of the MFF will require the unanimous approval of the Member States and the consent of the European Parliament. In a press release, the Commission stated that it was counting on the Spanish Presidency of the EU Council to ensure that an agreement was reached just after the summer, “given that the urgent budgetary constraints will already materialise in 2024 “.
See the legislative proposals submitted by the Commission: https://aeur.eu/f/7n5 (Original version in French by Pauline Denys)