A study on recent developments in inflation and the EU budget was presented to the European Parliament’s Committee on Budgets (BUDG) on Thursday 12 December by authors from the Vienna Institute for International Economic Studies and the Austrian Institute of Economic Research.
The study focused on the impact of inflation on the main EU programmes and the implementation of the European budget by the Member States in a context of inflation linked to the Covid-19 pandemic and the war in Ukraine. Particular attention has been paid to EU research programmes, which account for 7% of the Multiannual Financial Framework (MFF), the CAP (31%) and cohesion policy (31%).
When inflation exceeds 2%, EU research programmes come under more pressure on the overall budget than on the allocation per country. Horizon Europe funds have offset the increases, but not without consequences for the overall EU budget. For agriculture, the consequences of inflation are encouraging unfair competition from imports from third countries that do not respect EU social and environmental standards.
Generally speaking, the study notes that the difference in inflation rates between Member States complicates the possibility of uniform budgetary adjustments. As a result, the experts suggested targeting adjustments to maintain competitiveness on world markets.
The study recommends introducing dedicated reserves to protect MFF programmes against inflation, but capping increases or the flexibility of adjustments in order to preserve budget flexibility.
See the study: https://aeur.eu/f/esc (Original version in French by Florent Servia)