It's official: after months of leaked documents and announcements, on Wednesday 16 July the European Commission confirmed its plan to reorganise the EU’s long-term budget into four main pillars: the national and regional partnership plans, the Competitiveness Fund (with Horizon Europe), the Global Europe Fund and a pillar devoted to spending on European public administration.
An increased budget. According to the European Commission, the proposed Multiannual Financial Framework (MFF) will amount to €2 trillion. €1 trillion, representing 48% of the MFF, will go to national and regional partnership plans, €589.6 billion to the Competitiveness Fund, which will make up 23% of the budget, and €215.2 billion to the Global Europe Fund, representing 11% of the budget.
Erasmus + and the new AgoraEU fund, which will be devoted to culture (including Europe creative), the media and civil society, will account for 3% of the budget. 16% will be allocated to an ‘other’ category, which does not include the Next Generation EU repayment. This breakdown, provided by the European Commission in a presentation, totals 101%.
The Commission is proposing a new €400 billion crisis mechanism (above the MFF ceiling), “since crises have become the norm”, declared European Commission President Ursula von der Leyen at a press conference. This mechanism, which has the capacity to lend to Member States, constitutes “a reserve fund” that can be activated to access additional resources “in the event of a crisis”, with “a series of guarantees”, explained Ursula von der Leyen. Unanimity in the EU Council and the agreement of the European Parliament will be required to activate these loans.
The €2 trillion represents 1.26% of the Union’s gross national income (GNI), including repayment of the Next Generation EU loan. Excluding the latter, the budget actually represents 1.15% of GNI.
There are two ways of financing the EU budget. Through contributions from its Member States and its own resources. Ursula von der Leyen explained that “Member States’ contributions will remain constant”. The European Commission is proposing the adoption of new own resources to meet the remaining needs.
It has decided to present five proposals for new own resources, which should generate €44 billion a year (or €308 billion over seven years). With the own resources already in place, this total would amount to more than €58 billion a year, or €406 billion over seven years.
In recent months, the European Commission has repeatedly stressed that it would be essential to adopt new technologies in order to finance the EU’s priorities while at the same time repaying the Next Generation EU loan.
In detail, these new own resources would be as follows: the EU Emissions Trading System (ETS1) is expected to generate €9.6 billion per year, the Carbon Border Adjustment Mechanism (CBAM), around €1.4 billion, an own resource based on uncollected electronic waste, around €15 billion per year, an own resource from excise duties on tobacco, around €11.2 billion per year and a European Own Resource (CORE), corresponding to an annual flat-rate contribution paid by companies with an annual net turnover of at least €100 million, around €6.8 billion per year. The European Commission initially envisaged taxing companies with an annual net turnover of at least €50 million (see EUROPE 13680/2).
A more flexible budget. By grouping more than 540 programmes into 27 national and regional plans, the European Commission aims to simplify the budget and make it more flexible. This reduction in the number of headings and programmes should already facilitate “the reallocation of non-pre-programmed resources within or between programmes”, explained the Commission.
The funds will be allocated progressively to the Member States throughout the programming period. Larger unallocated margins and reserves will be included in the MFF ceilings and in the programmes, to enable funding to be redirected.
In addition to the crisis mechanism mentioned above, special instruments “beyond” the ceilings, such as the Flexibility Instrument, will make it possible to respond to new or unforeseen needs.
This new flexibility, backed by the introduction of minimum funds per priority and per programme, should increase the number of negotiations on the amounts debated at the time of the annual budgets.
European priorities. The European Parliament has opposed this new organisation, which it says would amount to a “renationalisation” of the EU budget. This criticism is “debatable”, given that the Commission also intends to ensure that the money in the MFF is spent “in line with EU’s priorities”, said European Budget Commissioner Piotr Serafin during his presentation of the post-2027 MFF to Parliament.
At the same time, Ursula von der Leyen warned that “Member States will develop plans based on European priorities”. The national and regional plans will be organised on a ‘cash for reform’ basis, and the European Commission wants to reserve the right to suspend payments if milestones or targets are not met.
The European Commission also wants to give Europe the opportunity, via soft loans, to invest in European priorities (defence, energy infrastructure). “This is the very first time such a scheme has been presented”, insisted the President of the European Commission.
The Competitiveness Fund and the Global Europe Fund will also be guided by European political priorities. The first will aim to make Europe self-sufficient by investing in “strategic technologies”, while the second will enable the EU to give priority to international partnerships that will contribute to the EU’s objectives.
The Rule of law, an “indispensable condition”. Respect for the Rule of law is “at the heart of the reform” of the budget, declared Ursula von der Leyen. The European Commission intends to extend the Rule of law conditionality to the entire budget, releasing funding “as soon as the key conditions of respect for the Rule of law and the Charter are met”.
It wants to make it possible, as is the case with Next Generation EU, to suspend payments “in the event of systemic breaches of the Rule of law”.
To see the draft post-2027 MFF: https://aeur.eu/f/HWW and the accompanying appendix: https://aeur.eu/f/hwx
To see the draft decision introducing new resources: https://aeur.eu/f/hwy (Original version in French by Florent Servia)