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Multiannual financial framework 2014-2020

GENERAL REMARKS:

The multiannual financial framework (MFF):

  • ensures that EU spending is predictable and, at the same time, subject to strict budgetary discipline;
  • establishes the Union's medium-term financial perspectives by laying down strategic priorities and defines the maximum amounts (‘ceilings') available for each major spending area (‘heading') for a clearly defined period;
  • the MFF can only be formally approved by a unanimous decision of the Council of Ministers, once Parliament has given its consent.

The Treaty on the Functioning of the European Union (TFEU):

  • requires the EU to keep spending within these ceilings in each annual budget, so as to ensure that spending remains within the preset limits of the EU's income, its own resources;
  • requires the European Parliament, the Council and the Commission to take any measure necessary to facilitate the adoption of the MFF;
  • stipulates that the presidents of the three institutions are to hold "regular meetings", convened by the Commission.

The previous MFF started in 2007 and finished at the end of 2013.

TOWARDS A NEW FINANCIAL FRAMEWORK 2014-2020:

Ahead of the publication by the Commission of its communication entitled "A budget for Europe 2020", the European Parliament was the first institution to present its starting position on the next MFF.

On 8 June 2011: on the basis of the report by Salvador Garriga (EPP, ES) on behalf of the SURE Special Committee, the European Parliament adopts, by a large majority, a non-legislative resolution entitled "Investing in the Future: a new Multiannual Financial Framework (MFF) for a competitive, sustainable and inclusive Europe".

In this resolution, the European Parliament:

  • challenges those Member States wishing to freeze the EU's next long-term budget for the 2014-2020 period (France, Finland, Germany, the Netherlands and the UK);
  • states that freezing the next MFF at 2013 levels is not a viable solution;
  • proposes an increase of at least 5% over the 2013 level which would mean that the EU budget would be roughly 1.11% of the EU's total Gross National Income (GNI).

From mid-June 2011, the Commission presents its proposals in regard to the MFF for the period 2014-2020. Measures proposed include the following:

The Commission proposes to freeze the budget: the MFF, as proposed by the Commission, seeks to increase growth and jobs in Europe, encourage greener agriculture and establish a more environmentally conscious and internationally prominent Europe.

The overall amount proposed by the Commission for the 2014-2020 period is EUR 1 025 billion (2011 prices) in commitment appropriations - 1.05% of the EU's GNI - and EUR 972.2 billion - 1% of the EU's GNI - in payment appropriations. This proposal represents an increase of 3.16% compared with the current MFF but a reduction of -0.1% compared to the 2013 level.

Since its presentation by the Commission, the following were the main milestones in the debate on the MFF:

- June 2012: the Parliament adopts, with a large majority, a resolution on the MFF and own resources confirming the content of its resolution of 8 June 2011. It opposes the Commission proposal to freeze the next MFF and reiterates its view that the EU needs a budget that is both robust in order to respond to its political objectives and sufficiently flexible to deal with new challenges.

- October 2012: Parliament adopts, by a large majority, a resolution aiming to achieve a positive outcome of the Multiannual Financial Framework 2014-2020 approval procedure. It recommends that the Council should not try to reduce any further the level of Union budget than that in the Commission's proposal. In addition, the Cypriot Presidency presents a compromise proposal recommending large cuts to the MFF. The revised negotiating framework provides for savings of at least EUR 50 billion across the budget headings.

- 8 February 2013: the European Council reaches political agreement on the MFF. The package agreed amounts to EUR 960 billion (1% of EU GNI). This means that the overall expenditure ceiling has been reduced by 3.4% in real terms, compared to the current MFF (2007-2013). This is to reflect the consolidation of public finances at national level. The ceiling for overall payments has been set at EUR 908.40 billion, compared with EUR 942.78 billion in the 2007-2013 MFF, which represents 0.95% of EU GNI.

- 13 March 2013: the European Parliament adopts a non-legislative resolution tabled by the leaders of the EPP, S&D, ALDE, Greens/EFA and GUE/NGL political groups, rejecting the Conclusions of the European Council of 8 February. Parliament does not disagree with the overall amount of EUR 960 billion in commitments appropriations adopted by the Council but lays down conditions for the adoption of the MFF: (i) to put an end to the growing problem of payment shortfalls, which jeopardises EU programmes; (ii) ensures greater flexibility; (iii) allows for a mid-term revision of the MFF; (iv) establishes own-resources. The resolution, adopted by a large majority, defines the European Parliament's mandate in view of the future MFF negotiations with the Member States.

- 6 May 2013: the end of the stalemate on the MFF and the start of political negotiations on the Agreement and on a proposed amending budget No 2/2013 for a first tranche of EUR 7.3 billion to cover outstanding payment needs in 2012. A binding political commitment regarding the second tranche is also made and will be decided upon in early autumn 2013.

- 13 May 2013: the first trilogue (European Parliament, Commission and Council) on the 2014-2020 MFF ended in full agreement on various technical issues such as the scope and calendar of the negotiations showing both sides' will to reach a swift agreement on the next financial period. This trilogue agreed in particular that the negotiations would focus mainly on future flexibility of the EU budget, a revision clause, the future of the EU budget's own resources and the unity of the EU budget.

- 27 June 2013: an agreement was struck at the highest political level on the MFF (Irish Presidency, European Parliament and Commission). This agreement, adopted unanimously, confirmed the expenditure ceilings agreed by the European Council on 8 February.

This agreement concerns:

  • a draft MFF Council Regulation, which has meanwhile been sent by the Council to the Parliament with the request for its consent;
  • a draft Interinstitutional Agreement between the European Parliament, the Council and the Commission on budgetary discipline, cooperation in budgetary matters and sound financial management;
  • four joint declarations by the three institutions;
  • two unilateral declarations by the Commission.

- 3 July 2013: with an overwhelming vote in favour, the European Parliament adopts a resolution on the 2014-2020 MFF which lays down certain key priorities including the new arrangements relating to the revision of the MFF, provisions on its flexibility, and an undertaking regarding the settlement of the issues of own resources and of the unity and transparency of the budget.

- 11 September 2013: the Budgets Committee decides to postpone the consent vote to the EU's 2014-2020 budget regulation and the MFF due to the fact that the conditions set out in the Committee's resolution of 3 July are still not met.

Moreover, Members also call for the issue of payment shortfalls to be resolved, an issue which the institutions committed themselves to in their joint statement on payments for 2012 and 2013 signed by the Parliament, Council and the Commission in December 2012.

They insist on the need to establish a high-level working group on EU own resources to promote the modernisation of the EU's financing.

MAIN COMPONENTS OF THE MFF AGREEMENT

Provisional agreement on the MFF: on 28 June 2013, the Council approves the deal reached with the European Parliament on the draft regulation laying down the EU's multiannual financial framework for 2014-2020 and the interinstitutional agreement on budgetary matters.

The deal builds on the European Council's agreement of 8 February 2013 and addresses the four issues raised by the European Parliament to be able to adopt the MFF: (i) payment shortfalls; (ii) greater flexibility between and within headings, as well as between financial years, needs to be ensured in the next MFF; (iii) a mid-term revision of the MFF so as to allow the newly elected Parliament in 2014 and the new Commission a chance to examine the budgets inherited from the current legislators; (iv) introduction of own resources in order to reduce the share of GNI-based contributions to the EU budget to a maximum of 40% and phases out all existing rebates and correction mechanisms.

More specifically, the main elements of the Agreement are as follows:

1. Payment issues: to ensure that the full amounts committed are actually paid throughout the next programming period, the Interinstitutional Agreement on budgetary management envisages a new article in regard to the outstanding commitments (reste à liquider - RAL). RAL are defined as the amount of appropriations committed that have not yet been paid. The RAL is to be closely monitored by the European Parliament, the Council and the Commission in order to mitigate the risk of blocking the implementation of EU programmes due to the shortage of payment appropriations at the end of the financial framework.

2. Flexibility: this is to ensure that the EU can fulfil its obligations and cope with unforeseen budgetary needs in spite of limited financial resources:

Starting in 2015, the unused margins under the payment ceiling of the previous year will be carried over to the following years, subject to limits in the last three years of the MFF:

  • 2018: EUR 7 billion,
  • 2019: EUR 9 billion,
  • 2020: EUR 10 billion.

The payment ceilings of the years in which the unused margins arise will be cut accordingly in order to leave the overall ceiling unchanged.

A number of new special instruments are set up outside the multiannual financial framework, in addition to the existing ones:

- tackle youth unemployment: up to EUR 2.143 billion (in 2011 prices) would be frontloaded in 2014 and 2015 to tackle youth unemployment, meaning that the whole EUR 6 billion for the youth employment initiative would be committed in the first two years of the MFF;

- strengthen research: up to EUR 400 million (in 2011 prices) would be frontloaded in 2014 and 2015 for research, Erasmus+ and SMEs;

- global margin for commitments for growth and employment: this is for policy objectives related to growth and employment, in particular youth employment in the years 2016-2020; it is financed by the margins left available below the MFF ceiling for commitments in the years 2014-2017;

- aid for the most deprived: in order to maintain the current level of funding for this programme, Member States may decide to increase their allocation by up to EUR 1 billion on a voluntary basis, in addition to the EUR 2.5 billion already agreed;

- contingency margin: this is a last resort instrument to react to unforeseen circumstances and amounts to 0.03% of the EU's gross national income; any amounts made available would be fully offset against the margins for the current or future financial years.

3. Review: a review of the MFF is to take place in 2016 at the latest, allowing the newly elected European Parliament, the Council and the Commission to reassess the priorities for the remaining years of the financial framework.

4. Unity of the budget: all expenditure and revenue of the EU and Euratom should be included in the EU budget.

5. Own resources: a high-level group, composed of members appointed by the European Parliament, the Council and the Commission will be convened in order to undertake a general review of the own resources system and provide a first assessment at the end of 2014. On the basis of the results of this work, the Commission would assess whether new own resource initiatives are appropriate for the period after 2020.

THE AMOUNTS IN THE FINAL AGREEMENT (by heading): the Agreement reached between the Irish Presidency and representatives of the European Parliament and the Commission on 27 June, confirmed the expenditure ceilings agreed by the European Council on 8 February 2013.

The total commitment appropriations for 2014-2020 are estimated at EUR 959.988 billion (in 2011 prices) corresponding to 1.0% of the EU's Gross National Income (GNI) compared to 1.12% for the previous MFF and EUR 908.40 billion in payments corresponding to 0.95% of GNI - compared with 1.06% for 2007-2013.

A particular effort is made to boost growth and create jobs by increasing the expenditure ceiling for sub-heading 1a ("competitiveness") by more than 37% compared to the MFF covering the years 2007-2013.

Compared with the initial amounts proposed by the Commission, the final Agreement establishes the following amounts:

  • Heading 1 - Smart and Inclusive Growth: EUR 450.763 billion (of which EUR 325.149 billion for economic, social and territorial cohesion);
  • Heading 2 - Sustainable Growth: Natural Resources EUR 373.179 billion of which EUR 277.851 billion for market related expenditure and direct payments);
  • Heading 3 - Security and citizenship: EUR 15.686 billion;
  • Heading 4 - Global Europe: EUR 58.704 billion;
  • Heading 5 - Administration: EUR 61.629.

The IIA: in accordance with Article 295 of the Treaty on the Functioning of the European Union (TFEU), a new Interinstitutional Agreement (IIA) on budgetary discipline and sound financial management was to be adopted in parallel to the MFF.

Under the agreement, finalised on 27 June 2013, the new IIA would focus on the following requirements:

  • maximum flexibility of the financial framework and related annual budgets;
  • increased transparency at all stages of the budget negotiations;
  • insertion of several new financial instruments outside the MFF and specific reserves such as a "contingency margin" mobilised by the European Parliament and the Council;
  • budgetisation of the EDF as of 2021;
  • specific provisions on outstanding commitments (RAL).

FINAL AGREEMENT ON THE MFF: at its 19 November 2013 plenary session, the European Parliament by 537 votes to 126, with 19 abstentions, gave its official assent to the draft Council Regulation on the MFF for the 2014-2020 period, as agreed in the interinstitutional negotiations. All the conditions laid down in Parliament's July 2013 resolution were met.

Parliament also approved the conclusion of the Interinstitutional Agreement (IIA) between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management.

Council Regulation (EU, Euratom) No 1311 of 2 December 2013 laying down the multiannual financial framework for the years 2014-2020 is in line with the agreement reached between the European Parliament, the Council and the Commission.

The definitive approval of the MFF enabled Parliament and the Council to finalise their work, in accordance with the ordinary legislative procedure, on the legislative proposals relating to the spending programmes and instruments envisaged for each sector for the 2014-2020 period (e.g. agriculture, cohesion policy, environment, research, transport, education, justice, external policy, etc.).

The funding programmes for each of the sectors were adopted by the co-legislators. The legal framework governing the allocation of funding to each sector is in place and is in force since 1 January 2014.

24/04/2014


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