In “An Economy that Works for People”
For a brief overview of the key points of the adopted text and its significance for the citizen, please see the corresponding summary note.
The Multiannual Financial Framework (MFF) sets the annual limits (‘ceilings’) on EU commitments in different policy areas ('headings') and on overall annual payments for a period of at least five years, usually seven. On 2 May 2018, when the 2014-2020 MFF entered its final stretch, the Commission published its legislative package comprising proposals for a post-2020 long-term budget. The Commission presented a package that included a proposal for a regulation laying down the multiannual financial framework for the years 2021 to 2027 (COM (2018) 321), proposal for an Interinstitutional Agreement on budgetary discipline, cooperation in budgetary matters and on sound financial management (COM (2018) 323), as well as several other proposals, including on the system of the new Own Resources and the protection of the Union’s budget in case of generalised deficiencies as regards the rule of law. At the political level, all these elements (in May 2020 amended and extended with the proposal for the Recovery Instrument) are negotiated as a joint package. Formally, however, each element of the package is adopted in different legislative procedure, with different roles for the EU institutions (see the legislative train fiche on the proposals for the new own resources, the regulation on the rule of law, and European Union Recovery Instrument).
Procedure for the adoption of the MFF
According to Article 312 TFEU, the MFF is adopted in the form of a regulation via a special legislative procedure, with the Council acting unanimously after receiving Parliament's consent as expressed by absolute majority. Alternatively, the European Council may unanimously authorise the Council to act by a qualified majority when adopting the MFF regulation. In addition, Article 312(5) TFEU requires the EP, the Council and the Commission to take any measure necessary to facilitate the adoption of the MFF. While the Treaty does not mention the European Council as an actor in the procedure (except the possibility to authorise the Council to act by majority, Art. 312(2)), in practice it plays a decisive role in bringing the procedure to a close. During the last negotiations it decided on many detailed aspects of the 2014-2020 MFF and its spending programmes. A similar approach has been taken this time.
European Commission proposal of May 2018
The initial Commission's proposal for the 2021-2027 MFF amounted to €1 134 583 million (all figures are expressed in 2018 prices), this is 1.11 % of the EU-27's GNI in commitment appropriations. Increases were most visible in the areas of research and innovation, support for investment, migration and border management, and security and defence. Cuts have mainly fallen on cohesion policy (-10 %) and the EU's Common Agricultural Policy (-15 %). Moreover, the proposal reinforced special and flexibility budgetary instruments outside the MFF ceilings.
On 14 March 2018, the European Parliament set out its expectations on the post-2020 MFF. They were confirmed in an interim report on the MFF package, voted on 14 November 2018. In the report, the EP outlined its negotiating mandate. It estimated that, in order to finance new priorities, the MFF ceiling should increase from the current 1.0 %, to 1.3 % of EU GNI. The Parliament's position, thus, amounts to €1 324 089 million, this is 16.7 % more than proposed by the European Commission.
In particular, the Parliament insisted that financing of the CAP and cohesion policy (in real terms) should remain unchanged, and that a number of programmes supporting the attainment of the EU goals should be reinforced (in relation to the Commission's proposal). For example, the Parliament demanded additional resources for the following programmes: +43.7 % Horizon Europe; +55.9 % Erasmus+, a new Child Guarantee amounting to €5.9 billion, +33.4 % LIFE programme, creation of a new Energy Transition Fund amounting to €4.8 billion; +4.4 % migration and border management, +4.1 % neighbourhood and the world. Moreover, according to the Parliament's report, the EU's contribution to the achievement of climate objectives should be set at a minimum of 25% of MFF expenditure in 2021-2027, and 30% as soon as possible, but no later than 2027.
The newly elected Parliament confirmed and updated its negotiating mandate in a resolution of October 2019. However, negotiations in the Council and the European Council have proved lengthy. In December 2019, Finnish presidency for the first time presented a revised Negotiating Box including figures. It proposed the MFF set at 1 087 billion (€48 billion less than the Commission's proposal). This represents 1.07% of the gross national income (GNI) of the EU27. However, at their meeting in December 2019, the European Council did not reach an agreement and called on its President to take the negotiations forward. EU leaders held their first substantive debate on the MFF only in February 2020, but failed to find an agreement.
Since then, the outbreak of the coronavirus pandemic and its massive socio-economic impact have complicated negotiations further. On 23 April 2020, the European Council asked the Commission to come up with a proposal for a recovery fund of 'a sufficient magnitude', and linked to the MFF. In the meantime, the recovery fund featured as part of the Franco-German initiative (18 May), and in a non-paper of Austria, Denmark, the Netherlands and Sweden (23 May).
The European Parliament outlined its expectations on the recovery plan and the revised proposal for the next MFF in the resolution of 15 May 2020. Furthermore, given the significant risk that the negotiations on the MFF will not conclude in time for it to enter into force on 1 January 2021, the Parliament requested the Commission to submit a proposal for an MFF contingency plan to protect the beneficiaries of Union programmes through ensuring continuity of funding and implementation.
European Commission amended proposal of May 2020
On 27 May 2020, the Commission presented the recovery and resilience package including the amended proposal for the 2021-2027 MFF, the amended proposal for a decision on the system of Own Resources and the proposal for a regulation establishing a EU recovery instrument (Next Generation EU, NGEU) for the years 2021-2024 (based on Article 122 TFEU), to support the recovery in the aftermath of the COVID-19 pandemic. According to the proposal, the NGEU resources amounting to €750 billion, borrowed by the Commission on the financial markets on behalf of the EU, would top up the 2021-2027 MFF worth €1.1 trillion. Channelled through the MFF programmes (already existing and new), the recovery funds would provide support to the EU economy where most needed. Despite this strong link with the MFF, given the legal base of these resources, they will be assigned to the various spending programmes as so-called “external assigned revenues” [see Article 21(5), Financial Regulation]. Therefore, the borrowed funds will be additional to the annual budget and they will not be part of the MFF and of the annual budgetary procedure.
The amended proposal for the next MFF was built on the progress in the negotiations, in particular the results of the meeting of the EU leaders on 20 February 2020, and took into account the creation of the NGEU. The proposed changes concerned the structure and the overall size of the MFF, as well as the allocations for individual programmes and funds. In particular, the Commission proposed the MFF which is €34.6 billion lower than its own proposal of 2018 (-3%) and €224.1 billion (-16.9%) lower than demanded by the European Parliament in its negotiating position of November 2018. In comparison with the 2018 version of the MFF, and against the expectations of the European Parliament, the Commission reduced the allocations for such programmes as the Connecting Europe Facility (-8.4%), European Solidarity Corps (-19.6), Justice Rights and Values (-19.6%) the Erasmus+ (-6.7%), European Defence Fund (-30%), military mobility (-74%). The resources from the NGEU were proposed to reinforce such spending areas as heading 1 ‘Single market, Innovation and digital’ (+€69.8 bln), heading 2 ‘Cohesion and values’ (+€610 bln), heading 3 ‘Natural resources and environment (+€45 bln), heading 5’ Resilience, security and defence’ (+€9.7 bln), heading 6 ‘Neighbourhood and the world’ (+€15.5 bln). Moreover, the Just Transition Fund has been included in the MFF with an allocation amounting to €40 bln (€10 bln under the MFF + €30 bln under the NGEU). The revised MFF proposal included also €17.4 bln to cover the interest payments for the resources borrowed to finance the NGEU (for more detailed list of changes to the 2021-2027 MFF proposed by the Commission see the earlier versions of the legislative train, in particular June 2020).
The European Parliament’s negotiators for the MFF welcomed the Commission’s recovery plan, but warned that it cannot come at the expense of the standard MFF and its wider objectives. They disagreed with the proposed cuts to the long-term EU budget.
Agreement in the European Council (July 2020)
The recovery instrument and the amended proposal for the MFF were discussed at the regular European Council meeting on 19 June 2020 and the EU leaders decided to continue the negotiations at an extraordinary meeting in July 2020. The crucial negotiations lasted almost five days (17-21 July 2020) and the agreement reached opened the way to formal negotiations between the European Parliament and the Council.
The main, MFF-related parts of the agreement:
- The MFF commitment appropriations total €1 074.3 billion and represent almost 2% decrease when compared with the 2014-2020 MFF (UK excluded and the European Development Fund included);
- Programmes reduced in comparison with the Commission’s proposal of May 2020 include: Horizon Europe (-6.2%), Connecting Europe Facility-Transport (-11.6%), Digital Europe Programme (-17.5%), Erasmus+ (13.8%), Asylum and Migration Fund (-20.9%), Integrated Border Management Fund (-50%), European Defence Fund (-12.3%).
- The top-ups to MFF programmes from the NGEU proposed by the Commission were significantly reduced;
- Programmes reinforced in comparison with the Commission’s proposal of May 2020 include: Justice, Rights and Values (+24%), the budget for cohesion policy (+2.2% for subheading Economic, social and territorial cohesion) and the Common Agricultural Policy (+1%);
- Special and flexibility instruments (outside the MFF ceilings), designed to tackle unexpected events, were significantly reduced.
- Creation of a €5 billion reserve to counter the impact of Brexit.
On 23 July 2020, in reaction to the European Council’s common position, the European Parliament voted a resolution, in which it stated that it ‘does not accept’ the political agreement on the 2021-2027 MFF and outlined its negotiating priorities:
- creation of the effective rule of law mechanisms;
- reform of the EU’s own resources system, including the introduction of the basket of new resources to facilitate repayment of the costs related to the NGEU;
- adequate funding for flagship EU programmes (in such areas as climate, digital transition, health, youth, culture, research, border management);
- legally binding mid-term revision of the MFF by the end of 2024 at the latest;
- improvements in the flexibility provisions; adjustments ensuring parliamentary involvement in the governance and scrutiny mechanisms of the Recovery and Resilience Facility;
- horizontal issues, such as a legally binding climate-related (30%) and biodiversity (10% targets, spending target of 30%, gender mainstreaming in the budget, and a legally biding mid-term review and revision of the MFF.
Negotiations between the European Parliament and the Council Presidency
The negotiations between the Parliament, the German Presidency of the Council and the Commission (trilateral meetings) started on 27 August 2020. Three months later, on 10 November 2020, the three institutions reached a political agreement covering all elements of the budgetary package, i.e. the 2021-2027 MFF, the new own resources, the Next Generation EU and the rule of law budget conditionality. As far as the MFF is concerned, the most important points of the agreement include:
- the overall ceiling for the 2021-2027 MFF stays as agreed by the European Council in July 2020 (€1 074.3 billion in 2018 prices), however, starting from 2022 it will be progressively increased to include additional €11 billion for selected EU flagship programmes;
- in total, the EU flagship programmes will be reinforced with €15 billion over the period 2021-2027. Out of this amount, €11 billion will be financed through a new mechanism linked to the revenue from the competition fines, €2.5 billion from the unallocated margins under the MFF, €1 billion from reflows under the ACP investment facility, and €0.5 billion from research decommitments in line with Article 15(3) of the Financial Regulation. The top-ups will be distributed as follows: Horizon Europe +4 billion; InvestEU +1 billion; Erasmus+ + 2.2 billion; EU4Health + 3.4 billion; Creative Europe + 0.6 billion; Rights and Values programme + 0.8 billion; Border Management Fund & Border and Coast Guards + 1.5 billion; NDICI + 1 billion; Humanitarian aid +0.5 billion.
- the overall level of spending on cohesion policy and agricultural policy will be comparable to 2014-2020 and significantly boosted under the NGEU;
- the creation of the Just Transition Fund;
- reinforcement of the Flexibility Instrument with additional €1 billion;
- by 1 January 2024 the Commission will present a review of the functioning of the MFF, and, as appropriate, proposals for a revision;
- the overall target of expenditure supporting climate objectives will increase from 25% (proposed by the Commission) to at least 30% of MFF/NGEU expenditure;
- introduction of the annual biodiversity target of 7.5% in the MFF from 2024, in view of reaching 10% in 2026 and 2027;
- further improvements of the methodology to track the climate, biodiversity and gender related expenditure in the MFF.
The final agreement
The final steps of the procedure, i.e. consent vote in the European Parliament and unanimous vote in the Council, were delayed by a month due to the dispute around the mechanism linking the EU budget with the rule of law. It was only on 10 December 2020 that the Member States leaders found a solution and unblocked the procedure.
On 14 December 2020, the European Parliament Committee on Budget (BUDG) adopted the draft recommendation on the draft Council regulation laying down the multiannual financial framework for 2021-2027 and the joint interinstitutional declarations annexed to it (30 votes in favour, 2 against and 4 abstentions). As part of the overall agreement, the members of the Committee on Constitutional Affairs (AFCO) adopted the interinstitutional agreement on budgetary matters (23 in favour, 3 against, 2 abstentions).
On 16 December 2020, the European Parliament gave its consent to the regulation on the 2021-2027 MFF. In the resolution on the Multiannual Financial Framework 2021-2027, the InterInstitutional Agreement, the EU Recovery Instrument and the Rule of Law Regulation, the Parliament emphasised that (inter alia):
- the financial package agreed has a historic importance, it will amount to €1.8 trillion and include the MFF 2021-2027 (€1074 billion moving progressively to €1085 billion) coupled with the Recovery Instrument (€750 billion);
- an effective Rule of Law Regulation and the introduction of new own resources were a pre-condition of the European Parliament to agree with the MFF package;
- it regrets that, due to the unanimity rule in the Council, the adoption of the entire package, including the new EU programmes for the period 2021-2027, cause unduly delay for the entire process;
- the overcoming of the hurdles posed by unanimity requirement in Council regarding the adoption of the MFF and own resources decision, among other instances, shall be addressed in the upcoming Conference on the Future of Europe.
On 17 December, after receiving the Parliament’s consent, the Council adopted unanimously the MFF regulation and recovery package.
- Legislative acts, Official Journal of the EU, L 433 I, Volume 63, 22 December 2020
- EP Legislative Observatory, Resolution on the Multiannual Financial Framework 2021-2027, the Interinstitutional Agreement, the EU Recovery Instrument and the Rule of Law Regulation, 2020/2923(RSP).
- European Parliament, Recommendation on the draft Council regulation lying down the multiannual financial framework for the years 2021-2027, 17 December 2020.
- Commission proposal, May 2020.
- EP Legislative Observatory, Resolution on the conclusions of the extraordinary European Council meeting of 17-21 July 2020, 2020/2732(RSP).
- EP Legislative Observatory, Resolution on the new multiannual financial framework, own resources and the recovery plan, 2020/2631(RSP).
- EP Legislative Observatory, Procedure files on Multiannual financial framework for the years 2021 to 2027, 2018/0166(APP).
- EP Legislative Observatory, Procedure files on Interinstitutional Agreement on budgetary discipline, cooperation in budgetary matters and on sound financial management, 2018/2070(ACI).
- EP Legislative Observatory, Procedure files on Interim report on MFF 20201-2027 - Parliament's position in view of an agreement, 2018/0166R(APP).
- European Parliament resolution of 14 March 2018 on the next MFF: Preparing the Parliament's position on the MFF post-2020 (2017/2052(INI)).
- European Parliament resolution of 30 May 2018 on the 2021-2027 multiannual financial framework and own resources (2018/2714(RSP)).
- European Parliament resolution of 14 November 2018 on the Multiannual Financial Framework 2021-2027 - Parliament's position with a view to an agreement (2018/0166R(APP)).
- European Parliament resolution of 10 October 2019 on the 2021-2027 multiannual financial framework and own resources: time to meet citizens' expectations (2018/2833 (RSP))
- European Parliament resolution of 13 May 2020, A safety net to protect the beneficiaries of EU programmes: setting up an MFF contingency plan (2020/2051(INL)
- Proposal for a Council Regulation laying down the multiannual financial framework for the years 2021-2027, COM(2018)322 final.
- Proposal for a Interinstitutional Agreement between the European Parliament, the Council and the Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, COM(2018)323 final.
- Communication from the Commission, A Modern Budget for a Union that Protects, Empowers and Defends. The Multiannual Financial Framework for 2021-2027, COM(2018)321 final.
- Council of the EU, Revised Draft Negotiating Box (December 2019).
- Council of the EU, Timeline of the negotiations on the 2021-2027 MFF.
- European Committee of the Regions, Opinion, The Multiannual Financial Framework package for the years 2021-2027, COTER-VI/042, 9 October 2018.
- European Economic and Social Committee, Opinion, Recovery plan for Europe and the Multiannual Financial Framework 2021-2027, ECO/523, 16 July 2020.
- M. Sapala, M. Pari, N. Kresnichka-Nikolchova, EU financing for 2021-2027. The 2021-2027 Multiannual Financial Framework, the Next Generation EU recovery instrument and new own resources, Infographic, EPRS, European Parliament, December 2020.
- 2021-2027 MFF in figures - Animated infographics
- Alessandro D’Alfonso, M. Pari, M. Sapala, Negotiations on the next MFF and the EU recovery instrument, Briefing, EPRS, July 2020
- Alessandro D’Alfonso, N. Kresnichka-Nikolchova, Future financing of the Union: MFF, Own Resources and Next Generation EU, At a Glance, EPRS, July 2020
- Infographics, M. Sapala, N. Kresnichka-Nikolchova, Amended proposal for the 2021-2027 MFF and 2021-2024 recovery instrument ‘Next Generation EU’ in figures, EPRS, July 2020.
- EPRS blog on the MFF negotiations.
- EPRS Briefing, A. D'Alfonso, Multiannual financial framework for the years 2021 to 2027: The future of EU finances, EU Legislation in Progress, European Parliament, January 2021.
- Secretariat of the Committee on Budgets, European Parliament, Comparative of the proposals: 18 February 2020( tables and analysis); 14 July 2020 (analysis), 23 July 2020 (analysis).
- EPRS In-depth Analysis, M. Parry. M. Sapala, 2021-2027 multiannual financial framework. Analysis of the Commission's proposal, European Parliament, July 2018.
Author: Magdalena Sapala, Members' Research Service, firstname.lastname@example.org