The Multiannual Financial Framework 2021-27: Deal, But No Deal?
What is the Multiannual Financial Framework (MFF) and How is it Decided?
The MFF sets the budget for how much money the EU can spend in different policy areas and usually covers a seven-year period. It is also commonly referred to as the ‘EU long-term budget’. There have been five MFFs to date, with the current 2014-20 Framework adopted on 2 December 2013.
Around 93% of the MFF is usually allocated to actions benefitting citizens, regions, cities, farmers, universities and businesses. The EU’s administrative expenses currently account for less than 7% of the total budget.
Over the course of a seven-year MFF period, the total budget is spent through annual rounds approved jointly by the European Council (representing the Member States) and the European Parliament, which function as the two arms of the EU budgetary authority.
Roles of the European Council and European Parliament
The European Council is legally responsible for setting the overall policy and priorities of the EU. Although this does not formally incorporate financial affairs, and the Council cannot exercise legislative functions, it is required to unanimously adopt the MFF regulation after obtaining the consent of the European Parliament. This effectively gives the Parliament a de facto right of veto. However, the provisions also allow for the Council to decide on the MFF by a qualified majority.
European Council Finally Agrees New MFF, But Reduces Horizon Europe Budget
On 21 July 2020, after a four-day emergency summit to resolve months of stalled negotiations, EU leaders agreed an overall MFF package of €1,824.3 billion. This comprises the MFF for 2021-27 and a new Next Generation EU (NGEU) recovery instrument. NGEU will raise money by temporarily lifting the own resources ceiling to 2.00% of EU Gross National Income, allowing the Commission to borrow €750 billion on the financial markets. Reinforced by NGEU, the MFF will also be the main instrument for implementing the recovery package to tackle the socioeconomic consequences of the COVID-19 pandemic.
The MFF includes a budget of €80.9 billion for Horizon Europe, confirming fears that cutting the Commission’s proposed budget for research had been high on the Council’s agenda during negotiations.
The proposed final allocation for the core Horizon Europe programme is €75.9 billion with an additional €5 billion from the NGEU recovery fund. Compared to the main budget of €94.4 billion plus €13.5 billion top-up proposed by the European Commission in May, this figure represents a victory for the ‘frugal four’ of Austria, the Netherlands, Denmark and Sweden (supported by Finland).
This ensures that the Council, which represents the Member States, plays a leading role in negotiating the fixed budget ceilings of the MFF, both at its highest level and for the maximum values that will be allowed for projects supported in MFF 2021-27. In practice, this enables the Council to outline what specific areas will receive the most funding and therefore the greatest priority over the seven years of the MFF.
Council and Parliament Clash Over Research Budget Cuts
Charles Michel, President of the European Council, described the MFF deal as ‘strong and ambitious’, while acknowledging the disparity with the Commission’s budget proposal. Michel insisted that additional funding would be ‘mobilised in the various areas such as digital, Horizon Europe and Erasmus’ compared to the current allocation for Horizon 2020.
In response, the European Parliament’s negotiating team issued a statement saying: ‘We will strive to secure improvements, including higher amounts, on future-oriented MFF programmes like Horizon, InvestEU, LIFE, Erasmus+. And if our conditions are not sufficiently met we will adopt the programmes on the basis of the existing MFF, as foreseen by the Treaty [on the Functioning of the European Union].’
Responding on Twitter, Mariya Gabriel, European Commissioner for Innovation, Research, Culture, Education and Youth, called the cuts to research, innovation and education ‘regrettable’. German MEP Christian Ehler, one of the two co-rapporteurs for Horizon Europe described the proposal as leading to ‘…a Europe falling apart in terms of R&D and innovation when stronger member states like Germany already started to raise their R&D budget beyond 3% of the GDP and develop their national programmes on key technologies like quantum and AI’.
European Parliament President David Sassoli said that MEPs should ‘correct errors’ made by EU leaders, adding: ‘We cannot cut budget resources from research and Erasmus.’ EU Commission President Ursula von Der Leyen struck a more measured tone, describing the cuts as ‘regrettable and painful’.
In a resolution on the conclusions of the European Council meeting adopted by 465 votes against 150, with 67 abstentions, MEPs welcomed EU leaders’ acceptance of the recovery fund as proposed by Parliament in May, calling it a ‘historic move for the EU’. Parliament also expressed disapproval of ‘massive cuts’ to grant components and future-oriented programmes, arguing that they would ‘undermine the foundations of a sustainable and resilient recovery’.
The resolution ended with confirmation that Parliament would not accept the Council’s political agreement on the 2021-2027 MFF as it stands and ‘will not rubber-stamp a fait accompli’. MEPs are also ‘prepared to withhold their consent’ for the MFF until a ‘satisfactory’ agreement is reached in upcoming negotiations between Parliament and the Council, preferably by the end of October at the latest for a smooth start to the new EU programmes in 2021.
MFF Adds €5 Billion Fund to Plug Brexit Black Hole
Tensions over the adoption of the next MFF have been complicated by the UK’s departure from the European Union and the subsequent ‘black hole’ this has left in the Budget. While its precise contribution to the EU changed over time and can be measured by many different metrics, the UK has consistently been a net contributor to the EU’s budget.
In response, the next MFF will include a €5 billion Brexit Adjustment Reserve to ‘counter unforeseen and adverse consequences in Member States and sectors that are worst affected’ by the UK’s departure from the EU and possible No Deal Brexit.
Acknowledging that Brexit talks have so far proved fruitless, President Michel said: ‘We all know that the ongoing negotiations are not easy. And we know that probably by the end of the summer or in September, October, we will have a clearer vision about where we are in these negotiations process.’
MFF Confirms Support for European Green Deal
The European Green Deal is the Commission’s flagship strategy for boosting the efficient use of resources by moving to a clean, circular economy, restoring biodiversity and cutting pollution. Set out in President Ursula von der Leyen’s Agenda for Europe, it increases the EU’s climate ambitions by laying out a roadmap of policies and measures needed to put Europe on the path to becoming the first carbon-neutral continent by 2050. The European Green Deal Investment Plan (EGDIP) is the investment pillar of the Green Deal.
The MFF as agreed by the Council confirms and reiterates the EU’s commitment to the policy, saying expenditure should be ‘consistent’ with the ‘do no harm’ principle of the European Green Deal.
Will Unprecedented Times Call for Unprecedented Measures?
The MFF 2021-27 is required to be ready for implementation in all Member States by 1 January 2021. However, in the event of Council and Parliament failing to agree a budget, Article 312.4 of the Treaty on the Functioning of the European Union allows for the 2020 budget to be extended for an additional year.
Supported by a research sector dismayed by EU leaders slashing the proposed budget for Horizon Europe, the European Parliament has already declared that it will not accept the MFF in its current form. At the same time, EU leaders must address the rapidly closing window to agree a trade deal with the UK.
With time running out to reach agreement on multiple fronts, observers and stakeholders alike should prepare for further twists and turns before the end of the year.
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