European Council’s Historic Deal on the Multiannual Financial Framework 2021-2027
Last week the European Council reached a political agreement on the next MFF 2021-2027. It defines for a period of seven years where the EU’s revenue comes from, its own resources and, in particular, how much each of the Member States must contribute. On this basis, it sets the limits for EU spending over a period of several years, and the maximum amounts available for each major spending area (or heading) for each year. Simply put, the MFF serves two main purposes: it ensures budgetary discipline and predictability with regard to EU finances and it allocates financial means to the Union’s’ political objectives and strategic priorities. In principle, the implementation of each and every priority should be secured by sufficient financial resources.
Unprecedented times call for unprecedented measures
This deal marks a historic shift in the EU finances. The EU can now spend more than €1.8 trillion over the next seven years, which implies a huge responsibility. The MFF for the period 2021-2027 will have the following structure:
• Heading 1 “Single Market, Innovation and Digital”;
• Heading 2 “Cohesion, Resilience and Values” which will include a sub-Heading for economic, social and territorial cohesion and a sub-Heading for resilience and values;
• Heading 3 “Natural Resources and Environment” which will include a sub-ceiling for market related expenditure and direct payments;
• Heading 4 “Migration and Border Management”;
• Heading 5 “Security and Defence”;
• Heading 6 “Neighbourhood and the World”;
• Heading 7 “European Public Administration” which will include a sub-ceiling for administrative expenditure of the institutions.
Recovery through the “Next Generation EU” - a quantum leap for European integration
The "Next Generation EU" (NGEU) package adopted within the MFF will be the main instrument for implementing the recovery response to the socio-economic consequences of the COVID-19 pandemic. This is a more forward looking recovery plan than any other region has formulated focusing on the resilience, digitalization and greening of EU economies. Member States agreed to jointly commit €750 billion to respond to the COVID-19, €390 billion of which will be paid out as grants and €360 billion loans. After they failed to agree and commit to issuing joint debt during the financial and sovereign debt crisis, the new model of debt-financing is also a breakthrough in EU’s integration implying more solidarity and burden-sharing.
Strengthening the role of the EU as an ambitious “geopolitical” player
The new budget reflects Europe's priorities, which are relevant to ensure a sustainable recovery and strengthen its international role. The Heading 6 “Neighbourhood and the World”, finances the Union's external action and assistance for countries preparing to join the Union (Western Balkans and Turkey). Stronger coordination between external and internal policies will ensure proper implementation of the 2030 Agenda for Sustainable Development, the Paris Climate Agreement, the EU Global Strategy, the European Consensus on Development, the European Neighbourhood Policy, as well as the external dimension of migration, including the Partnership Framework with third countries on migration.
Commitment appropriations for this Heading will not exceed € 98.419 billion. The allocation for the Instrument for Pre-Accession - IPA III, supporting beneficiaries on their path to fulfilling the accession criteria, will be €12.565 billion. In comparison with IPA II there is an increase of around € 600 million. The novelties in IPA III include the plan to diminish country-specific allocations, to favour regional competitiveness in terms of absorption capacity, the “blending” of funds and the Maturity Assessment.
However, despite the European Council’s pivotal move, the deal is not final yet. Now it is up to the European Parliament to deliberate and vote and its backing should not be taken for granted.
(photo credit - European Commission)