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EU Financing / Budgetary Affairs, PUBLICATIONS

Multiannual Financial Framework for the years 2021-2027 and the New Own Resources

‘Updated on April 30, 2021’

Written by Magdalena Sapała.

Euro bandiera

© oraziopuccio / Fotolia

If you are looking for a comprehensive source of information, analysis and infographics on the EU’s  multiannual budget and recovery plan, you are in the right place. This blog post will lead you through a collection of publications, prepared by researchers at the European Parliamentary Research Service, covering the EU multiannual financial framework for 2021‑2027 and the Next Generation EU, own resources as well as all proposed sector-specific acts for new and continued programmes and funds.

Who decides about the MFF?

The EU’s long-term budget, officially known as the multiannual financial framework (MFF) sets the annual limits on EU commitments in different policy areas and on overall annual payments (expenditure side of the budget). It must cover at least five years. In practice, in most cases its duration has been set at seven years. This multiannual plan of spending is usually negotiated as a package, together with proposals for own resources (revenue side of the budget) and for new and continued programmes and funds.

Formally, these elements are adopted in different legislative procedures, with different roles for the European Parliament, the Council and the European Commission. While the Parliament’s consent is necessary before the Council can adopt the MFF Regulation (Article 312 TFEU), it is only consulted by the Council before adopting the Own Resources Decision (Article 311 TFEU). The sectoral regulations in turn are agreed under the ordinary legislative procedure, with the Parliament acting on an equal footing with the Council (Articles 289 and 294 TFEU). In addition, although, according to the Treaties, the European Council ‘shall define the general political directions and priorities’ of the Union, and ‘it shall not exercise legislative functions’, experience of the last MFF negotiations shows that it plays a decisive role in taking decisions, including on the figures and on many detailed aspects of the spending programmes.

The proposal to link the new MFF with the proposed Recovery Instrument (next generation EU) to support the EU economic revival following the Covid‑19 pandemic introduced yet another legal base and decision-making procedure to this complex picture. The European Commission’s proposal for a regulation establishing the Recovery Instrument is based on article 122 TFEU and requires a decision from the Council alone. The European Parliament is informed of the decision taken.

 


See our Animated Infographic on
Visualising the 2021-2027 MFF and the recovery instrument


 

Milestones on the road to agreement on the 2021‑2027 MFF and the Recovery Instrument NextGenerationEU

In the spring of 2018, with the MFF for 2014‑2020 entering its final stretch, the EU began preparing the post-2020 plan. In the first formal step in the procedure, on 2 May 2018, the European Commission proposed a 2021‑2027 MFF worth €1 134.6 billion (2018 prices), which corresponds to 1.11 % of EU‑27 gross national income (GNI). The Commission also proposed changes to the EU’s system of own resources and to link the EU budget with the rule of law. This was followed by a series of further legislative proposals for new and continued spending programmes and funds under the next MFF.

Parliament had been ready to negotiate with the Council since November 2018, when its interim report estimated that the new MFF should be endowed with €1 324.1 billion (1.3 %) to meet EU policy objectives. The newly elected Parliament confirmed and updated its negotiating mandate in October 2019. Since the summer of 2018, Parliament had simultaneously prepared the mandates for legislative negotiations on the rules for EU spending programmes and funds proposed by the Commission. Some of these mandates were already approved in plenary – and negotiations with the Council begun – before the end of the parliamentary term (April 2019). However, the lack of progress in the MFF negotiating process impeded this work. As a result, in December 2019, the European Parliament political group leaders decided to freeze negotiations on sectoral legislation related to the new MFF until the Council agrees a full negotiating mandate.

The negotiations on the MFF package in the Council and the European Council proved lengthy. Despite the efforts of successive EU presidencies (Bulgarian, Austrian, Romanian and Finnish) and several occasions for EU leaders to exchange views on the topic at European Council summits (June, October and December 2019), agreement proved elusive. A special two-day summit, organised by Charles Michel on 20 February 2020, also failed to find an agreement and ended without specifying next steps or dates in the negotiating process.

Timeline of the 2021-2027 MFF and NGEU negotiations

Timeline of the 2021-2027 MFF and NGEU negotiations

The outbreak of the coronavirus pandemic and its massive socio-economic impact 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. This idea then featured as part of the Franco-German initiative (18 May), and in a non-paper from Austria, Denmark, the Netherlands and Sweden (23 May 2020).

The European Parliament outlined its expectations for the recovery plan and the revised proposal for the next MFF in a resolution of 15 May 2020. Furthermore, given the significant risk that the negotiations on the MFF would not be concluded in time for it to enter into force on 1 January 2021, the Parliament requested that the Commission submit a proposal for an MFF contingency plan to protect the beneficiaries of Union programmes by ensuring continuity of funding and implementation (this idea was later rejected by the Council).

On 27 May 2020, two years after the initial legislative package for the 2021-2020 MFF was presented, the Commission put forward its proposal for the post-coronavirus recovery package, in which it bundled the amended MFF and the proposal for the new own resources with the recovery instrument (known as ‘NextGenerationEU’). In addition, the package included the rule of law regulation proposed by the Commission in May 2018. The crucial negotiations between the Member States took place at a special European Council summit on 17‑21 July 2020. The agreement reached by the EU leaders opened the way to formal negotiations between the European Parliament and the Council.

On 23 July 2020, the European Parliament adopted a resolution in which it once again outlined its negotiating mandate for the forthcoming negotiations. The negotiations between the Parliament, the German Presidency of the Council and the Commission began 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.

In one of the biggest successes, European Parliament negotiators considered reinforcing ten flagship EU programmes with an additional €15 billion (see figure below) and the flexibility instruments with extra €1 billion. In addition, important improvements concerned the process of introducing the new own resources, more ambitious targets and better methods of tracking of spending on climate, biodiversity and gender equality policy.

However, the final steps on the road to the new MFF were delayed by another month, due to a dispute between the Member States around the mechanism linking the EU budget with the rule of law. It was only on 10 December 2020 that EU leaders, gathered at the European Council meeting, found a solution that unblocked the procedure.On 16 December 2020, the European Parliament gave its consent to the 2021‑2027 MFF. The next day, on 17 December 2020, the MFF regulation was unanimously approved by the Council.

Once the new MFF was agreed, the related interinstitutional negotiations on sectorial programmes and funds could also be finalised. However, due to the late agreement on the MFF, the formal approval procedures for some of them could not take place before the start of the new programming period on 1 January 2021, and have continued throughout the spring of 2021.

 

Source: M. Sapala, M. Pari, N. Kresnichka-Nikolchova, EU financing for 2021-2027, Infographic, EPRS, December 2020.

 

2021-2027 MFF and the Next Generation EU: by headings and selected programmes (commitments, 2018 prices, € billion rounded):

 


 

Context of the negotiations

The preparation of the next MFF was launched amid a broader debate on the future of Europe. Member States set out the political priorities in the Bratislava Declaration of September 2016 and the Rome Declaration of March 2017, including security and defence, protection of external borders, asylum and migration policy, and climate policy, priorities which had to be translated into concrete measures and financial means. At the same time, the long-standing budgetary priorities remained relevant, and some have even gained in importance. Increased resources were expected for youth, research and innovation, as well as for cohesion and agriculture policies. The new long-term financial plan also had to take account of the financial consequences of the United Kingdom’s withdrawal from the EU.

Furthermore, the new round of preparation for the MFF was seen as an opportunity to reform EU finances and re-emphasise some of the underpinning principles upon which they are built, such as the European added value and the focus on delivering European public goods, designed and implemented with a view to enhanced performance, efficiency, agility and simplification. Another very important issue that was part of the package under the negotiations concerned links between the disbursement of EU funds and respect for the rule of law.


See our Topical Digest on 2021-2027 MFF and NGEU


Changes were also expected on the revenue side of the EU budget. There was broad consensus that the own resources system needed to be reformed. However, while many ideas for alternative own resources that would radically simplify the system and endow the EU budget with greater financial autonomy, have been proposed, achieving significant reform has proven notoriously difficult.

The expectations for the MFF negotiations process changed slightly following the European elections of May 2020. The new European Commission announced its political agenda and brought new elements – with budgetary consequences – to the debate. The most prominent among these being the European green deal and digital transition. A more dramatic change in the circumstances and the priorities for the negotiations was triggered by the outbreak of the Covid‑19 pandemic in March 2020. The amended proposals for the 2021‑2027 MFF and own resources were bundled with the temporary recovery instrument (NextGenerationEU) and presented as a budgetary, recovery package for Europe struggling with the economic and social consequences of the Covid‑19 pandemic.

The final months of the negotiations have been dominated by yet another difficulty. The proposal for a regulation that would introduce a general rule of law conditionality in the EU’s financial rules has raised objections from some Member States. Poland and Hungary’s threat to veto the entire financial package delayed the final agreement by several weeks.

The 2021-2027 MFF by heading and special instruments (at different stages of the negotiations)

Key EPRS publications

Publications on 2021-2027 MFF, Own Resources and Next Generation EU

Publications on the sector-specific proposals (new and continued programmes and funds)

Initial appraisals of European Commission impact assessments accompanying the MFF proposals

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