Members' Research Service By / December 18, 2020

Adoption of the European Union’s 2021 Budget

During the December plenary session, the European Parliament is due to adopt the European Union’s general budget for the year 2021.

© PhotoSG / Adobe Stock

Written by Sidonia Mazur,

© PhotoSG / Adobe Stock

During the December plenary session, the European Parliament is due to adopt the European Union’s general budget for the year 2021. In practice, Parliament will vote on the Council’s position on the second draft EU general budget for 2021. The Council adopted the second draft budget as presented by the European Commission on 10 December, without any amendment. This second draft budget is the fruit of the agreement found on 4 December during the budgetary conciliation between Parliament and the Council on the first draft budget for 2021. Commitment appropriations for 2021 will amount to €164.2 billion and payments to €166.1 billion. The annual budgetary negotiations this year were delayed and complex due to the lack of agreement on the multiannual financial framework (MFF) for 2021-2027, as well as the context of the coronavirus crisis.

European Union budget for 2021: Figures

2021 Budget by MFF heading
2021 Budget by MFF heading

The Union budget for 2021 is the first of the new multiannual financial framework (MFF) for 2021-2027. The European Parliament can adopt it now, as the Council Regulation that establishes the new MFF – to which it consented on 16 December – has now been adopted. For the 2021 budget, commitment appropriations are agreed at €164 251.5 million (-5.5 % compared to the 2020 budget), leaving a margin of €778.8 million beneath the MFF ceilings. The overall level of payment appropriations is set at €166 060.5 million (+1.2 % compared to the 2020 budget), leaving a margin of €2 001.4 million in payment appropriations below the MFF ceilings for 2021. Figure 1 shows the allocations of commitments and payments under each of the headings established in the new MFF. On the top of the EU budget, the Commission estimates the contribution from the EU recovery instrument at €285 billion for 2021.

The EU Budget for 2021 includes an increase of €185 million, over the first draft budget, obtained in the conciliation negotiations reflecting Parliament’s main political priorities. Particularly noteworthy are the increases for: the Connecting Europe Facility – Transport (€60.3 million), LIFE (€42 million), the Digital Europe programme (€25.7 million), the Rights and Values programme (€6.6 million, of which €4.8 million for Daphne), the Justice programme (€2.7 million), Humanitarian Aid (€25 million), for UNRWA under the Neighbourhood, Development and International Cooperation Instrument (€10.2 million) and €7.3 million for the European Public Prosecutor’s Office. The 2021 budget includes the package of pilot projects and preparatory actions as adopted by the Parliament, for a total of €71.8 million in commitments.

The budgetary procedure for 2021

The annual budgetary procedure establishing the Union budget for 2021 started late due to the delay in the agreement of the new MFF in the Council. The Commission published its draft general budget of the EU for 2021 on 27 July 2020, which is some three months later in the year than usual. The draft amounted to €166.7 billion in commitments and €163.5 billion in payments. The novel EU recovery instrument aimed at tackling the coronavirus crisis, Next Generation EU (NGEU), was set to reinforce several EU programmes with a proposed additional €211 billion in commitments as assigned revenue alongside the 2021 budget. Since there was no agreement on the new MFF yet, the Commission based the draft annual budget on its own MFF proposal, updated on 28 May 2020.

The five-day-long July 2020 European Council meeting reached political agreement on a €1 074.3 billion MFF, strengthened by the €750 billion borrowed on the capital markets for NGEU. Subsequently, the Council adopted its reading of the draft budget on 29 September 2020, proposing to reduce commitments, to €162.9 billion (-2.3 % on the draft budget) and to increase payments to €164.8 billion (+0.8 %), to cover the consequences of an increase in the pre-financing rate of programmes relating to the 2014-2020 period.

On 10 November, Parliament reached an agreement with the Council Presidency on the next MFF to, inter alia, increase funding by €16 billion on top of the package agreed by the European Council. €15 billion will reinforce flagship EU programmes, and €1 billion increases flexibility to address future needs and crises.

The Parliament’s reading of the draft 2021 EU budget, voted in plenary on 12 November, amended the September Council position. Parliament confirmed its priorities, as reflected in its resolution of 19 June 2020 on general guidelines for the preparation of the 2021 budget, in particular, mitigating the effects of the coronavirus pandemic and supporting a recovery built on the European Green Deal and digital transformation. The Parliament’s position opposed most of the Council’s cuts. Moreover, it proposed to increase the Commission’s original proposal by over €15 billion in commitments and in line with Parliament’s MFF negotiating position; bringing it to almost €182 billion. Parliament called to make available a further €1.6 billion in commitment appropriations for research, by reusing unspent commitments in line with Article 15(3) of the Financial Regulation. It referred to Parliament’s resolution of 16 September 2020, stating that, as of 2021, new own resources should be introduced, a key demand from the MFF negotiations. It also argued in favour of a more detailed budgetary nomenclature, to allow the budgetary authority to play a stronger role and for more transparent oversight over the use of the funds.

On 13 November 2020, the Commission adopted Amending Letter No 1 to the draft general budget of the European Union for the financial year 2021 (AL 1/2020). The Commission’s draft budget (DB) as amended by AL 1/2020 set commitment appropriations at €164.1 billion, and payment appropriations at €166.1 billion. AL 1/2020 included the adjustments resulting from the European Council’s July MFF position and the 10 November political agreement between Parliament and the Council on the 2021-2027 MFF. AL 1/2020 endorsed Parliament’s demands by proposing additional funding for several programmes, in particular for Horizon Europe, EU4Health and Erasmus.

The President of Parliament, in agreement with the President of the Council, convened the Conciliation Committee, which then had until 7 December to agree on a joint text. On 4 December, the Conciliation Committee reached a common understanding on the content of the 2021 Union budget. However, as the MFF had still to be adopted, the Parliament and Council could not sign the Joint Text and, at that stage, the conciliation had to fail technically. This obliged the Commission to adopt a second draft budget for 2021, which happened on 10 December. This second draft budget integrates fully the agreement found on 4 December during budgetary conciliation.

Finally, the European Council meeting of 10-11 December 2020 found the necessary unanimity on the MFF package. On 14 December, the Council adopted its position on the second draft budget for 2021, accepting the Commission’s proposal without any changes. On 15 December, Parliament’s Committee on Budgets (BUDG) voted (31 to 2, with 4 abstentions) to recommend that plenary approves the Council position on the second draft general budget as well as the joint statements annexed to the resolution, without any amendment. If the plenary follows the BUDG recommendation, the Union budget for 2021 will be adopted and can enter into force on 1 January 2021. The adoption in plenary of any amendment to the Council position would, on the other hand, trigger another budgetary conciliation.

Budgetary procedure: 2020/0371(BUD) and 2020/1998(BUD); Committee responsible: BUDG; Rapporteurs: Pierre Larrouturou (S&D, France) Section III – European Commission, and Olivier Chastel (Renew, Belgium) other sections.

Read this ‘at a glance’ on ‘Adoption of the European Union’s 2021 Budget‘ in the Think Tank pages of the European Parliament.

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