The EU Budget

Multiannual EU budget (2014-2020)

Regulation (EU, Euratom) No 1311/2013 — the EU’s multiannual financial framework for the years 2014-2020 sets out the maximum annual amounts that can be spent on the EU’s different policy areas over the 2014-2020 period.

KEY POINTS

The EU adopted the 7-year plan for the 2014-2020 period in December 2013. The multiannual financial framework (MFF) amounts to €960 billion in commitments (legal promise to provide finance, assuming certain conditions are met) and €908.4 billion in payments (actual transfers to beneficiaries) over the 7-year period, expressed in constant prices of the year 2011.

The MFF regulation lays down ceilings (maximum amounts) for each category of EU spending over the period. These must be respected when agreeing the EU’s annual budgets.

The 2014-2020 MFF is broken down into headings, as follows.

Heading 1 – Smart and inclusive growth: €450.763 billion (of which €325.149 billion for economic, social and territorial cohesion).
Heading 2 – Sustainable growth: natural resources: €373.179 billion.
Heading 3 – Security and citizenship: €15.686 billion.
Heading 4 – Global Europe: €58.704 billion.
Heading 5 – Administration: €61.629 billion.
piechart

A central focus of the 2014-2020 MFF is on growth and employment. Subheading 1a on ‘competitiveness’ has increased by over 37% compared with the previous 2007-2013 MFF, reflecting the importance of this political priority. However, the new MFF is smaller than its predecessor, given that many EU countries face budgetary pressures on the home front.

The MFF regulation also provides for special instruments that allow the EU to react to specified, unforeseen circumstances. It can also allow the financing of clearly identified expenditure that cannot be financed within the limits of the ceilings that are available for one or more headings, notably:

the Emergency Aid Reserve (used to finance, for example, humanitarian aid and civilian crisis management);
the European Union Solidarity Fund;
the Flexibility Instrument;
the European Globalisation Adjustment Fund;
the Contingency Margin (a last-resort instrument to react to unforeseen circumstances).
An interinstitutional agreement on budgetary discipline, cooperation in budgetary matters and sound financial management was also agreed between the European Parliament, the Council and the European Commission. This should rationalise the annual budgetary procedure and complement the MFF regulation.

Reallocation of 2014 unused commitments

The MFF regulation provides that in the event of the adoption of programmes under shared management for the Structural and Investment Funds, the European Agricultural Fund for Rural Development, the European Maritime and Fisheries Fund, the Asylum, Migration and Integration Fund and the Internal Security Fund after 1 January 2014, the MFF should be revised to reallocate the amounts not used in 2014 to subsequent years.

As a result, the MFF regulation has been revised so as to allow the transfer of 2014’s unused commitments: €16.5 billion to 2015, €4.5 billion to 2016 and €0.1 billion to 2017. This was due to the late adoption of 300 out of the 645 EU programmes in areas covered by the abovementioned EU funds.

The revision of the EU’s MFF keeps the total expenditure ceilings unchanged and involves no additional money.

Review

The MFF had to be reviewed no later than in 2016 to allow the European Parliament (elected in 2014), the Council and the Commission (appointed in 2014) to reassess the priorities for the remaining years of the framework. This assessment was undertaken in light of the economic situation at the time as well as of the latest macroeconomic projections.

Following the mid-term reviewRegulation (EU, Euratom) No 1311/2013 was amended by Regulation (EU, Euratom) 2017/1123 in 2017. The revised MFF increases the resources earmarked for the EU’s main priorities by €6.01 billion for the years 2017-2020, as follows:

€2.08 billion for boosting growth and creating jobs through programmes such as the youth employment initiative (+ €1.2 billion), Horizon 2020 (+ €200 million), and Erasmus+ (+ €100 million);
€2.55 billion for addressing migration, enhancing security and strengthening external border control;
€1.39 billion for tackling the root causes of migration.
Each year, ahead of the budgetary procedure for the following year, the Commission makes a technical adjustment to the MFF in line with movements in the EU’s gross national income and prices. The results of this adjustment for 2018 were first communicated to the European Parliament and the Council in May 2017. However, these results were subsequently revised to take into account the 2017 amendment to Regulation (EU, Euratom) No 1311/2013 and were communicated to the European Parliament and the Council in September 2017.

MAIN DOCUMENT

Council Regulation (EU, Euratom) No 1311/2013 of 2 December 2013 laying down the multiannual financial framework for the years 2014-2020 (OJ L 347, 20.12.2013, pp. 884-891)

Successive amendments to Regulation (EU, Euratom) No 1311/2013 have been incorporated into the original document. This consolidated version is of documentary value only.

Article 312 of the Treaty on the Functioning of the European Union (TFEU)

Communication (COM(2018) 98 final) on the EU’s new multiannual financial framework (MFF)

Article 312 TFEU requires that the multiannual financial framework (MFF) should ensure that the EU’s expenditure develops in an orderly manner and within the limits of its own resources. It also sets out the procedure by which the MFF is agreed.

This European Commission communication, presented prior to an Informal EU Leaders’ meeting in February 2018, sets out various options for a new long-term budget designed to deliver efficiently on the EU’s post-2020 priorities and looks at the financial consequences of these options.

KEY POINTS

The EU budget is very different to EU countries’ national budgets — it is primarily an investment budget, has a long-term planning horizon and must always be in balance.

The Commission’s MFF proposals, to be presented by May 2018, are shaped by the principle of European added value, i.e. the value resulting from EU spending which is additional to the value that would have been otherwise created by EU countries if they had acted alone.

The communication points out that the Informal Leaders’ meeting is both timely and essential. The first step is to define what Europe wants to do together and agree on priorities. The next step will be for them to equip the EU with the appropriate financial means to achieve these priorities.

The communication lists a series of policy choices and seeks to quantify their financial impact.

2 examples:

If EU countries commit to a pledge that they have often made to improve the protection of the EU’s external borders, this would cost between €20 and €25 billion over 7 years, and up to €150 billion for a full EU border management system.

Looking at supporting the mobility of young people, there is also strong support for the need to step up mobility and exchanges, including through a substantially extended Erasmus+ programme. Depending on the level of ambition, several scenarios could be envisaged. Doubling the number of young people in the EU participating in Erasmus+ would require an investment of €30 billion over 7 years. Providing an ERASMUS+ opportunity for 1 in 3 young people would require a budget for the 2021-2027 period in the order of €90 billion.

The communication also discusses:

doing more with less through more efficient financial instruments and the importance of guarantees;
increasing flexibility to adapt the long-term budget to new needs and react swiftly to unforeseen events, for example by making the most of decommitted funds* and the possibility of creating a reserve;
modernising the EU budget, including by making the link between the goals of the EU budget and the way it is funded stronger, making use of possible new own resources;
the possibilities to strengthen the link — often referred to as ‘conditionality’ –— between EU funding and respect for the EU’s fundamental values.
The communication recalls that the final decisions on the MFF will be for the European Council to take, with the consent of the European Parliament.

The communication also underlines the importance of the right timing: agreement on the next MFF in 2019 would send a signal of a strong and united Europe of 27 that is able to deliver convincingly and would also ensure predictability and continuity of funding to the benefit of all.

BACKGROUND

The Commission’s communication follows on from:

the Bratislava declaration and roadmap of September 2016 and the Rome Declaration of March 2017 when the 27 EU leaders agreed on a positive agenda for the EU countries and
the Commission’s White Paper on the Future of Europe and its Reflection Paper on the Future of EU Finances, both published in 2017.
For more information, see:

MFF post 2020 (European Commission).

Decommitted funds: in the EU budget, commitment appropriations cover the total cost of legal obligations that could be signed in a given financial year by the budgetary authorities (the European Parliament and the Council of the European Union). These legal obligations can be contracts, grant agreements and decisions. The Commission has the power to decommit any part of the amount in an operational programme that has not been used for payment of the initial and annual pre-financing and interim payments by 31 December of the third financial year following the year of budget commitment.

MAIN DOCUMENTS

Consolidated version of the Treaty on the Functioning of the European Union — Part Six — Institutional and financial provisions — Title II — Financial provisions — Chapter 2 — The multiannual financial framework — Article 312 (OJ C 202, 7.6.2016, pp. 182-183)

Communication from the Commission to the European Parliament, the European Council and the Council — A new, modern Multiannual Financial Framework for a European Union that delivers efficiently on its priorities post-2020 — The European Commission’s contribution to the Informal Leaders’ meeting on 23 February 2018 (COM(2018) 98 final, 14.2.2018)

Results-focused review of the EU’s multiannual financial framework

Communication (COM(2016) 603 final) — mid-term review/revision of the EU’s multiannual financial framework 2014-2020. The communication presents the mid-term review of the functioning of the multiannual financial framework (MFF)* for the years 2014-2020.
It also proposes about €13 billion of additional European Union (EU) funding for the 2017-2020 period to finance further investments in jobs and growth on the one hand, and migration and security measures on the other.

KEY POINTS

Mid-term review of the MFF

The mid-term review takes stock of the key achievements at mid-course of the current 7-year financial programming cycle during which the EU budget seeks to:

promote the economic recovery notably with the European Fund for Strategic Investment (EFSI) with about €115 billion to boost jobs and growth;
respond to the most important refugee and migration crisis the EU has ever faced with more than €15 billion between 2015 and 2017;
fight against youth unemployment with the Youth Employment Initiative which has benefited over 1.3 million young people;
sustain several policies to address the causes and effects of climate change with investment of about €200 billion in the years up to 2020.

More money for more result-oriented actions

With its Budget Focused on Results initiative, the effectiveness of the EU budget for the 2017-2020 period will be maximised in order to boost jobs and growth and to manage migration and security threats.

In this context, the mid-term review proposes a financial package of about €13 billion of additional EU funding as well as additional capacity for the EU budget to react to unforeseen circumstances.

This financial package includes:

growth measures with €2.4 billion directed to implement programmes such as Horizon 2020 for research and innovation, the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME), Erasmus+ as well as the Connecting Europe Facility (CEF) that supports the development of trans-European networks in the fields of transport, energy and digital services.

This also includes €50 million for the WiFi4EU initiative, which aims to help public authorities to offer free WiFi hotspots to citizens, and the extension of the EFSI until 2020;
migration, security and external border control, including the setting up of the European Border and Coast Guard, the EU Agency for Asylum (which will replace the European Union Asylum Support Office), and the reform of the Common European Asylum System with an overall amount of €2.5 billion;
investments in regions outside the EU to address the root causes of migration with €1.4 billion for the European Fund for Sustainable Development, under the External Investment Plan which encourages investment in Africa and the EU Neighbourhood to achieve the Sustainable Development Goals.
The overall package also includes additional spending on migration in 2017 (€1.8 billion) and specific cohesion allocations redirected to the above priorities (€4.6 billion).

BACKGROUND

The MFF for the years 2014-2020 was agreed in 2013 in the light of the financial and economic crisis. As a result, the MFF placed a strong emphasis on investing in areas to boost jobs and growth.

The performance of the mid-term review was one of the conditions for the political agreement on the MFF.

Multiannual financial framework (MFF): lays down the maximum annual amounts (‘ceilings’) which the EU may spend in different political fields (‘headings’) over a 7-year period running from 2014 to 2020.

MAIN DOCUMENT

Communication from the Commission to the European Parliament and the Council: Mid-term review/revision of the multiannual financial framework 2014-2020 – An EU budget focused on results (COM(2016) 603 final, 14.9.2016)

Article 314 of the TFEU

It lays down the procedures for the drawing up and adoption of the EU’s annual budget.

KEY POINTS

EU institutions and bodies forward their budget estimates for the following year no later than 1 July to the European CommissionIn practice, the Commission seeks to have its draft budget ready in spring (April/May).

Based on these estimates, the Commission draws up the draft budget for the following year. It must forward this draft budget to the Council and the European Parliament by 1 September.

The Council must reach its position on the draft budget by 1 October. It forwards its position and the reasons for it to the European Parliament.
The European Parliament must adopt its amendments to the Council’s position within 6 weeks (42 days).
The Council has 10 days to accept the Parliament’s amendments. If it does not, a conciliation committee is formed comprising equal numbers of representatives of the Council and members of the European Parliament. This committee must agree on a joint text within 3 weeks (21 days).
If the conciliation committee cannot agree on a joint text, the Commission must present a new draft budget.

Once agreement is reached in the conciliation committee, the Council and the Parliament must approve or reject the text within 2 weeks (14 days).
If the Council rejects the joint text, Parliament may still adopt it but only if a majority of its members vote and three fifths of them support it.
If both institutions reject the joint text, the Commission must prepare a new draft budget.

If the budget is not agreed by the end of the year, a system known as ‘provisional twelfths’ comes into play (Article 315 of the Treaty on the Functioning of the European Union). This means that the equivalent of no more than one twelfth of the previous year’s budget or of the Commission’s draft budget — whichever is the smaller — can be spent each month until the budget is definitively adopted.

As new developments arise, the budget may need to be amended. The procedure for adopting amending budgets is the same as that for the annual budget.

EU budget 2020: €168.7 billion

Definitive adoption (EU, Euratom) 2020/227 of the European Union’s general budget for the financial year 2020 is the text agreed by the European Parliament and the Council of the EU adopting the EU’s budget for 2020.

The budget:

helps turn the EU’s political priorities into reality;
sets out and authorises the total annual revenue and expenditure for the EU and the European Atomic Energy Authority;
identifies specific priority expenditure areas.
For 2020, the priorities areas that matter to citizens include:

climate change;
jobs;
young people;
security and solidarity in the EU.

KEY POINTS

The 2020 EU budget provides for €168.689 billion in spending commitments* and €153.566 billion in payment* credits.

The main areas of expenditure (in € million) are:

Commitments (€ million)

Payments (€ million)

Competitiveness, for growth and jobs (research, innovation, education, small- and medium-sized enterprises, etc.)

25,285

22,308

Economic, social and territorial cohesion (regional, social and investment funds, etc.)

58,646

50,046

Sustainable growth, natural resources (agriculture, fisheries, rural and environment policies, etc.)

59,907

57,904

of which: Direct financial support to farmers and market intervention measures

43,410

43,380

Security and Citizenship (border protection, asylum policy, anti-terrorism activities, etc.)

3,729

3,685

Global Europe (development aid outside EU, humanitarian aid, etc.)

10,262

8,929

Administration (staff salaries, pensions and running costs)

10,272

10,275

Special instruments

588

419

The UK, despite leaving the EU on 31 January 2020, continues to contribute to and participate in the implementation of the budget until the end of 2020 as though it were an EU member state.

BACKGROUND

The budget is primarily an investment budget financing the whole range of EU policies, activities, institutions and agencies. It represents about 1% of member countries’ gross national income and some 2% of all EU public spending. It aims to complement national budgets and implement priorities which all EU governments have agreed.

The 2020 EU budget is the last under the current multiannual financial framework running between 2014 and 2020.

On 5 June 2019 the European Commission proposed a draft EU budget for 2020 of €168.3 billion in commitments (+ 1.3% over 2019) and €153.6 billion in payments (+ 3.5%). The Council slightly reduced that amount, while the Parliament increased it. On 18 November 2019, the three institutions reached an agreement during the conciliation procedure*. The 2020 EU budget was formally endorsed by the Council on 26 November 2019 and adopted by the European Parliament on 27 November 2019.

MAIN DOCUMENT

Definitive adoption (EU, Euratom) 2020/227 of the European Union’s general budget for the financial year 2020 (OJ L 57, 27.2.2020, pp. 1-2384)