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Brace for a disappointing EU budget

Marta Pilati

Date: 24/02/2020
More waiting won’t make the next EU budget more ambitious or modern. Better to focus on damage control and finding a deal quickly

The extraordinary European Council meeting of last week failed to result in an agreement among member states on the European Union’s (EU) next Multiannual Financial Framework (MFF) for 2021-2027. Discussions at the summit revealed the short-sightedness of EU leaders when it comes to investing in the Union’s future. The next MFF will probably not be able to deliver on the EU’s objectives in innovation, climate neutrality and Europe’s global role, even though national leaders and citizens expect the EU to do more in these areas. With a disappointing MFF as the only remaining option, the focus should be on containing the damage and adopting a final deal quickly.

A delayed start of EU programmes in 2021 already seems inevitable. Experience from 2013, when the MFF 2014-2020 was agreed in February, confirms that the European Parliament’s approval and subsequent technical work will take too long for the implementation to start in January. Even if EU leaders agree on a deal in the coming months, not all programmes will be at full capacity in early 2021. Further delays should be avoided as much as possible. The European Council should also be pressured to present a common position sooner rather than later.

But what is this common position likely to be? The negotiating boxes presented by the Finnish Presidency in December 2019 and European Council President Charles Michel in February, as well as the revised technical document circulated by the European Commission during the extraordinary summit, gave us a glimpse of what a compromise could look like: an EU budget deeply rooted in the past with little to no room to fund new priorities adequately. As some member states want to protect the funding of Cohesion Policy and the Common Agricultural Policy (CAP) while others insist on reducing the overall size of the budget, it is the newer programmes that are taking the biggest hit.

The draft compromise documents mentioned above envisage a smaller budget than what the Commission had proposed (respectively 1.07% of EU GNI, 1.074% and 1.069% compared to 1.11%). Additionally, they suggest a 40% cut to security and defence, more than 20% to migration, 10% to innovation and 5% to foreign policy. Importantly, Michel’s negotiating box further increased the cuts in these ‘modern’ policy areas, reduced the cut to Cohesion Policy and allocated even more funds to the CAP.[1]

A likely compromise will be an MFF that is unable to support measures which fight climate change, instruments for a ‘geopolitical’ EU (including security and external action), or programmes that strengthen innovation (e.g. R&I and space programmes) and boost the digital transformation.

It appears that member states are now unwilling to finance those very programmes that would allow them to deliver on the goals they committed to themselves, such as climate neutrality and turning Europe into a global tech leader. These priorities were jointly agreed in the European Council’s Strategic Agenda 2019-2024 and are in line with the priorities of the von der Leyen European Commission. But they are quickly disregarded by member states as soon as their implementation demands additional contributions from national coffers. Consequently, the EU will fail to meet its medium- to long-term objectives.

Ideally, national governments would be willing to put their money where their mouth is and agree to increase contributions to fund new priority programmes. This option, however, is not even on the table; President Michel’s proposed compromise went in the opposite direction and the European Parliament’s demands, such as a bigger MFF (i.e. 1,3% of EU GNI), are all but ignored. Member states may accept the introduction of a levy on non-recycled plastic (with some caveats) as a way to accommodate MEPs, but will likely not go further than that.

The MFF negotiations can end in three ways. First, a compromise could be found in the spring. This option is the preferred one, as it limits implementation delays in 2021. However, it is far from being the best outcome as the resulting MFF will still grossly underfund crucial policy priorities.

In the second scenario, EU leaders dig their heels in and demand more time, and summit after summit remain inconclusive. If member states refuse to budge, the agreement will, at the end of the day, most likely be very similar to what is already on the table. The difference with the first scenario would be timing: adoption would happen in the final months of this year, meaning that most programmes would not be able to start before well into 2021.

Lastly, the worst possibility is a failure to agree by the end of the year. Should the next MFF not be in place by 31 December 2020, the ceilings of the 2020 budget would automatically apply to 2021 (Article 312.4 TFEU). While this would mean that all programmes that currently do not exist would not start at all – even high-profile ones such as the Just Transition Fund –, there could be even more far-reaching consequences.

With the UK contribution missing, it is unclear how the current ceilings could be maintained in 2021. Without a swift solution, the whole EU institutional framework, as well as all of its programmes and payments, could shut down.

Considering the deep-rooted short-sightedness of national governments, it is highly unlikely that they will change their positions in the coming months. While member states have repeatedly called for a modernised EU, in practice they will support an MFF compromise that safeguards existing policies and slashes the budget of new, future-oriented programmes.

Nonetheless, a disappointing MFF is still better than no MFF at all. A deal can be reached relatively soon if every country can bring home some success in its initial position. The focus should, therefore, be on damage control: to avoid the protraction of delays and avoid a shutdown as much as possible.

The support the European Policy Centre receives for its ongoing operations, or specifically for its publications, does not constitute an endorsement of their contents, which reflect the views of the authors only. Supporters and partners cannot be held responsible for any use that may be made of the information contained therein.

[1] Jacques Delors Centre, “#ChartoftheWeek: MFF negotiations”, Twitter, @DelorsBerlin, 20 February 2020.

Photo credits:
Aris Oikonomou / AFP

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