The multiannual financial framework (MFF) package for 2020-2021 includes proposals for:
an amended MFF regulation, which lays down how much the EU can spend to carry out its policies and programmes
an amended own resources decision, which defines the sources of EU revenue
a regulation for the European recovery instrument Next Generation EU
a mechanism to protect the EU budget in case of generalised deficiencies regarding the rule of law in a member state (proposal from 2018)
EU expenditure: multiannual financial framework
The MFF is the EU’s long-term budget. It sets the amounts that match the EU’s priorities.
Regarding expenditure, the Commission 2018 proposal included:
increased funding for areas such as digital transition, young people, external border management, migration and asylum, research and innovation, security and external action
a reduction for the common agricultural policy (CAP)
a reduction in cohesion spending, but an increased role for cohesion policy in supporting economic reforms and the long-term integration of migrants
The new MFF package builds on the 2018 proposal, taking into account recent discussions in the European Council and the fallout from the COVID-19 pandemic.
On top of the updated MFF proposal, the Commission has put forward a temporary, one-off fund designed to support the recovery from COVID-19: Next Generation EU.
In the Commission’s proposal, the bulk of the funding from Next Generation EU is destined to support public investment and key structural reforms in member states, concentrated where the needs are greatest.
The Commission is also proposing to help private investment to boost the green and digital transitions.
The proposal also builds on the experience of the COVID-19 pandemic to strengthen the EU’s capacity to respond to crises. Proposals include a new EU health programme and an expanded RescEU – the EU’s civil protection mechanism.
EU revenue: own resources
Regarding EU revenue, the Commission own resources proposals include:
phasing out of all rebates – the money that certain member states can claim back from their contributions to the EU budget
reducing the amount member states keep to cover costs of collecting customs revenue – from 20% to 10%
simplifying the current value-added tax (VAT) own resource
introducing new sources of revenue – linked to the EU emissions trading system, the amount of non-recycled plastic packaging waste in each member state, and a possible common consolidated corporate tax base
To finance the recovery measures, the amended own resources decision proposal enables the European Commission to exceptionally borrow up to €750 billion on financial markets by issuing bonds.
The loans would be repaid by additional own resources to be proposed at a later stage.
EU long-term budget negotiations
The European Council and the Council of the EU have a central role in the process of establishing the EU’s long-term budget.
In the European Council, EU leaders provide political guidance on the main features of the long-term budget. This enables the Council to reach its position.
Based on political guidance from EU leaders, the Council of the EU takes forward the legislation underpinning the budget and sectoral funding programmes.
Sectoral funding programmes
The Commission presented proposals for sectoral programmes between May and June 2018. Amended proposals were presented in May–June 2020.
In 2018, the Commission proposed to reduce the number of programmes. The aim is to group fragmented funding sources into new integrated programmes and streamline the use of financial instruments.
With the revised budget proposal, a number of sectoral programmes are reinforced to play a bigger role in the recovery. These include the Common Agricultural policy, the single market programme and the just transition fund. The Commission is also proposing a new health programme.
For each programme, the proposals set out the:
objectives
budget
criteria for the allocation of funds
The financial and horizontal aspects of the programmes depend on the outcome of the MFF negotiations.
Sectoral legislation 2021-2027 in the Council
Sectoral Council configurations are responsible for work on EU funding programmes within the Council.
For instance, the Agriculture and Fisheries Council works on the legislative proposals related to the Common Agricultural Policy (CAP), the Competitiveness Council on the programmes for the single market, research and space.
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