In the course of the mid-term review of the Multiannual Financial Framework, the EU Commission is proposing an increase in funds. This is necessary to ensure that the budget can fulfil its most important tasks in view of the numerous crises. The focus is also on investments in key technologies. In contrast, no increase in funds is planned for important social programmes. AK demands a significantly stronger focus on social policy goals.
The current Multiannual Financial Framework (MFF) covers the period from 2021 to 2027 and amounts to €1,216 billion. In response to the economic downturn following the Covid pandemic, the EU also decided on the NextGenerationEU recovery instrument amounting to €807 billion. Both figures refer to the respective prices. The MFF is currently under revision. This is always scheduled halfway through its term.
Mid-term review of the MFF reveals major challenges
The increased costs due to the Russian war of aggression against Ukraine, the energy crisis and interest rate increases are placing a considerable burden on the EU budget. In the course of the revision, the EU Commission made several proposals in June 2023 to ensure that the budget can still fulfil its most important tasks. Therefore it is scheduled to be increased in several areas. Ukraine is to be supported with reconstruction aid. The funds for migration and neighbourhood policy are also to be expanded. A mechanism to finance the increased interest costs for NextGenerationEU is also planned. In addition, there is to be a Strategic Technologies for Europe Platform (STEP), whose aim it is to ensure the EU's long-term competitiveness in the area of selected key technologies.
The European Parliament's Committee on Budgets has also developed a Position on the long-term EU budget, which will be voted on in the plenary in October. The Committee on Budgets considers the Commission's proposal to be insufficiently ambitious. It calls for additional funding of €10 billion for the period of 2024-2027 to finance spending on migration, external affairs, strategic autonomy and crisis management. MEPs stress that a quick agreement is important. The revised MFF should be operational at the beginning of 2024 to provide a framework for the annual budget for 2024.
However, if an increase in funding is actually to take place, the EU Member States must agree on it. The Commission assumes that the Spanish Presidency will take forward the work in the Council in order to reach a quick agreement. It points out that the negotiations must be concluded before the end of the year "as a tight budgetary situation will already be concretely noticeable in 2024".
AK criticises lack of focus on social goals
From the point of view of the AK, the Commission's proposal is to be criticised above all because of the lack of an increase in funds in the social sector. Even though, according to the Commission's explanations, the proposed increases are intended to "maintain and strengthen the unique European social model", neither the European Social Fund Plus nor the Just Transition Fund or the Social Climate Fund will receive more funds. However, this would be urgently needed, because many people are threatened by poverty and suffer from high inflation. It is time to reorient the priorities of the EU budget towards social goals.
The new special instrument, which is to be used to cover the increased financing costs of NextGenerationEU, is also problematic. According to a recent Study, a failure to agree on this instrument could lead to funds being redirected from the European Social Fund Plus or the Erasmus+ education programme, of all things, to cope with this situation. AK strictly rejects such a move. Instead, AK is in favour of making the granting of EU subsidies also dependent on whether labour and social standards towards employees are complied with.
New own resources are urgently needed for financing
Another Commission communication contains proposals on the revenue side. In 2021 already, it had been proposed that revenues from the Emissions Trading System, the new Carbon Border Adjustment Mechanism and shares in the residual profits of large companies were to be booked as own resources. The proposal to use a harmonised indicator to generate own resources based on the gross operating surpluses of companies, is new. According to the Commission, a total of around €16 billion in own funds could flow in this way. AK criticises that the funds would still flow from national budgets and not directly from company profits. Instead, it calls for a separate EU corporate surtax and also brings the financial transaction tax into play. All in all, it should be rejected that tax revenues from labour and consumption are disproportionately used to finance the EU budget.
AK rates the promotion of strategic technologies through the creation of STEP as positive, but recognises a need for improvement here as well, such as better involvement of the social partners. Finally, according to AK, with regard to Common Agricultural Policy, the inclusion of genuine sustainability aspects should also be promoted and a fair distribution of funds ensured.
EU Commission: EU budget
AK EUROPA Position Paper: Mid-term review of the multiannual financial framework
AK EUROPA: Commission proposes new own resources
Bruegel Think Tank: The rising cost of European Union borrowing and what to do about it