In May 2018, the Commission President Jean-Claude Juncker presented the proposal for the Multiannual Financial Framework 2021-2027. However, it took until 10 November 2020 for representatives of European Commission, Parliament and Council to reach political agreement on this long-term budget plan, which meanwhile has been expanded by a recovery plan as a reaction to the Coronavirus crisis.
The Multiannual Financial Framework (MFF) for 2021 to 2027 amounts to 1,074 billion – ca. 61 billion less than provided for in the Commission’s initial proposal in May 2018. The majority of these resources will continue to be allocated to Common Agricultural Policy and the Cohesion Fund. However, what makes this Agreement special, is the parallel Agreement on the recovery plan NextGenerationEU, which was presented in 2020 in the course of the Coronavirus crisis. Due to the unprecedented sharp economic decline of the EU – the Commission currently assumes a minus of 7.8 % for the current year across Europe – the institutions agreed additional 750 billion euros, the majority of which will be paid to Member States in form of direct subsidies. Apart from that, it is ground-breaking that for the first time the Commission is given the opportunity to issue bonds on the financial markets.
The basis for the newly found Agreement was the joint position of the heads of state and government, which they announced in July 2020. Since then, negotiations have been taking place with representatives of the European Parliament, who were able to secure improvements in some sectors, for example additional 15 billion euros, in particular for the EU Research and Innovation Programme Horizon, Erasmus+ and the EU4Health programme. Furthermore, it is due to the European Parliament that 30 % of the EU funds have to be spent on fighting climate change and – at least from 2026 – 10 % on maintaining biodiversity.
Own resources, i.e. direct EU revenue shall be increased to fund the MFF and the recovery fund: a plastic tax has been planned from next year, followed in 2023 by a CO2 border tax for imports and a digital tax. The Commission has also been asked to present a plan to expand the existing Emission Trading System. Apart from that, it has been planned to make a new attempt regarding a financial transaction tax, and in case of the – not yet adopted – Common Consolidated Corporate Tax Base, part of it could be allocated to the EU budget.
Another key condition of the EU Parliament – in order to agree to the proposals – is a stronger obligation to maintaining the rule of law. Hence, Member States shall be denied EU funds if the Commission finds rule of law violations and if the Council confirms these with a qualified majority: this has been achieved when 15 of 27 Member States agree, representing 65 % of the total EU population.
The rule of law regulation probably represents the last remaining hurdle: this compromise, which was negotiated by the German Presidency with selected representatives of the EU Parliament must still be confirmed by the other Member States and the EU Parliament’s plenary. Apart from that, the regulations on own resources have to be ratified by all national parliaments. However, at least in Budapest and Warsaw, the vote could be more than just a formality.