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About the EU budget

The EU budget is regulated in the Multiannual Financial Framework (MFF), a seven-year financial perspective. The European Commission’s proposals for the next MFF covering the period 2021-27 were published in May-July 2018. The proposed legal texts and fact sheets explain the proposed MFF, while there are also various additional legislative acts laying down agricultural, cohesion, environmental and other spendings for the future. In general, it can be said that the proposed MFF is largely simplified, reducing the number of programmes and harmonising the rules of spending. Even though the European Parliament has been asking for better aligning the MFF to the political cycles of the EU, namely the terms of the European Parliament and European Commission, the next MFF will continue to cover a seven-year-long. It will include a mid-term review by the end of 2023,  which might be accompanied by relevant proposals for revision of the Regulation. 

How does MFF work?

Currently, over 76% of the EU budget is managed in partnership with national and regional authorities through a system of “shared management”, largely through 5 main funds – the Structural & Investment Funds. (the European Regional Development Fund (ERDF) for regional and urban development, the European Social Fund (ESF) for social inclusion and good governance, the Cohesion Fund (CF) – economic convergence by less-developed regions, the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF)). The European Agricultural Guarantee Fund (EAGF) is also under shared management and it primarily finances direct payments to farmers and measures regulating or supporting agricultural markets. These funds will continue to operate (with some changes in the priorities and functioning) in the next period as well. 

Other funds are managed directly by the EU, provided in the form of grants and contracts.  Grants are for specific projects in relation to EU policies, usually following a public announcement known as a ‘call for proposals’. Part of such funding comes from the EU, part from other sources. Contracts are issued by EU institutions to buy in services, goods or works they need for their operations – like studies, training, conference organisation, IT equipment. Contracts are awarded through calls for tender.

Cornerstones of the next MFF

The proposed MFF  can be seen as greater or smaller than the current MFF, depending on the perspective chosen. However, it clearly falls short of the size of 1.3% of GNI as proposed by the European Parliament, what they see as necessary to fund new priorities properly whilst protecting existing priorities. In the Council, some Member States strongly oppose any increase in the size of the EU budget and insist that the EU should ‘do more with less’, while others would support a greater MFF, on certain conditions. 

The MFF structure is more than just a way of classifying and presenting the EU’s spending plan, as it is rather a political statement of EU priorities. The proposed structure differs significantly from the current MFF, as it increases the number of headings from five to seven, reduces the number of programmes from 58 to 37, and shifts some programmes between headings. Within the headings, the programmes are grouped into 17 ‘policy clusters’, designed to show how the programmes contribute to individual policy objectives. 

The seven proposed headings of the next MFF in billion euro, current prices (Source: European Commission)

As a new element, the Commission proposes within the new Justice, Rights and Values Fund a new rights and values programme to promote rights, values, and equality. To protect the EU budget from financial risks linked to generalised deficiencies as regards the rule of law, the Commission proposes a new rule of law instrument. Under the proposals, the EU could suspend, reduce or restrict access to EU funding in a manner proportionate to the nature, gravity, and scope of the deficiencies. It could be invoked when a generalised deficiency as regards the rule of law in a Member State endangers:

  • The proper functioning of the authorities implementing the Union budget,
  • The proper functioning of investigation and public prosecution of fraud or corruption relating to the budget,
  • The effective judicial review by independent courts,
  • The prevention and sanctioning of fraud, corruption or other breaches of EU law relating to the budget, or
  • The effective and timely cooperation with the European Anti-Fraud Office and with the European Public Prosecutor’s Office.

Also, the new InvestEU programme is an investment instrument that brings together the European Fund for Strategic Investments and several many other existing equity, guarantee, and risk-sharing instruments aimed to mobilise additional investment across Europe.

Read more about the proposed MFF:  In the original proposals and facts sheets or in the Analysis of the Commission’s proposal by the European Parliamentary Research Service