In recent days, the eyes of Brussels have focused on the European recovery fund, but meanwhile the 27 heads of government are also negotiating the EU budget for the next seven years. From nightly meetings to discontinued negotiations. What exactly is at stake? Five questions about the multiannual financial framework (MFF).
What exactly does the European multiannual budget (MFF) entail?
In the multiannual financial framework, European heads of government determine the financing of EU activities and policies. The budget has a duration of seven years (2021-2027) and must be approved by all Member States.
The MFF sets the maximum amounts that the EU may spend on an annual basis and throughout the life of the budget. In addition to the European Council, the European Parliament must also agree to the MFF. Before the end of this year, the various parties must have reached an agreement on the new European multi-year budget.
How is the amount of the MFF determined?
A proposal is currently on the table of the Commission, which puts the multi-annual budget at EUR 1,074 billion. That is several tens of billions of euros more than the previous budget. Negotiations for the MFF are known to be difficult. Negotiations were also very difficult for the outbreak of COVID-19.
In May 2018, the European Commission submitted its first proposal for the new MFF. In February 2020, the Commission cut its MFF proposal by several tens of billions. European heads of government, headed by President Charles Michel, are currently negotiating the Member States’ contribution to the European budget.
The EU budget in the current MFF, which runs from 2014 to 2020, is approximately EUR 1,000 billion. That is about 1 percent of the total European gross domestic product (GDP). EU GDP is the total GDP of all EU Member States.
What is the role of the corona repair fund in the MFF?
The corona repair fund is linked to the multi-year budget. European leaders are negotiating both packages at the same time. The costs for the MFF and the recovery fund together amount to approximately 1.8 trillion euros. In both procedures, Member States can exercise their right of veto, which allows individual countries to avoid an agreement. The Netherlands is very critical in both negotiations.
The corona repair fund has recently been the subject of discussion. Countries such as the Netherlands, Denmark, Austria, Finland and Sweden are not prepared to accept more than 350 billion euros in donations. In addition, Mark Rutte, among others, demands that the recovery fund be accompanied by reforms in various European countries such as Italy and Spain.
How is the Dutch government in the discussion about the MFF?
Prime Minister Rutte has recently emerged as one of the most critical European leaders on the new EU budget. As the captain of the ‘economical four’ (the Netherlands, Denmark, Austria and Sweden), the Netherlands is very critical of the MFF proposal and the accompanying recovery fund. For example, these countries disagree with the increased EU budget. In the current plans, Brexit means that fewer member states have to pay for a higher EU budget.
As a guide, Charles Michel recently cut the European budget to meet the needs of the critical countries. Also, ‘net payers’ such as the Netherlands, who pay more to the EU than they get in subsidies, can keep their discount on the discount on the EU contribution. This is an important condition for the Netherlands for an agreement on the next MFF.
What will happen if no agreement is reached before the end of this year?
If a new MFF is not presented on 1 January 2021, the EU may still have a budget. A special rule then prescribes that the European Commission may spend one twelfth of the annual budget of the previous EU budget every month. In this case, the agreements and amounts from the 2020 MFF are adhered to. The Council may also decide, in agreement with the Commission, to approve expenditure in excess of one-twelfth of the annual budget.