About once every seven years, the European Union debates the size of their budget – also known as the Multiannual Financial Framework (MFF) – and how it will utilise said funds. Traditionally, the MFF has collected roughly one percent of total income from each member state in exchange for security, stability, and prosperity benefits. After consulting with the Parliament and meeting with stakeholders across all 27 member states, Budget and Human Resources Commissioner Günther Oettinger proposed that all participating countries increase contributions to 1.11% of their national wealth for the 2021-2027 budget for a total 1.279 trillion euro budget –– a higher budget for a smaller number of members states.
Reflecting New Goals
While reasons for this increase include efforts to fill the monetary gap of 100 billion euros that the EU will lose after the U.K.’s departure from the Union, Oettinger also says the new spending outline will help keep Europe competitive in the years to come while tackling rising issues like migration flows and climate change.
Areas like border defence, technology research, and security are getting a significant boost under the Commission’s blueprint budget spending. The new budget calls for a 9-fold increase in digital transformation investment and more than doubling programmes for young people, like Erasmus and reduced Interrail passes. Most notable, however, is the unprecedented focus on climate protection.
Budget Commissioner Oettinger suggests that 25% of the 2021-2027 MFF be relegated to activities to ensure that economic and political challenges won’t weaken the bloc’s stance on sustainability. This allocation includes funding for reducing greenhouse gases, developing renewable energy and promoting public transport. It is a notable increase from the 20% of the budget that was dedicated to climate efforts in the 2014-2020 budget, equating to a 320 billion euro increase. A possible plastic tax and shift from carbon dependence have also been mentioned. 14 member states, including Germany, France, Italy, Spain, and Portugal have released a joint statement expressing support for a greener EU budget.
Some areas of spending, like farming subsidies and rural development, are being cut. Leaders hope the changes will help the EU modernise, making them more efficient and targeting support only where it’s needed most. Of the 30% of the fund that remains geared toward agricultural policy, a stronger focus will be placed on small and medium-sized farms. Still, some countries aren’t satisfied. France has made it clear that the budget shifts are “unacceptable” considering challenges like price volatility and climate change. Agro-dependent countries like Ireland and Italy largely agree.
Perhaps the most contentious parts of the new budget plan are changes to the Cohesion Policy, the EU’s regional investment policy and an expression of solidarity across regions. Allocations have traditionally been based on gross domestic product (GDP) per capita. With a reduced budget of 373 billion euros for 2021-2027, some countries will receive less support than they have become accustomed to under the current budget. But Europe’s economy is bouncing back, and Commissioner for Regional Policy, Corina Creţu, urges that the proposal “leaves no one behind”.
Investments will focus on innovation, support to small businesses, digital technologies and industrial modernization to bridge gaps between richer and poorer regions with the Union. The new proposal does however, shift distribution methods to alter allocation criteria from simply GDP per capita to incorporate youth employment, low education level, climate change, and the integration of migrants. As of 2021, the largest allocations will swing from central and eastern countries to southern ones. Spain, Greece, and Italy will all receive greater percentages of the budget to help them recover from the economic and migrant crises. Some states, like Portugal and Malta, feel that they’re being punished for low unemployment rates and recent economic growth. Commissioner Creţu insists that no one should be dissatisfied because their economy has improved. The Cohesion Policy will still account for more than 20% of the total EU budget.
What Happens Next
Oettinger’s proposal is just the beginning. The European Parliament will deliberate and debate the terms for months, as more becomes clear. Potential areas of discourse include what constitutes “climate protection,” who will supervise the use of funds, and whether changes to the agricultural and cohesion policy award equal opportunity for all member states. The final budget must win unanimous support from all 27 governments to pass.
At a time when national budgets are stretched thin, it could be challenging to reach a consensus. Central and Eastern European countries like Poland, Czechia, and Hungary have expressed early opposition, especially in regard to the 7% cut to the Cohesion Policy and movement away from coal energy.
An informal deadline has been set for the middle of next year, as it can take up to 18 months to agree on sector-specific legislation. Leaders urge the EU to agree before the May 2019 European elections, as waiting could be detrimental to key projects in need of funding.