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The Multi-annual Financial Framework 2014-2020

The Multi-annual Financial Framework 2014-2020. A budget for E urope 2020 Janusz Lewandowski Commissioner for Budget and Financial Programming of the European Commission. 1. EU Budget = policy in numbers. Challenges Lisbon Treaty : more responsibilities Connect Europe better

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The Multi-annual Financial Framework 2014-2020

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  1. The Multi-annual Financial Framework 2014-2020 A budget for Europe 2020 Janusz Lewandowski Commissioner for Budget and Financial Programming of the European Commission 1

  2. EU Budget = policy in numbers Challenges • Lisbon Treaty: more responsibilities • Connect Europe better • Unstable neighborhood • Austerity climate • Financial crisis interventions • Response to natural disasters MORE EUROPE FOR THE SAME MONEY! Responses • European logic fully geared to Europe 2020 strategy • Modernised budget - outputoriented,simplification, conditionality, leveraging investment • Limited in size, but redesigned - savings in some areas - more to areas that matter - multi-purpose expenditure • Budgetary rigour, administrative limits • New legitimacy of traditional policies

  3. Overview of the presentation • Background on financial frameworks and EU budget • Overall volume • Overview of expenditure side • Own resources and corrections

  4. Why do we need a multi-annual financial framework (MFF)? History • The Financial Framework (previously ‘financial perspective’) was created in 1988 to create financial stability and ensure budgetary discipline • Currently we have the 4th MFF (2007-2013), after the 2 package proposals DELORS I (1988-1992) and DELORS II (1993-1999), and Agenda 2000 (2000-2006) • Since the Treaty of Lisbon (1-12-2009), the MFF became legally binding through a regulation and cannot just be laid down in an Interinstitutional Agreement (IIA). • In the Council, the 27 Member States must unanimously adopt a regulation on the MFF with consent of the European Parliament

  5. What is the multi-annual financial framework (MFF)? • The MFF defines maximum amounts (‘ceilings’) by category of expenditure (‘headings’). • Any expenditure must have a legal basis. • Allows predictability of EU expenditure • The MFF provides a 7-year framework for the annual budget • It structures the amounts outlined for each EU policy in each legal basis (e.g. agriculture, structural funds,…)

  6. EU funds’ beneficiaries 2009 In million € In % GNI

  7. Overall figures for 2014-2020 MFF

  8. What does constant in real terms mean? MFF Commitments: • Level of 2013 x 7 years = € 1025 Billion in 2011 prices = 1.05 % of GNI • Outside the MFF: € 58.5 BN in 2011 prices MFF Payments: • € 972 Billion = 1.00 % of GNI

  9. Ambitious, but realistic…

  10. Decreasing payment share

  11. Development of CAP and cohesion share in the budget between 2013 and 2020

  12. Despite restraint - significant re-distribution in key policy areas

  13. Connecting Europe Connecting Europe Facility 40 EUR billion ( + 10 EUR billion earmarked under Cohesion Fund) • Energy, transport and digital networks • Cross-border multi-country investments to the benefit of internal market • Strong co-ordination with cohesion policy • Proposed use of EU project bonds

  14. Cohesion policy proposal • Three categories of regions • Less developed regions (GDP per capita < 75% of EU average) • Transition regions (GDP per capita between 75% and 90%) • More developed regions (GDP per capita > 90%) • Cohesion Fund for Member States with GNI per capita <90% • Territorial cooperation • Concentration on poorer and weakest regions • Stronger conditionality • Thematicconcentration Multiannual Financial Framework 2014-2020 *Cohesion Fund will earmark 10 billion EUR for the new Connecting Europe Facility ** ESF minimum share: 25%

  15. Agriculture • Declining share in the EU budget until 2020 • Greening of CAP - direct aid 30 % linked to environment measures • Progressive convergence towards EU average: • Close 33% of the gap with 90% of EU average • Financed by all Member States above the average • Market measures: Emergency Mechanism • European Globalisation Fund to help farmers adapt to globalisation

  16. Change of Direct Payments between 2013 and 2020

  17. Administrative expenditure* • Budget under restraint • Staff reduction up to 5% • Efficiency gains (increase working hours to 40 a week) • Reviewing certain benefits in line with similar trends in Member States • Administrative expenditure discipline for all EU institutions

  18. A new own resources system • Commission proposal : • End statistical VAT own resource as of 2014 • Introduce 2 new own resources • Financial Transaction Tax • VAT resource • Radically simplify the system of corrections • In comparison with current system • Simpler • Fairer • More transparent

  19. New structure of own resources

  20. EU taxation of financial sector • Commission proposal • Proposal for a Council Directive on FTT adopted on 27/9/2011 complemented by proposals in the area of own resources. • Financial transaction tax (FTT) to be introduced on 1/1/2014. • Applicable tax rates defined in the Directive. • The revenue arising from the FTT can be wholly or partly used as own resource for the EU budget.

  21. EU taxation of financial sector • Advantages of the FTT • Ensure that financial institutions make a fair contribution to covering the costs of the recent crisis. • Ensure even taxation of the sector vis-à-vis other sectors. • Disincentive for overly risky transactions and complement regulatory measures. • Avoid fragmentation in the internal market for financial services. • FTT more efficient at EU than at national level. • Support in European Parliament, national parliaments, NGOs and public at large (Eurobarometer: 61% in favour and 50% or more in 20 Member States) As a new revenue stream the FTT will contribute to budgetary consolidation of Member States by reducing their contributions to the EU budget. All MS will benefit in line with their GNI.

  22. VAT • Commission proposal • Maximum rate in OR decision: 2% • New VAT resource from 1/1/2018 at the latest. Effective rate: 1 % • Advantages • Link EU VAT policy and EU budget • Part of wider revision of VAT systems: fight against VAT fraud and reinforce harmonisation of VAT systems Combining the 2 new OR • Critical mass to reduce contributions to EU budget • Ensures fair distribution of impact on Member States • Link to EU policies

  23. Correction mechanisms • Commission proposal • Replace all corrections mechanisms by a system of fixed annual lump sums for 2014-2020 • Based on Fontainebleau principle: "any member State sustaining a budgetary burden which is excessive in relation to its relative prosperity may benefit from a correction at the appropriate time." • Advantages • Fairness - equal treatment of the Member States • Simplicity and transparency • Lump-sum correction mechanism to correspond to MFF duration • Avoids perverse incentives for expenditure

  24. Correction mechanisms LUMPSUMS ADJUSTED FOR RELATIVE PROSPERITY Average annual (in million of euro lumpsum / in current 2014-2020 prices) GROSS AMOUNT DE 2500 NL 1050 SE 350 UK 3600 TOTAL 7500

  25. Abolish VAT-based own resource Way ahead • Timing of negotiations: • 2011: Preparatory work under PL presidency • June 2012 (DK pres) : Council level • December 2012 (CY pres): Agreement on new MFF regulation between European Parliament and Council • 2013: Adoption by co-decision of new legal bases

  26. Multiannual Financial Framework Thank You

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