TIME TO DECIDE ON THE UNION’S FINANCIAL FRAMEWORK FOR 2021-2027

1.Time to deliver

In June, Leaders confirmed their objective of reaching an agreement on the Union's future financial framework before the end of 2019. Since then, work has progressed under the leadership of Finland’s Presidency of the Council. This work has highlighted areas of common ground, as well as areas where compromise will be necessary to finalise a balanced agreement that is fair for all.

An agreement on the future framework by the end of 2019 will provide the Union with a renewed sense of direction and resolve. It will help to avoid delays and blockages at least as severe as those experienced at the beginning of the current period, the effects of which were felt in all Member States in 2014 and 2015. This objective is within reach but will only be possible with strong political leadership and determination to find solutions in the general European interest.

The October European Council will be an opportunity for Leaders to provide orientations on the key parameters of the future framework. These include the overall size of the budget, the balance between policy areas, the future financing of the budget, and the conditions attached to funding. The task for Leaders is to find a fair balance, combining ambition and realism. This should take full account of the position of the European Parliament, which continues to defend an ambitious future budget.

Throughout this final phase, the Commission will continue to make the case for the modern, streamlined and flexible budget that the Union needs. This is a time for the institutions to come together to equip the Union for success over the decade to come. Only 14 months remain before the launch of the new programmes and there is much work to do. It is time to deliver.

2.A budget that is up to the task

The financial framework for 2021-2027 must provide the resources necessary to drive forward the positive agenda agreed in Rome and Sibiu. This is a unique opportunity to translate into action the priorities identified in the Strategic Agenda of the European Council and the political guidelines of the Commission’s President-elect Ursula von der Leyen. The overall level of the future framework must match the Union’s ambitions, while also fairly reflecting the budgetary consequences of the withdrawal of the United Kingdom. The Commission proposed a long-term budget equivalent to 1.114% of EU 27 gross national income. Some have argued for the budget to be limited to 1.00%, while others have supported the European Parliament’s call for a larger budget of up to 1.3%. It is essential to view these figures in context. Today, the EU long-term budget for 28 Member States is equivalent to 1.03% of EU 28 gross national income, including the European Development Fund. However, removing spending in the United Kingdom brings this to 1.16% of EU 27 gross national income. This is the right point of comparison. The size of the EU budget as a percentage of EU gross national income (GNI) The level proposed by the Commission already represents a reduction compared to the current situation. This is a realistic response to the impact of the departure of a major contributor to the EU budget, but also provides an essential funding boost for new and emerging priorities. A long-term budget of this size would not result in significant and unsustainable increases in Member States’ contributions. The increase in national contributions of about a third by 2027 compared to 2020 levels is mainly a consequence of inflation and real growth, which will lead to similar increases in national budgets over the period. The remainder is partly a consequence of the withdrawal of the United Kingdom from the EU and partly driven by reinforced investment in common priorities such as research, digitalisation, climate, migration, security and defence, as well as the Union's external action. Further significant cuts would prevent the Union from delivering on its priorities and have an immediate impact on the level of EU support in the regions and for Europe’s farmers, students, and researchers. It would open up a serious gap in relation to the Strategic Agenda agreed by the European Council in June 2019. The European Council therefore needs to urgently define a realistic range of outcomes for the overall level of the EU budget. Departing significantly from the balance struck by the Commission proposal would have real consequences. A larger budget would allow the Union to achieve more together but would put additional pressure on national contributions, although reforming the system of financing the EU budget as the Commission has proposed would mitigate this effect. Conversely, a smaller budget would have a damaging impact on the Union’s capacity to deliver efficiently on the Strategic Agenda and the Union's priorities. It would undermine the modernisation of our policies and our ability to address urgent new priorities.

3.A fairer approach to financing the EU budget