Consequences for the European Union's Budget 2018 and beyond in case the Mid-Term Revision of the Multiannual Financial Framework 2014-20 is not adopted

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

Consequences for the European Union's Budget 2018 and beyond in case the Mid-Term Revision of the Multiannual Financial Framework 2014-20 is not adopted

The Commission's proposal for the 2018 Budget of 30 May 2017 is presented as if the Mid-Term Revision of the Multiannual Financial Framework would be approved. This Communication looks at the consequences of the revision not being adopted.

1.Challenges for the European Union's budget

The European Union (EU) has a limited budget (around 1% of the EU Gross National Income) but this budget is a critical tool for the Union to achieve results for its citizens. It is mainly an investment budget, pooling resources in areas where EU action makes sense, such as: improving transport, communication and energy networks across EU countries, protecting the environment and the development of rural areas, making the economy more competitive, helping researchers to team up across borders and young people to study abroad, promoting cohesion between regions.

The EU budget is also a factor of stability and predictability. It is framed over five to seven years through the multiannual financial framework (MFF), which sets the maximum annual amounts which the EU can spend in various policy areas every year. Today, however, the design of the EU budget is faced with significant challenges in a world that has become more complex and unpredictable.

The European Union must cope with a range of significant long-term challenges. Faced with the effects of the worst economic crisis since World War II, it must durably return to growth and address exclusion and youth unemployment. The migration crisis has revealed the need for the EU not only to provide humanitarian aid and shelter for refugees but also the importance of protecting its borders and addressing the root causes of migration. Terrorist attacks have shaken our societies, calling for more effective security and intelligence cooperation. The EU budget should be able to not only to deliver on the initial plans of the MFF, but also to adjust swiftly to new challenges and to deliver results rapidly on the ground.

So far the EU budget has been stretched as far as possible to respond to changing circumstances: unused margins and available flexibilities have been intensely used notably to (a) set-up the European Fund for Strategic Investments (EFSI) under the Investment Plan for Europe; (b) respond to the migration, refugee and security crisis and (c) help finance new initiatives such as the Youth Employment Initiative, the European Solidarity Corps as well as the upcoming proposal to launch the European Defence Industrial Development Programme.

The capacity of the EU budget to respond to further unforeseen events over the period 2017-2020 has now been seriously reduced.

2.Broad political agreement on the Mid-Term Revision

The Commission proposed a Mid-Term Revision of the current Multiannual Financial Framework 2014-2020 in September 2016. The main objective was to increase funding and flexibilities available to continue to provide an appropriate budgetary response to the two main political priorities – growth and jobs and response to migration – and reinforce the flexibility and agility of the budget.

After intense negotiations between the three institutions, a unanimous agreement was reached in the Council on 7 March 2017 and the European Parliament gave its consent on 5 April to a compromise Mid-Term Revision package, including the revision of the MFF regulation as well as a number of political agreements concerning in particular the reinforcement of specific programmes.

In accordance with relevant procedures, the General Affairs Council of 25 April was supposed to give final approval to the Multiannual Financial Framework at its mid-term. However, upon last minute request from the UK, the point was removed from the agenda. The arguments invoked are linked to the purdah (the official pre-election period during which the Government is not allowed to adopt any major decisions).

The formal adoption in Council is expected to take place shortly after the UK elections on 8 June, when the UK government will no longer be constrained by the rules governing the pre-election period.

Given the broad political agreement in both the European Parliament and the Council, the Draft Budget 2018 already anticipates this formal adoption and incorporates the elements of the Mid-Term Revision package related to 2018.

3.What does the Mid-Term Revision provide?

The Mid-Term Revision will provide the EU with important room for manoeuvre to respond to new developments until 2020. Even though it does not increase the total budget ceilings, it allows an increase of expenditure and additional flexibility for certain areas that have been agreed between the European Parliament and Council.