COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Mid-term review/revision of the multiannual financial framework 2014-2020 An EU budget focused on results
Date: 2016-09-14
Institutions: European Commission, Secretariat-General
Subjects: budgetary discipline (EU), budgetary procedure, commitment of expenditure, financial management, general budget (EU)

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 14.9.2016  COM(2016) 603 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Mid-term review/revision of the multiannual financial framework 2014-2020 An EU budget focused on results   {SWD(2016) 299 final}  
 
 
1. 

INTRODUCTION 

The EU is facing a range of significant long-term challenges: strengthening Europe's 
economy  and  social  fabric;  ensuring  security  inside  the  EU  and  at  its  external 
borders;  managing  migration;  and  addressing  the  causes  and  consequences  of 
climate  change.  Addressing  these  and  other  challenges  requires  comprehensive 
medium-  to  long-term  policies  and  strategies,  underpinned  by  adequate  financial 
support at both European and national level. 

The  Union's  multiannual  financial  framework  provides  essential  medium-term 
predictability  for  supporting  investment  in  Europe's  priorities.  However,  in  the 
current  context  of  multiple  crises,  it  also  needs  to  be  able  to  adjust  swiftly  to 
changing priorities and unforeseen events and to deliver rapidly on the ground. This 
was  done  successfully  in  the  setting-up  of  the  European  Fund  for  Strategic 
Investments  (EFSI)  under  the  Investment  Plan  for  Europe  and  in  making  funding 
available for measures addressing urgent migration, refugee and security challenges.  

The multiannual financial framework (MFF) for the years 2014-2020 was agreed in 
2013 against the background of the financial and economic crisis and strained public 
finances in many Member States. Consequently, the MFF placed a strong emphasis 
on  investing  in  areas  of  EU  value-added  to  boost  jobs  and  growth.  The  MFF  also 
reinforced  the  link  between  the  EU  budget  and  essential  administrative  and 
structural  reforms  in  the  Member  States  by  introducing  strong  conditionalities.  It 
introduced  a  more  performance-based  approach  to  budgeting  and  simplified 
delivery  mechanisms  so  as  to  deliver  results  quickly.  Innovative  techniques  and 
instruments strengthened the EU budget's capacity to respond to new challenges and 
to leverage public and private funds.  

The  Commission  which  took  office  in  November  2014  reinforced  this  framework 
with  the  successful  launch  of  the  Investment  Plan  for  Europe  supported  by  the 
European  Fund  for  Strategic  Investments  (EFSI).  Moreover,  its  initiative  for  a 
Budget  Focused  on  Results  (BFOR)  will  ensure  that  resources  are  allocated  to 
priorities  and  that  every  action  delivers  high  performance  and  added  value.  The 
BFOR initiative aims to address four key questions1: 

1. Where to spend EU money – how to achieve high EU added value? 

2. How to  spend  EU  money  – how to get more out  of each Euro spent by the EU 
budget? 

3. How can the performance of the EU budget be adequately assessed? 

4. And how to communicate about the EU budget – how to explain better to citizens 
what the EU budget achieves? 

As required by Article 2 of the MFF Regulation2, the Commission herewith presents 
a mid-term review of the functioning of the MFF,  taking account of the economic 

1   http://ec.europa.eu/budget/budget4results/index_en.cfm. 
2   Council  Regulation  No  1311/2013  laying  down  the  multiannual  financial  framework  for  the  years 

2014-2020, COM(2016) 311, 30.6.2016. 

2 

 
 
                                                 
and  wider  context.  It  reviews  the  main  aspects  of  implementation  of  the  current 
MFF  since  2014.  This  period  has  been  characterised  both  by  concerted  efforts  to 
promote  economic  recovery  and  the  urgent  imperative  to  respond  to  the  refugee 
crisis and security threats. 

Together with the increased appropriations proposed under the Draft Budget 2017, 
mainly  for  migration,  and  the  additional  allocations  stemming  from  the  technical 
adjustment  of  cohesion  policy  envelopes,  the  mid-term  review  financial  package 
proposes about EUR 13 billion of additional EU funding in 2017-2020 for jobs and 
growth, migration and security (see financial annex).  

The  unprecedented  migration  flows  experienced  in  2015  and  the  repeated  terrorist 
attacks in Europe and throughout the world called for a strong and swift European 
response, combining new legislative, operational and financial means. As a central 
element  of  that  toolbox,  the  EU  budget  has  shown  considerable  flexibility  in 
reorienting  and  making  available  additional  means  within  the  budget  itself  and  in 
mobilising additional contributions from Member States and other donors. However 
this flexibility is reaching the limits of the current framework.  

As  the  challenges  of  migration  and security  are rooted in  geopolitical  and  societal 
developments which need to be addressed in the longer-term, the EU budget must 
further develop its capacity to support the management of migration flows as well as 
the  protection  and  integration  of  refugees  and  to  address  the  root  causes  of 
migration. This is one of the main purposes of the package of legislative proposals 
which  accompanies  this  review  and  which  aims  at  both  providing  additional 
financial  means  for  migration  and  security  within  the  current  MFF  and  at  further 
strengthening the flexibility of the latter in dealing with unforeseen circumstances.  

Consequently, it is  proposed  to  amend the MFF Regulation to  further increase the 
capacity  of  the  Flexibility  Instrument  and  the  Emergency  Aid  Reserve  and  to 
remove  a  number  of  restrictions  which  limit  the  effectiveness  of  instruments 
allowing  for  the  reuse  of  margins3  left  available  from  previous  financial  years. 
Furthermore, it is proposed to create a European Union Crisis Reserve to finance the 
response to crises, such as the current migration crisis, as well as events with serious 
humanitarian  and  security  implications.  This  Reserve  would  be  funded  by  de-
committed appropriations from all MFF headings4. It would not increase the overall 
ceilings  for  commitments  and  payments  of  the  agreed  multi-annual  financial 
framework.  

Closing the investment gap left behind by the financial and economic crisis as well 
as promoting employment, in particular youth employment, remains a key challenge 
for  the  Union.  Based  on  implementation  to  date,  the  Commission  has  identified  a 
number  of  successful  programmes  and  instruments  which  it  proposes  to  reinforce 
with  additional financial means. This includes  in particular the European Fund for 
Strategic  Investments  as  well  as  Horizon  20205,  the  Connecting  Europe  Facility6, 
Erasmus+7, COSME8 and the Youth Employment Initiative.   

3   Global Margin for Commitments and Global Margin for Payments. 
4   Current estimates point to EUR 3 to 4 billion per year. 
5   Horizon 2020 is the EU Research and Innovation programme for 2014-2020. 

3 

 
                                                 
EU  financing  has  a  strong  leverage  effect  on  Member  States  and  private 
investments. This is also relevant in the digital area - one of the top 10 priorities of 
this Commission – where investment needs linked to high-performance computing, 
cybersecurity, digital skills and connectivity have been identified. The Commission 
will look into ways to address these investment needs by pooling EU, national and 
private funding. 

Improving  the  budget's  performance  in  addressing  the  EU's  priorities  not  only 
requires appropriate financial means but also cost-efficient delivery mechanisms. In 
consultation  with  stakeholders,  the  Commission  has  assessed  how  the  measures 
aimed at simplifying the implementation of EU funds introduced under the current 
legislation  have  worked 
identified  room  for  further 
improvements.  On  that  basis,  it  is  tabling  together  with  this  Review  an ambitious 
revision of the general financial rules accompanied by corresponding changes to the 
sectorial financial rules. 

in  practice  and  has 

A Commission Staff Working Document on the mid-term review further elaborates 
on all the aspects dealt with by this Communication. It also includes a medium-term 
payments  forecast,  which  provides  a  forecast  of  payment  needs  until  2020,  also 
taking into account  the proposals accompanying this Review. It concludes that the 
current  payment  ceiling  would  be  just  sufficient:  after  an  accumulation  of  an 
unprecedented  backlog  in  2014,  the  delayed  implementation  of  the  European 
Structural  and  Investment  Funds  would  leave  large  payment  margins  in  2016  and 
2017 before payment needs increase sharply towards the end of the period9.  

The Mid-Term Review is accompanied by the following legislative proposals: 

–  A proposal for amending Council Regulation No 1311/2013 of 2 December 2013 
laying  down  the  multiannual  financial  framework  for  the  years  2014-2020,  as 
amended  by  Council  Regulation  No  2015/623  of  21  April  201510  and 
corresponding  adjustment  of  the  Interinstitutional  Agreement  on  budgetary 
discipline,  on  cooperation  and  budgetary  matters  and  on  sound  financial 
management11;  

–  A proposal for amending Decision No 2015/435 of the European Parliament and 
of  the  Council  of  17  December  2014  on  the  mobilisation  of  the  Contingency 
Margin12; 

–  A  proposal  to  simplify  financial  rules  under  the  Financial  Regulation  and 

relevant basic acts13; 

6   The  Connecting  Europe  Facility  (CEF)  is  an  EU  funding  instrument  to  support  the  development  of 
high  performing,  sustainable  and  efficiently  interconnected  trans-European  networks  in  the  fields  of 
transport, energy and digital services. 

7   Erasmus+ is the EU's programme to support education, training, youth and sport in Europe, providing 
opportunities for over 4 million Europeans to study, train gain experience, and volunteers abroad. 

8   COSME is the EU programme for small and medium-sized enterprises. 
9   Based on this forecast, the Commission proposes the decision on the mobilisation of the contingency 
margin to be amended in order to offset earlier than expected the EUR 2.8 billion of the contingency 
margin mobilised in 2014 and to confirm that payments related to special instruments are entered in 
the budget over and above the ceilings.  

10   OJ L 347, 20.12.2013, p. 884, and OJ L 103, 22.4.2015, p. 1. 
11   COM(2016)604 of  14.09.2016, and COM(2016)606 of 14.09.2016. 
12   COM(2016)607 of  14.09.2016 .  

4 

 
                                                                                                                                                 
–  A proposal for amending the EFSI Regulation (2015/1017) with  the purpose  of 

extending the EFSI14; 

–  Under the External Investment Plan: a proposal for a Regulation of the European 
Parliament  and  of  the  Council  on  the  European  Fund  for  Sustainable 
Development  (EFSD)  and  establishing  the  EFSD  Guarantee  and  the  EFSD 
Guarantee Fund15; a proposal for a Regulation of the European Parliament and of 
the  Council  amending  Regulation  (EC,  Euratom)  No  480/2009  establishing  a 
Guarantee  Fund  for  external  actions16;  and  a  proposal  for  a  decision  of  the 
European  Parliament  and  of  the  Council  amending  Decision  No  466/2014/EU 
granting an EU guarantee to the European Investment Bank against losses under 
financing operations supporting investment projects outside the Union17. 

–  Under  the  Telecommunication  package:  A  proposal  for  a  Regulation  of  the 
European  Parliament  and  of  the  Council  amending  Regulations  (EU)  No 
1316/2013    and  (EU)  No  283/2014    as  regards  the  promotion  of  Internet 
connectivity in local communities18. 

The Commission calls upon Council and Parliament to ensure a very swift adoption 
of these proposals and their financing. 

2.  THE MFF AT MID-TERM: STATE OF IMPLEMENTATION AND NEW CHALLENGES 

Eliminating the payments backlog 

The insufficient level of payment appropriations in the 2014 budget coincided with 
high  accumulated  payment  needs  resulting  from  the  implementation  cycle  of  the 
cohesion programmes from the previous MFF. This led to the building up of a very 
significant backlog of outstanding payment claims at year-end (EUR 24.7 billion at 
the end of 2014). The mobilisation of special instruments provided for in the MFF 
Regulation  helped  mobilising  additional  payment  appropriations  in  2014.  The 
backlog of payments is now expected to be eliminated by end 2016. 

The  absorption  of  the  backlog  is  being  facilitated  by  the  slower  than  expected 
launch of the new generation of programmes financed from the European Structural 
and Investment Funds, which results in large margins remaining available under the 
payment ceilings in 2016 and even more so in 2017. Whilst this temporarily allows 

13   Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  the  financial  rules 
applicable to the general budget of the Union and amending Regulations (EU) No 1296/2013, (EU) No 
1299/2013, (EU) 1301/2013, (EU) No 1303/2013, EU No 1304/2013, (EU) No 1305/2013, (EU) No 
1306/2013, (EU) No 1307/2013, (EU) No 1308/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) 
No  223/2014,(EU)  No 283/2014,  (EU) No 652/2014  of  the  European Parliament  and  of  the  Council 
and  Decision  No  541/2014/EU  of  the  European  Parliament  and  of  the  Council  [COM(2016)605  of   
14.09.2016]. 

14   Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) 
No 1316/2013 and (EU) 2015/1017 as regards the extension of the duration of the European Fund for 
Strategic Investments as well as the introduction of the technical enhancements for that Fund and the 
the European Investment Advisory Hub [COM(2016)597 of 14.09.2016]. 

15   COM(2016)586 of 14.09.2016. 
16   COM(2016)582 of  14.09.2016. 
17   COM(2016)583 of  14.09.2016. 
18   COM(2016)589 of  14.09.2016. 

5 

 
                                                                                                                                                 
for new needs to be accommodated without requiring additional contributions from 
national  budgets,  it  is  likely  to  result  in  significant  payment  pressures  towards  the 
end of the MFF period once new programmes reach their cruising speed. 

Implementation of the European Structural and Investment Funds 

The  new  legislative  framework  for  implementing  the  European  Structural  and 
Investment  Funds  (ESI  Funds)  agreed  for  the  2014-2020  period  has  introduced  a 
number  of  provisions  aimed  at  improving  the  effectiveness  and  European  added 
value  of  the  funds.  The  new  legislative  framework  notably  concentrates  the 
resources  on  the  national  objectives,  which  in  line  with  the  country-specific 
recommendations  translate  the  key  Europe  2020  objectives.  It  establishes  a 
performance  framework  based  on  measurable  indicators  and  targets  linked  to  the 
release  of  a  performance  reserve  and  also  introduces  ex-ante  conditionalities  and 
creates  closer  linkages  with  the  EU  economic  governance.  As  a  result,  the  ESI 
Funds will be supporting structural reforms in line with the priorities set at EU level. 

The setting-up of these innovative elements required time and resources in the start-
up phase to ensure that the necessary conditions for effective spending are in place. 
This and the late adoption of the legal acts and the introduction of a general n+3 de-
decommitment rule, which considerably relaxed the regulatory discipline on speed 
of  implementation  contributed  to  delaying  the  preparation  of  the  operational 
programmes.  Moreover,  Member  States  focused  their  efforts  on  maximising  the 
implementation  of  the  2007-2013  programmes  in  order  to  avoid  potential  loss  of 
allocations.  

In view of their potential contribution to jobs and growth, urgent action is needed to 
accelerate  the  implementation  of  the  ESI  Funds.  The  Commission  has  urged 
Member States to complete the process of designating their managing and certifying 
authorities,  submit  major  project  applications  and  implement  actions  to  make 
progress in fulfilling ex-ante conditionalities to accelerate project implementation. It 
will  continue  to  offer  technical  support  to  Member  States  with  implementation 
issues.  

Simpler  and  more  flexible  rules,  as  proposed  in  this  package,  will  contribute  to 
accelerating the implementation of the ESI Funds.  

To take account of the difficult situation of Member States who suffered most from 
the crisis, the Member States' cohesion allocations were reviewed in June 2016 and, 
where appropriate, adjusted for the years 2017-2020 on the basis of the most recent 
data available. As announced in the technical adjustment of the MFF for 201719, the 
Commission has engaged in discussions with Member States who benefit most from 
the adjustment of cohesion policy envelopes with a view to focusing the additional 
amounts on measures to help tackling the migration crisis and youth unemployment 
and  on  investments  through  financial  instruments  and  a  combination  with  the 
European  Fund  for  Strategic  Investments,  taking  into  account  the  needs  and 
relevance of those priorities for each Member State. 

19   Technical  Adjustment  of  the  financial  framework  for  2017  in  line  with  movements  in  GNI  and 
adjustment of cohesion policy envelopes, adopted pursuant to Articles 6 and 7 of Council Regulation 
No 1311/2013 laying down the multiannual financial framework for the years 2014-2020, COM(2016) 
311, 30.6.2016. 

6 

 
                                                 
Youth Employment Initiative 

As part of the current MFF, a specific allocation of EUR 3.2 billion (with the same 
amount being added from the European Social Fund) was made available to create a 
dedicated Youth Employment Initiative (YEI). The YEI provides targeted support to 
young unemployed people living in regions with youth unemployment rates higher 
than  25%.  The  YEI  experienced  significant  delays  in  setting  up  the  programmes, 
designating authorities and submitting payment applications. However, now that the 
structures  are  in  place,  first  evaluations  point20  to  significantly  improved 
opportunities  for  young  people  who  received  support  from  the  YEI  in  finding 
employment or continuing their studies afterwards. To date, over 1.3 million young 
people have benefited from the YEI, exceeding initial estimates. 

Given the persistently high levels of youth unemployment in many regions and the 
encouraging first results shown, it is proposed to supplement the original allocation 
of the YEI by EUR 1 billion over 2017 – 2020, to reach a total amount of EUR 8 
billion (with EUR 1 billion of matching funding to be provided from the European 
Social Fund). 

Competitiveness programmes 

In  contrast  to  the  delays  in  cohesion  policy,  competitiveness  programmes  under 
direct management under heading 1A of the MFF ("Smart and Inclusive Growth"), 
such as Horizon 2020, the CEF and COSME, have experienced very strong take-up, 
with calls for application resulting in a number of eligible projects often exceeding 
the available budget by a significant margin. It is also the case of Erasmus+, with a 
strong EU value-added in its transnational mobility activities, contributing to skills 
development, employability of students and less likelihood of unemployment. 

Based on this first experience, it is proposed to supplement the original allocation of 
Horizon  2020  by  EUR  0.4  billion,  of  CEF-transport  by  EUR  0.4  billion,  of 
Erasmus+ by EUR 0.2 billion and of COSME by EUR 0.2 billion over 2017-2020 to 
further enhance the EU support to jobs and growth.  

Following the Communication setting out a European vision of Internet connectivity 
for  the  Digital  Single  Market  and  in  order  to  promote  digital  inclusion,  the  Union 
should  support  the  provision  of  free  local  wireless  connectivity  in  the  centres  of 
local  public  life  through  targeted  support.  For  this  reason  the  Commission  has 
adopted  the  Wifi4EU  proposal,  with  a  total  budget  proposed  of  EUR  120  million, 
including a reinforcement by EUR 50 million. 

European Fund for Strategic Investments (EFSI) 

To  complement  the  existing  programmes  within  the  MFF to  spur  job creation and 
growth,  the  Commission  proposed  to  set  up  a  European  Fund  for  Strategic 
Investments (EFSI) in November 2014 in the framework of the Investment Plan for 
Europe.  EFSI,  whose  legal  basis  was  agreed  by  Parliament  and  Council  in  June 
2015, is already delivering tangible results. EUR 115.7 billion in total investment is 
expected to be mobilised throughout the Union. This represents more than one third 

20   The  Commission's  Report  on  the  implementation  of  the  Youth  Guarantee  and  the  operation  of  the 

Youth Employment Initiative is being finalised (and foreseen to be adopted in October 2016). 

7 

 
                                                 
of the overall objective of EUR 315 billion in new investments over three years. The 
EFSI has been successful in crowding in significant additional finance (85% of the 
total investment mobilised) from private and public investors. The programme has 
been particularly successful in ensuring more financing for small businesses.  

In view of this success, the Commission proposes to continue the EFSI beyond 2017 
and to double its financing capacity21.  

Given  the  results  delivered,  the  Commission  presents  a  legislative  proposal  to 
extend the duration of the EFSI until 2020 in parallel with its Communication on the 
mid-term review/revision of the MFF. This  proposal includes a transfer from CEF 
financial  instruments  to  the  EFSI  of  EUR  500  million,  a  transfer  of  EUR  1  146 
million  from  CEF  financial  instruments  to  CEF  grants22  to  be  blended  with  EFSI 
financing or to other instruments dedicated to energy efficiency, as well as the use 
of  EUR  150  million  from  the  unallocated  margin.  This  should  ensure  a  maximum 
impact  of  EU  funds,  eliminate  overlaps  and  maximise  the  synergies  between 
different grants and financial instruments as well as with private investors. Overall, 
EUR  1.4  billion  additional  financial  means  will  be  available  for  CEF  transport 
grants  to  finance  cross-border  transport  infrastructure  for  priority  networks  in  the 
EU. 

Sustainable Growth: Natural Resources 

Budgetary  execution  also  began  slowly  under  Heading  2  ("Sustainable  Growth: 
Natural  Resources"),  because  of  delays  in  the  implementation  of  the  new  direct 
payment schemes as well as the European Agricultural Fund for Rural Development 
(EAFRD). In response to the Russian ban on EU agricultural products  and  market 
imbalances  over  2014-2016,  the  Commission  adopted  a  number  of  exceptional 
market support measures for fruit and vegetable producers and the dairy  and other 
livestock sectors amounting to a total of EUR 1 664 million23.  

Migration, refugee crisis and security 

Critically, the implementation of the first years of the MFF has been characterized 
by the urgent need to address the internal and external dimensions of the migration 
and refugee crisis. Since the adoption of the European Agendas on Migration24 and 
Security25,  programmes  under  Heading  3  and  Heading  4  have  been  refocused  and 
reinforced  in  order  to  step  up  humanitarian  action  and  rescue  capacity,  further 
building up the legal and operational framework for protecting our external borders, 
assist the Member States in managing the refugee flows, and address the root causes 
of migration. A new legal base was established and endowed with fresh resources, 
the  Instrument  for  Emergency  Support  within  the  Union26.  The  Commission  is 

21   COM(2016) 359 final: Europe investing again – Tacking stock of the Investment Plan for Europe and 

next steps. 

22   This includes a transfer of financial instruments to grants for EUR 1 billion for CEF transport (besides 

the topping up of EUR 0.4 billion from this mid-term review).  

23   Since  these  measures  could be  financed  through  European  Agriculture Guarantee  Fund  by  means  of 
redeployments  and  the  use  of  assigned  revenue,  recourse  to  the  Agricultural  Reserve  was  not 
necessary. 

24   COM (2015) 240 of 13 May 2015 
25   COM(2015) 185 of 28 April 2015. 
26   OJ L 70, 16.3.2016, p.1 

8 

 
                                                 
committed to provide financial assistance for urgent needs to Member States facing 
extreme pressure at the external borders of the Union. 

The  Commission  has  reacted  swiftly  to  the  security  deterioration  by  proposing 
legislation  and  increasing  the  financial  resources  dedicated  to  address  the  security 
needs. Additional measures might be needed in the future, including stepping up if 
necessary the financial resources. 

In order to roughly double the initially programmed support to more than EUR 15 
billion  between  2015  and  2017,  an  array  of  measures  were  agreed,  including  the 
mobilisation  of  special  instruments  provided  for  in  the  MFF  Regulation.  The 
Flexibility Instrument and the Emergency Aid Reserve in particular allowed for the 
substantial top-up of key spending programmes such as the Asylum, Migration and 
Integration Fund despite very tight ceilings for commitments. 

In  order  to  further  leverage  EU  budget  and  European  Development  Fund 
availabilities, pool additional contributions from different sources and programmes 
and  coordinate  actions,  a  number  of  external  European  Union  Trust  Funds  and  a 
Facility  for  Refugees  in  Turkey  were  established.  Their  functioning  is  being 
carefully  monitored27,  and  procedures  for 
improving  democratic  scrutiny, 
transparency  and  legitimacy  through  a  timely  involvement  of  the  European 
Parliament  are  included  in  the  proposal  to  simplify  financial  rules,  which 
accompanies this Review. 

EUR 2.55 billion are needed to finance the budgetary implications during the years 
2018-2020  of  the  European  Border  and  Coast  Guard  and  the  reinforcement  of 
EUROPOL  as  well  as  the  Commission  proposals  related  to  the  EU  Agency  for 
Asylum, the review of the Dublin common asylum system, the Emergency support 
within the Union and the Entry/Exit system which aims at registering entry, exit and 
refusal of entry data of third country nationals crossing the external borders of the 
Member States of the EU. 

Should  these  measures  prove  not  sufficient  to  address  the  migration  and  security 
challenges, additional  resources  would  need  to  be  made  available.  This  could  also 

27   See the accompanying Staff Working Document for the current state of play. 

9 

3,715.15.21.801234562015201620172015-2020EDF+Budget (Africa TF)Amounts in billion EUREvolution of migration / refugees expenditure (heading 3, 4 + EDF)European development FundAdditional budgetary actionBudgetary actions programmed before the crisisTOTAL2015-2017 + Africa Trust Fund = EUR 15,7 billion 
 
                                                 
be financed by the proposed new European Union Crisis Reserve funded by the re-
use of de-committed appropriations. 

Beyond  the  existing  programmes,  the  Commission  has  proposed  a  Partnership 
Framework with third countries under the European Agenda on Migration in order 
to  ensure  a  coherent  approach  vis-a-vis  partner  countries  and  an  efficient 
deployment  of  the  different  funding  sources:  MFF  programmes,  European 
Development  Fund  (EDF),  European  Union  Trust  Funds  and  other  facilities.  This 
initiative aims at setting up a coherent and tailored process by which the Union and 
its  Member  States  act  in  a  coordinated  manner  combining  instruments,  tools  and 
leverage as the basis for comprehensive partnerships (compacts) with third countries 
in order to better manage migration in full respect of our humanitarian and human 
rights obligations.  

In the long term, the EU should continue to increase its efforts to address the root 
causes  of  irregular  migration  and  forced  displacement  and  to  provide  capacity 
building  to  the  host  communities  and  relevant  institutions.  This  will  require 
fundamentally  reconsidering  the  scale  and  nature  of  traditional  development  co-
operation  models.  A  much  greater  role  must  be  given  to  private  investors  looking 
for new investment opportunities in emerging markets. The Commission is therefore 
presenting an ambitious External Investment Plan that would tackle the root causes 
of migration and support partners to manage its consequences, while contributing to 
the achievement of other development goals.  

In parallel with the mid-term review, the Commission is submitting a proposal for a 
new European Fund for Sustainable Development (EFSD) which should constitute 
the  investment  pillar  of  the  External  Investment  Plan  and  will  combine  existing 
blending facilities and a new EFSD Guarantee for Sustainable Development 

It is proposed to mobilise EUR 750 million for the Partnership framework process 
and EUR 250 million for the European Fund for Sustainable Development. 

The macroeconomic and financial instability in the Union's neighbourhood, fuelled 
by recent regional crises and conflicts, has led to increasing demands for EU macro-
financial  assistance  (MFA)  over  recent  years.  MFA  commitments  have  increased 
from  EUR  1.5  billion  in  the  period  2000-2008  to  EUR  4.6  billion  since  200928. 
However, the size of potential MFA operations is limited to about EUR 500 million 
per  year  due  to  the  provisioning  mechanism  of  the  Guarantee  Fund  for  External 
Actions under the current MFF.  

As the geopolitical and economic instability of the region persists, the needs for EU 
macro-financial support are likely to remain at a historically high level for the years 
to come, it is proposed to increase the lending capacity of the MFA from currently 
EUR  0.5  billion  to  EUR  2  billion  per  year,  by  increasing  the  provisioning  of  the 
Guarantee Fund for External Actions by EUR  270 million over the financial years 
2019 and 2020. 

Also, an external mid-term review of the external actions of the EIB, guaranteed by 
the  Guarantee  Fund  for  External  Actions  (the  ‘external  lending  mandate’  -  ELM) 

28   MFA amounts made available in the context of the recent crisis in Ukraine alone account for EUR 3.4 

billion. 

10 

 
                                                 
has concluded that the ELM should be raised to EUR 30 billion in order to increase 
its lending capacity. In parallel, the EIB has proposed a new "Resilience" initiative 
aimed  at  rapidly  mobilising  additional  financing  in  support  of  sustainable  growth, 
vital  infrastructure  and  social  cohesion  in  Southern  neighbourhood  and  Western 
Balkans countries.  

Based  on  the  above,  the  Commission  proposes  to  increase  the  ELM  by  EUR  5.3 
billion to reach a total of EUR 32.3 billion. This requires increasing the Guarantee 
Fund by EUR 115 million over 2018-2020. 

More detailed review and analysis 

The 2014-2020 MFF is also characterised by a number of qualitative innovations on 
which the Staff Working Document (SWD) elaborates, notably the more systematic 
use  of  financial  instruments  as  a  means  to  leverage  scarce  resources  in  a  targeted 
manner and in sectors where the ‘crowding in’ of private investment is particularly 
appropriate. It is markedly pertinent in the context of the Investment Plan and EFSI. 
The  SWD  also  reports  on  progress  made  towards  the  political  commitment  of 
devoting  at  least  20%  of  EU  budget  to  climate  action  which  has  already  yielded 
considerable  results  by  encouraging  all  actors  involved  at  EU,  Member  State  and 
regional  level  to  incorporate  climate  considerations  in  their  decision  making  and 
programming, though further effort is still needed to make sure that the global target 
of  20%  climate  related  expenditure  can  be  sustained  until  2020.  The  mid-term 
reviews  of  the  MFF  programmes  will  assess  progress  made  towards  the 
achievements of 20% of EU spending objective. Also the reinforcement of Heading 
1A programmes should, for example, help Horizon 2020 to reach its expected target 
of  35%  climate  relevance.  Furthermore,  the  proposal  for  the  extension  of  EFSI  2 
sets a minimum target for climate-related projects.  

Finally,  the  Staff  Working  Document  reports  on  how  the  European  Structural  and 
Investment  Funds  are  being  used  to  support  sound  economic  governance  and  the 
implementation of Country Specific Recommendations.  

3. 

STRENGTHENING  THE  BUDGET'S  FOCUS  AND  FLEXIBILITY  TO  DELIVER  ON 
PRIORITIES AND NEW CHALLENGES 

The assessment of the MFF implementation at mid-term and the work undertaken in 
parallel under the strategy for a Budget Focused on Results leads the Commission to 
propose  further  improvements  with  a  view  to  focussing  the  budget  on  policy 
priorities and new challenges; improving its efficiency and flexibility in mobilising 
and  delivering  funds  to  respond  to  evolving  needs;  and  demonstrating  results  by 
refining its systems for reporting on performance, accountability and results.  

Focussing the budget further on policy priorities and new challenges 

As shown in the previous chapter29 considerable additional means have already been 
deployed for responding to new challenges by redeployments and the use of margins 
and special instruments, and by mobilising additional finance from Member States 
through the Facility for Refugees in Turkey and Trust Funds. 

29   A more detailed assessment is provided in the accompanying Staff Working Document. 

11 

 
                                                 
In order to reinforce or continue programmes which have shown a high demand and 
effective  absorption  of  funds  under  the  priority  given  to  jobs  and  growth  and  to 
maintain a strong European response to the new challenges linked to migration and 
security in the coming years, the Commission proposes to deploy further means and 
make  available  an  additional  amount  of  EUR  6.3  billion  for  the  remaining  MFF 
period.  

Together with  the  Draft Budget  2017  which  proposes  to  mobilise EUR  1.8  billion 
from  unallocated  margins  and  special  instruments,  mainly  for  the  purpose  of 
managing migration and the proposed earmarking of the additional EUR 4.6 billion 
stemming  from the technical adjustment of the national cohesion policy  envelopes 
for  2017-2020  for  sustaining  the  effort  to  fight  against  youth  unemployment, 
integration of refugees and supporting investment through financial instruments and 
in  combination  with  EFSI30,  the  proposals  amount  to  a  financial  package  of  EUR 
12.8 billion.  

In addition, a number of reinforcements are proposed by means of redeployments of 
funds from existing programmes, for example for extending the assistance provided 
under the Union's Instrument contributing to Stability and Peace31.  

Improving the budget's flexibility and agility in mobilising and delivering funds 

The initiatives proposed by this mid-term review make use of the budgetary margins 
available under the MFF32. The budget's capacity to react to unforeseen events until 
the end of the MFF period would consequently be more limited accordingly. Given 
the  particularly  high  level  of  instability  in  the  Union's  neighbourhood  and  the 
resulting  hybrid  threats,  the  Commission  proposes  to  amend  the  MFF  Regulation 
and – through the proposal to simplify financial rules - the Financial Regulation so 
as  to  allow  for  a  greater  responsiveness  of  the  budget  when  confronted  with 
unforeseen circumstances. The proposed measures comprise, notably, the doubling 
of  the  size  of  the  Flexibility  Instrument  and  of  the  Emergency  Aid  Reserve,  the 
removal  of  the  limitations  to  the  Global  Margin  for  Commitments  and  the  Global 
Margin for Payments so as to allow for the full use of the current MFF ceilings,  a 
new  European  Union  Crisis  Reserve,  the  creation  of  a  "flexibility  cushion"  for 
external  instruments33,  and  to  create  Trust  Funds  also  for  internal  policies,  which 
should facilitate flexible solutions to pool funds from Member States, for example 
in the digital area.   

To  honour  the  commitments  made  by  the  Union  and  allow  for  swift  action 
whenever  needed,  the  sufficiency  of  payment  appropriations  must  be  secured 
throughout  the  lifetime  of  the  MFF.  The  current  medium-term  payments  forecast 
shows that the actual overall payment ceiling should be just sufficient to satisfy the 
payment needs arising from the current MFF and of the initiatives proposed in this 
Mid-Term Review - provided that payments related to special instruments are made 
available "over and above" the MFF ceilings.  

Simpler rules and more performance-orientation 

30   These additional amounts benefit mainly to Greece, Italy and Spain.  
31   See accompanying Staff Working Document.  
32   About EUR 1.9 billion would remain available over 2017-2020.  
33   Each geographical external instrument would keep an unallocated reserve of 10 % annually, with the 

possibility to carry-over to the next year the amounts of that reserve not used in a given year.   

12 

 
                                                 
Simpler and more flexible financial rules for implementing EU funds are also key in 
enhancing  the  EU  budget’s  ability  to  adapt  to  changing  circumstances  and  to 
respond  to  unexpected  developments,  while  maintaining  a  high  level  of  financial 
control.  Considerable  progress  has  been  made  in  simplifying  rules  for  the 
implementation of EU funds. However, experience gained since 2014 and the work 
of  the  High  Level  Group  of  Independent  Experts  on  Monitoring  Simplification  of 
European Structural and Investment Funds points to room for further simplification, 
which is also confirmed by stakeholder feedback. 

As  an  integral  part  of  the  mid-term  review/revision  of  the  MFF,  the  Commission 
proposal to simplify financial rules seeks in a single act an ambitious revision of the 
general  financial  rules  accompanied  by  corresponding  changes  to  the  sectorial 
financial  rules  set  out  in  15  legislative  acts  concerning  multiannual  programmes. 
The inclusion of sectoral changes in a single legislative proposal aims at ensuring a 
coherent approach and an efficient adoption process.  

Box 1: Objectives of the proposed revision of financial rules: 

  Simplification for recipients of EU funds; 

  From  multiple layers of controls  to  cross  reliance  on  audit,  assessment  or 

authorisation, and harmonisation of reporting requirements; 

  Allowing  the  application  of  only  one  set  of  rules  to  hybrid  actions  or  in  the 

case of combination of measures or instruments; 

  More effective use of financial instruments; 

  More flexible budget management; 

  Focus on results and streamlining of reporting; 

  Simpler and leaner EU administration; 

  Citizen engagement. 

Simpler and more flexible financial rules will contribute to optimising spending and 
the  impact  of  the  MFF  2014-2020,  whilst  reducing  the  costs  related  to  the 
implementation  of  EU  rules  as  well  as  the  error  rate.  In  this  respect,  it  should  be 
pointed out that, at the time of closure of programmes, when all corrective measures 
have been implemented, the estimated amount at risk represents between 0.8% and 
1.3% of total expenditure. This shows that, already today, the multiannual systems 
adequately protect the EU budget from expenditure in breach of law. The proposed 
further simplification intends to achieve further improvements in this field.  

4.  TOWARDS THE NEXT MULTIANNUAL FINANCIAL FRAMEWORK 

The  proposals  submitted  together  with  this  review  aim  at  providing  targeted 
additional  means  for  the  Union  to  address  its  priorities  of  jobs  and  growth  and 
migration  and  security,  at  securing  the  sufficiency  of  the  payments  ceilings  and  a 

13 

 
 
strong  capacity  for  the  budget  to  react  to  unforeseen  circumstances,  and  at 
facilitating  implementation  of  EU  funds  whilst  maximising  their  impact.  They 
should allow for a considerable further modernisation of the EU budget, paving the 
way for more far-reaching changes in the next MFF.  

The Commission is due to make a proposal for the  next MFF by the end of 2017. 
This  proposal  will  be  guided  by  the  BFOR  initiative  and  reflect  the  future 
challenges  and  needs  of  the  Union  post-2020,  assessing  both  the  effectiveness  of 
existing  approaches  in  areas  such  as  cohesion  policy,  the  Common  Agricultural 
Policy  and  the  external  action  instruments;  and  the  potential  for  the  EU  budget  to 
contribute  in  new  areas,  such  as  for  example  in  relation  to  the  completion  of 
Europe's  Economic  and  Monetary  Union,  following  the  roadmap  in  the  Five 
Presidents' report, and in defence and security.  

This  will  also  be  an  opportunity  to  look  again  at  the  structure,  financing  and 
duration of the budget  to ensure that they  maximise its ability to  support Europe's 
political objectives.  

There  is  a  growing  consensus  that  the  modernisation  of  the  EU  budget  requires  a 
coherent reform of both its expenditure and financing side. The EU budget is too 
often perceived as a cost factor for national accounts, whereas its potential to pool 
resources  in  a  most  cost-efficient  manner  is  underestimated.  The  Commission  is 
looking  forward  to  the  recommendations  of  the  High-Level  Group  on  Own 
Resources  which  will  provide  an  important  contribution  for  the  preparation  of  its 
proposals for the next MFF. 

The  current  duration  of  seven  years  is  not  well  synchronised  with  the  five  year 
terms  of  the  mandate  of  the  European  Parliament  and  of  the  Commission.  The 
challenge  is  how  to  reconcile  the  requirements  and  time  needed  for  preparing  and 
implementing  EU  funds,  in  particular  those  under  shared  management,  with  the 
duration of the MFF.  

Striking the right balance between medium term predictability and the flexibility to 
respond  to  unforeseen  circumstances  will  be  essential.  In  the  current  MFF,  about 
80% of the EU budget is pre-allocated, which limits the budget's responsiveness to 
evolving  needs.  The  setting  up  of  reserves  which  can  be  rapidly  mobilised  within 
and across the Union's main programmes should be re-examined. 

taking 

Also,  in  line  with  the  2013  Interinstitutional  Agreement  the  Commission  will 
carefully  analyse  the  way  forward  for  the  budgetisation  of  the  European 
Development  Fund 
relevant  circumstances  and 
into  account  all 
considerations,  including  (i)  the  overall  design  and  structure  of  the  post-2020 
external action instruments; (ii) the nature of the partnership between the European 
Union  and  the  African,  Caribbean  and  Pacific  countries  after  the  expiry  of  the 
Cotonou agreement in 2020; and (iii) lessons learned from evaluations of previous 
action, stakeholder consultations and impact assessments of various arrangements. 

Another  key  aspect  of  the  reflection  will  be  on  how  EU  funds  can  be  used  to  the 
greatest effect so as to make the most of every euro available, building on some of 
the innovations of the current MFF, including: 

-  Conditionality: Even a small amount of money can have a significant impact by 
making financing conditional on changes in national policy-making: the link of 

14 

 
EU  funds  with  economic  governance  will  deserve  renewed  attention  in  the 
context of the next MFF, building on the assessment of progress made under the 
current provisions. 

-  Leverage and synergies: Under the current MFF, the EU budget has more than 
doubled  its  capacity  to  leverage  additional  public  and  private  funds,  through 
financial  instruments,  the  European  Fund  for  Strategic  Investments  and  other 
new  instruments  such  as  trust  funds.  Further  expanding  this  capacity  will  be 
crucial,  also  building  on  the  proposed  possibility  for  creating  contingent 
liabilities beyond the assets provided and the creation of a common provisioning 
fund  which  would  centralise  guarantees  by  the  proposed  revised  Financial 
Regulation. Also, fostering cooperation between Member States in areas where 
economies of scale and/or externalities are significant will be essential, notably 
where  cooperation  at  EU  level  has  gained  in  importance,  e.g.  on  security  and 
defence.  

-  Simplification:  A  fresh  look  will  have  to  be  given  to  the  requirements  for 
programmes  under  shared  management  given  the  delays  which  occurred  once 
again in their implementation. 

Throughout the process of developing these proposals, the Commission will listen 
carefully to the views expressed by the Parliament, Council and stakeholders. 

15 

 
Financial Annex 

Mid-Term Review proposals 

EUR millions (in current prices) 

Heading 1A: 

  Horizon 2020 
  CEF-Transport 
  Erasmus+ 
  COSME 
  Prolongation of EFSI 
  WIFI4EU 

Heading 1B: 

  Youth Employment Initiative 

Heading 3: 

European  Border  and  Coast  Guard,  EUROPOL,  EU 
Agency for  Asylum, Dublin common asylum system, 
Emergency  support  within  the  Union,  Entry/Exit 
system  

1 400 

  400 
  400 
  200 
  200 
  150 
  50 

1 000 

  1000 

2 549 

Heading 4: 

1 385 

  Partnership framework process 
  European Fund for Sustainable Development  
  Macro-financial assistance 
  External Lending Mandate 

  750 
  250 
  270 
  115 

TOTAL  

Draft Budget 2017 

6 334 

1 822 

  Additional spending on migration (from 

special instruments and margins) 

Technical Adjustment of cohesion policy envelopes  

4 642 

  For sustaining the effort to fight against youth 
unemployment, integration of refugees and 
supporting investment through financial 
instruments and in combination with EFSI 

TOTAL Mid-Term Review Package 

12 798 

16