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
Date: 2017-05-30
Institutions: Directorate-General for Budget, European Commission
Subjects: budgetary procedure, commitment of expenditure, draft budget (EU), financial management, financial year, general budget (EU), revision of financial perspectives

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   EN 

   EUROPEAN COMMISSION  Brussels, 30.5.2017  COM(2017) 290 final   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  
 
 
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 Budget1 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.  

1 Statement of estimates of the European Commission for the financial year 2018 (SEC(2017) 250, May 2017) 

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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.  

Within the agreed global MFF ceiling, the Mid-Term Revision includes a potential increase 
of expenditure of around EUR 6 billion over the period 2017-2020, particularly in areas such 
as: 

-  Youth  unemployment  (EUR  1.2  billion  for  the  Youth  Employment  Initiative  to  be 

matched by the European Social Fund) 

-  Security and  the intra-EU dimension of  migration (EUR 2.5 billion for  programmes 
such  as  the  European  Border  and  Coast  Guard,  EUROPOL,  the  EU  Agency  for 
Asylum, the new entry/exit system and emergency support for refugees), 

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-  Addressing  the  root  causes  of  migration  (EUR  1.4  billion  mainly  for  the  new 
Partnership  Framework  with  African  countries  and  European  Fund  for  Sustainable 
Development (EFSD) as part of the external Investment Plan)  

-  Erasmus+  (EUR  100  million,  also  contributing  to  the  new  European  Solidarity 

Corps), 

-  Reinforcing  successful programmes  fostering  growth  (EUR  775  million for  Horizon 

2020, Connecting Europe Facility (CEF), COSME, EFSI-2 and Wifi4EU). 

Furthermore, the agreement would provide substantial additional flexibility for the financing 
of  new  emergencies  (at  least  EUR  1.3  billion  available  immediately  from  2017).  This  is  a 
crucial point as without the increased flexibility the European Union response to any possible 
unforeseen developments in the coming three years would be extremely limited.  

Finally,  the  Mid-Term  Revision  provides  additional  flexibility  to  shift  unused  payment 
margins to the years 2019-2020, which will provide an additional layer of security to ensure 
that  the  payment  ceilings  in  those  years  will  be  sufficient  to  allow  all  invoices  from  the 
implementation of structural funds to be paid on time without creating a backlog of unpaid 
bills  as  was  the  case  in  the  period  2013-2015,  and  which  caused  great  anxiety  with  the 
European Parliament. 

4.  What happens if ever the Mid-Term Revision were not adopted? 

Some elements  of the Mid-Term Revision were  agreed  by the co-legislator and are already 
included  in  the  2017  budget  (mainly  the  EUR  750  million  for  the  Framework  Partnership 
with  African  countries)  or  are  soon  to  be  incorporated  via  politically  pre-agreed  amending 
budgets for 2017 (the first tranche of EUR 500 million for the Youth Employment Initiative 
(YEI) and EUR 275 million for the European Fund for Sustainable Development). 

However, all other elements of additional expenditure listed above related to the period 2018-
2020 would be at risk, since they can no longer be assumed to be politically pre-agreed.  

This concerns most prominently the remaining EUR 700 million for the Youth Employment 
Initiative - which would a negative signal from Europe to its youth in need of support - and 
other  funds  supporting  education,  research,  investment  and  growth.  Horizon2020,  which 
supports  collaborative  research  and  innovative  SMEs,  and  CEF-Transport,  which  delivers 
trans-European networks, would be affected. Wifi4EU, a proposal aiming to deliver free Wifi 
to communities across the Union would face a funding gap as well as new proposals such as 
the European Solidarity Corps and the Defence Action Plan. Also the funds needed for our 
response  to  migration  and  external  border  control,  to  the  extent  that  certain  Commission 
proposals have not yet been adopted by the European Parliament and the Council, could be 
questioned, in particular the Dublin regulation or the Macro-Financial Assistance capacity. 

Furthermore,  additional  flexibility  will  not  be  available,  which  will  seriously  limit  the 
capacity of the EU budget to provide a meaningful financial response to unforeseen events, 
particularly in the area of migration, for example in case the European Council were to decide 
on a prolongation of the Facility for Refugees in Turkey.  

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With regards to the Draft Budget for 2018, in case the Mid-Term Revision is not approved, 
the  only  flexibility  available  to  fund  additional  expenditure  for  migration,  security  or  the 
potential  prolongation  of  the  Facility  for  Refugees  in  Turkey  would  require  a  reduction  of 
available margins in other policy areas, such as agriculture.  

Another example of direct consequences of not having a Mid-Term Revision is the solidarity 
support for natural disasters asked by Italy to cope with the destructions following the 2016 
earthquakes. Without the flexibility provided by the Mid-Term Revision, the EU would find 
itself  with  very  limited  financial  means  to  act  in  this  case  or  in  case  of  any  major  natural 
disaster, another international crisis, or any other unforeseen event. 

All  these  consequences  would  be  perceived  as  a  lack  of  European  unity  and  capability  to 
react to any sudden crisis.  

5.  Preparing the future 

As outlined in the White Paper on the future of the EU, Europe has done a lot over the past 
60 years for its citizens. While there is currently strong support for the European project and 
strong expectations that the Union can do more for the common good, there is also a growing 
gap  between  expectations  and  the  ability  for  the  EU  to  deliver,  in  particular  because  its 
financial means are limited.   

A  swift  adoption  of  the  Mid-Term  Revision  is  a  crucial  step  in  the  right  direction.  It  will 
allow improving security, managing the migration flows, closing the investment gap resulting 
from the financial and economic crisis as well as promoting employment, in particular youth 
employment.  

In contrast, a failure to adopt the Mid-Term Revision would require an immediate adjustment 
of  the  budget  for  2018  and  would  reduce  the  ability  of  the  EU  budget  to  react  to  any  new 
emergencies.  

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