COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL AND THE COUNCIL A new, modern Multiannual Financial Framework for a European Union that delivers efficiently on its priorities post-2020 The European Commission's contribution to the Informal Leaders' meeting on 23 February 2018
Date: 2018-02-14
Institutions: European Commission, Secretariat-General
Subjects: VAT, budget policy, budgetary resources, corporation tax, financing of the EU budget, general budget (EU), gross domestic product, investment policy, national budget, national income

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 14.2.2018 COM(2018) 98 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL AND THE COUNCIL  A new, modern Multiannual Financial Framework for a European Union  that delivers efficiently on its priorities post-2020    The European Commission's contribution to the Informal Leaders' meeting on  23 February 2018  
 
 
A BUDGET FOR OUR UNION AT 27 
“Budgets  are  not  bookkeeping  exercises  –  they  are  about  priorities  and 
ambition. So let’s first discuss about the Europe we want.”  

Jean-Claude Juncker 
European Commission President 
8 January 2018 

1. A budget for a more united, stronger and more democratic Union  

Every seven years, the Union decides about its future finances. This is a time for Leaders to 
commit financially to the kind of Union they want. This is always an important moment. But 
it is doubly vital at a time when Europe is in the midst of  a fundamental debate on how the 
Union should evolve in the years to come. We now have an opportunity to choose the Europe 
we want and to decide on a budget that helps us build it.  

The Informal Leaders' meeting on 23 February is therefore both timely and essential. The first 
step is to define what Europe wants to do together and agree on priorities. The second is to 
equip  the  Union  with  the  means  to  act.  The  two  are  inseparable.  The  choices  we  make  on 
priorities and where we want the Union to be active will  shape the type of budget we need. 
The EU budget is a means to achieve our political goals. 

The Commission's White Paper on the Future of Europe of 1 March 2017 set out a number of 
possible scenarios for Europe's future. The Reflection Paper on the Future of EU Finances of 
28 June  2017 looked  at what each of these  scenarios  could mean  for the Union's budget.  A 
Europe limited to the Single Market does not need large funding programmes. A Europe that 
chooses  to  do  more  together  needs  the  resources  to  match  this  wider  ambition.  Whichever 
path we choose, one thing remains constant: the future Union of 27 must be equipped with a 
reliable and future-proof budget that allows it to deliver efficiently on its priorities. 

The current Financial Framework was agreed against the backdrop of the worst economic and 
financial  crisis  for  generations.  Public  finances  in  many  Member  States  were  under  strain. 
Thanks  to  the  concerted  efforts  of  the  Union  and  its  Member  States,  today’s  context  is 
different.  As  the  economic  recovery  has  gathered  pace,  the  focus  has  shifted  to  our  current 
and future challenges. 

Leaders  agreed  on  16  September  2016  in  Bratislava  and  on  25  March  2017  in  the  Rome 
Declaration  on  a  positive  agenda  for  the  Europe  of  27.  Citizens  now  expect  their  Union  to 
deliver  on  this.  The  next  Multiannual  Financial  Framework  is  a  decisive  moment  to  match 
aspirations with the means to act.   

The  withdrawal  of  the  United  Kingdom  from  the  Union  will  mean  the  loss  of  a  significant 
contributor to the financing of the Union's policies and programmes. This will require us to 
take  a  critical  look  at  where  savings  can  be  made  and  priorities  delivered  more  efficiently. 
This is an essential part of the preparation of any budget proposal and the Commission is fully 
committed  to  modernising  and  streamlining  wherever  possible.  However,  a  willingness  to 
look with an open mind at the resources needed to turn new priorities into tangible results will 
also be required. 

1 

 
 
The  Commission  intends  to  present  its  proposals  for  the  next  Multiannual  Financial 
Framework  by  early  May  2018  at  the  latest,  on  the  basis  of  intensive  consultations  with 
Member States, the European Parliament and the wider public.  These proposals will be fair, 
balanced, and focused squarely on delivering efficiently. It will then be for the Member States 
and the European Parliament to decide – both on the future budget and, more fundamentally, 
on the type of Europe we want.  

Agreement on a new Multiannual Financial Framework for the period 2021 to 2027 will be a 
key moment for EU Leaders to recommit to the positive agenda and to Europe itself. It will be 
an  important  test  of  the  unity  of  our  Union  and  our  capacity  to  act  in  a  changing  world. 
Leaders  now  have  a  window  of  opportunity  to  choose  a  more  united,  stronger  and  more 
democratic Union – and a budget that delivers it. 

2. The EU budget: a driver for European added value  

The  EU  budget  is  unique.  Unlike  national  budgets  which  are  used  in  large  part  to  provide 
public  services  and  fund  social  security  systems,  the  EU  budget  is  primarily  an  investment 
budget.  The  seven-year  Multiannual  Financial  Framework  provides  a  longer-term  planning 
horizon and the stability needed for investment planning. The EU budget must always be in 
balance.  

The EU budget helps the Union to implement common policies and address a wide range of 
challenges – both at home and elsewhere in the world. It represents a small part of total public 
expenditure in the Union, accounting for around 1% of the combined Gross National Income 
(GNI)  of  the  28  current  Member  States  and  only  around  2%  of  public  spending  in  the  EU. 
This means that every citizen enjoys the huge benefits that the Union brings for less than the 
price of one cup of coffee per day.  

The size of the EU budget as percentage of Gross National Income 

Commitments ceiling in % EU28 GNI 
*2014-2020 estimated commitments, UK expenditure 
excluded, in % EU27 GNI 

1.25% 

1.09% 

1.12% 

1.03% 
(1.13%)* 

Average 
Average
1993-1999 
1993-1999

Average
Average 
2000-2006
2000-2006 

Average 
Average
2007-2013 
2007-2013

Average 
Average
2014-2020 
2014-2020

2 

 
 
 
Over  time,  the  composition  of  the  EU  budget  has  evolved.  The  share  of  agriculture  and 
cohesion spending has declined, though still represents around 70% of the total. Investment is 
increasingly focused on programmes directly managed at European level and in areas such as 
research and innovation, trans-European transport and energy networks, mobility programmes 
for young people and Europe's external action. 

Common Agricultural Policy and Fisheries 

Economic, social and territorial cohesion 

Other programmes 

Administration 

*Adjusted for 1995 
enlargement 

During  the  economic  and  financial  crisis,  national  budgets  in  many  Member  States  came 
under  severe  strain.  In  that  time,  the  EU  budget,  and  notably  the  European  Structural  and 
Investment  Funds,  emerged  as  a  major  source  of  stable  growth-supporting  investment.  The 
European Fund for Strategic Investments has since played a major role in mobilising private 
investment  throughout  Europe.  Most  recently,  the  EU  budget  underpinned  the  European 
response to the refugee crisis and to the threat of organised crime and terrorism. This tested 
the budget's flexibility to the limit. 

In  all  these  areas,  pooling  resources  at  European  level  can  deliver  results  that  spending  at 
national  level  cannot.  This  is  the  added  value  of  the  EU  budget.  A  euro  spent  through  the 
European  budget  must  be  worth  more  to  our  citizens  than  a  euro  spent  at  national  level.  In 
many  areas,  funding  at  national,  regional  or  local  level  is  the  right  approach.  In  others,  the 
cross-border  nature  of  challenges  means  that  pan-European  programmes  are  both  more 
effective  and  more  efficient.  By  focusing  in  the  right  areas,  even  a  relatively  modest  EU 
budget can have a strong impact on the ground. And it can do so while allowing for savings to 
be made in national budgets.  

The  benefits  of  well-designed  EU  budget  programmes  are  felt  by  all  Europeans.  Fostering 
economic  convergence  for  the  least  developed  regions  through  cohesion  policy  strengthens 
the Single Market and creates opportunities for companies, workers and consumers across the 
Union. Scientific breakthroughs from EU-funded research programmes improve the quality of 
life for all. Mobility programmes such as Erasmus+ equip young people with labour market 
skills, improve cultural understanding and strengthen the social fabric of our Union. 

3 

 
 
 
 
 
The  common  focus  on  'net  balances'  in  the  EU  budget  debate  is  therefore  misleading.  Net 
balance calculations have fed the perception that EU budget negotiations are a zero-sum game 
between  net  contributors  and  net  beneficiaries.  This  misses  the  essence  of  the  EU  budget. 
Expenditure allocated to one Member State in reality benefits many others by creating market 
opportunities  or  improving  infrastructure.  For  example,  it  is  estimated  that  a  quarter  of 
additional growth in non-cohesion countries is due to indirect benefits from increased sales to 
and  trade  with  cohesion  countries.  This  is  thanks  to  the  2007-2013  cohesion  programmes. 
These  effects  are  amplified  by  the  leverage  effect  of  loans  or  other  financial  instruments 
guaranteed by the EU budget. 

Europe in accounting terms  

EU budget: average annual balance 2014-2016* (EUR billion) 

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

Poland: 10.1 

Romania: 5.2 

Greece: 4.8 
Hungary: 4.6 
Czech Republic: 4.0 

Spain: 2.4 
Slovakia: 2.0 
Bulgaria: 2.0 
Portugal: 2.0 

Lithuania: 1.1 

Latvia: 0.7 
Slovenia: 0.5 
Estonia: 0.4 
Croatia: 0.3 
Ireland: 0.2 
Malta: 0.1 
Cyprus: 0.04 

Luxembourg: -0.004 

Finland: -0.6 
Denmark: -0.8 
Austria: -1.0 

Belgium: -1.4 
Sweden: -1.8 

Netherlands: -2.8 
Italy: -3.5 

France: -7.4 
United Kingdom: -7.6 
Germany: -13.6 

* Average operating budgetary balances 2014-2016 in EUR billion. Figures may vary per year. 

EU spending also creates European public goods that benefit all. The benefits from stability, 
peace,  common  values,  a  level-playing  field  in  Europe's  Single  Market,  or  a  negotiating 
capacity which rivals the biggest global powers, do not show up in net balance calculations. 
For  example,  the  Single  Market  has  a  significant  and  direct  positive  impact  on  jobs  and 
growth. It allows companies to operate more efficiently, creates jobs and offers lower prices 
for consumers. It gives people the freedom to live, study and work where they want.  

4 

 
 
 
 
Benefits of Single Market integration  
Gains in income (EUR billion, baseline year 2014)1 

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The  Commission  proposals  for  the  future  Financial  Framework  will  be  shaped  by  the 
principle of European added value. By focusing on common policies and priorities and the 
areas  where  the  EU  budget  can  deliver  public  goods  that  national  spending  cannot,  we  can 
move beyond the 'net balance' debate. With a well-designed, modern EU budget, all Member 
States are net beneficiaries. 

3. Towards our priorities for the future  

The next  Multiannual  Financial Framework should better align available financing with  our 
political  priorities.  It  should  build  on  what  works  well  today  while  also  anticipating  the 
challenges  of  tomorrow.  In  line  with  the  Rome  Declaration,  the  budget  should  enable  a 
Europe that is safe and secure. A Europe that is prosperous and sustainable. A Europe that is 
social. And a Europe that is stronger on the global scene. 

Europeans consistently point to security and safety as a top priority for their Union2. This 
comes  at  a  time  when  instability  in  Europe's  neighbourhood  pose  serious  challenges  both 
within  and  outside  of  our  borders.  The  EU  budget  is  instrumental  in  ensuring  effective 
migration management, countering terrorism and addressing cyber threats. It has a crucial role 
to play in reinforcing the control of external borders. Our post-2020 budget will, for example, 
determine  whether  the  vision  of  a  strengthened  and  fully  operational  European  Border  and 
Coast Guard can be realised in practice. 

1   Source: Gabriel Felbermayr, Jasmin Gröschl, Inga Heiland (2018), Undoing Europe  in a New Quantitative 
Trade Model, ifo Working Paper No. 250. The chart shows the gains in income attributable, according to the 
model applied, to being part of the Single Market.  

2   Special Eurobarometer 464b: European's attitudes towards security, December 2017. 

5 

 
 
 
                                                            
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK3 

How can the EU budget support better management  
of the EU's external borders? 

Leaders have called for stronger external borders as a precondition to lifting internal borders. In 2016, 
the  European  Border  and  Coast  Guard  was  set  up  based  on  a  proposal  from  the  European 
Commission.  By  2020,  the  European  Border  and  Coast  Guard  will  have  1,015  staff,  including  field 
operatives  –  as  well  as  at  least  1,500  national  staff  on  standby  in  the  rapid  reaction  pool.  Its  annual 
budget  of  EUR  292  million  should  increase  by  that  time  to  EUR  335  million.  The EU also  provides 
funding  to  co-finance  national  management  of  Europe's  external  border  by  96,000  national  border 
guards and emergency support through the Internal Security Fund (Borders). Combined, these activities 
amount to around EUR 4 billion over a seven year period, or 0.4%  of the total EU budget.  

The future development of the European Border and Coast Guard will depend on the decisions taken on 
the  future  Financial  Framework.  Depending  on  the  level  of  ambition,  several  scenarios  could  be 
envisaged: 
Exploiting  the  existing  European  Border  and  Coast  Guard  to  the  maximum  would  support  the 
continuous development of the information exchange framework (Eurosur), as well as Member States’ 
capacity investments for border management. It would also ensure that the European Border and Coast 
Guard has access to the equipment it needs. This would require a budget of around EUR 8 billion over 
a  seven  year  period,  corresponding  to  approximately  0.8%  of  the  current  Multiannual  Financial 
Framework.  
An  upgraded  European  Border  and  Coast  Guard  would  allow  support  for  a  fully  integrated  EU 
border  management  system.  This  would  be  based  on  a  revised  legal  framework  with  an  expanded 
mandate, bringing together and reinforcing the existing tools related to risk assessment and situational 
pictures; stepping up the operational capacity of the agency with a standing corps of European border 
guards of at least 3,000 EU staff; providing financial support and training for the increase of the national 
border  guard  component  in  vulnerable  Member  States;  bigger  and  more  operational  expert  pools;  and 
reinforced  own  equipment.  It  would  entail  a  much  stronger  return  role  at  the  EU  level;  and  lower 
intervention  thresholds  for  the  Agency  to  help  prevent  serious  shortcomings  in  the  external  border 
controls that could lead to a crisis. This scenario would require a budget of around EUR 20 – 25 billion 
over  a  seven  year  period,  corresponding  to  approximately  1.8  –  2.3%  of  the  current  Multiannual 
Financial Framework.  

A full EU border management system would imply 100,000 EU staff and a substantial EU equipment 
pool, comparable to the US or the Canadian system. It would require around EUR 150 billion over a 
seven  year  period,  taking  into  account  all  national  expenditure  on  border  protection.  This  would 
correspond to approximately 14% of the current Multiannual Financial Framework, the equivalent of an 
annual EU budget. As an example, the US Customs and Border Protection agency alone has an annual 
budget of US$ 13.56 billion and more than 62,000 employees. The Canada Border Services Agency has 
an annual budget of about Can$ 2 billion and more than 14,000 employees. 

Our  Union  will  also  need  well-designed,  flexible  and  streamlined  instruments  in  relation  to 
defence.  We  face  complex  security  challenges  that  no  Member  State  can  meet  on  its  own. 
Europe  will  need  to  take  greater  responsibility  for  protecting  its  interests,  values  and  the 
European way of life, in complementarity with the North Atlantic Treaty Organisation. While 
the  Union  cannot  substitute  Member  States'  efforts  in  defence,  it  can  complement  and 
leverage  their  collaboration  in  developing  the  defence  capabilities  needed  to  address  our 
common security challenges. This would avoid duplication and allow for a more efficient use 
of taxpayers' money.  

3   Policy options set out in this document are intended to illustrate possible choices to be made, based on ideas 
put forward in the public debate. They are not exhaustive and do not necessarily reflect the position of the 
European Commission.  

6 

 
 
 
                                                            
OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

How best to support a true European Defence Union? 

The European Defence Fund was launched in June 2017 and is gradually being built up. With a limited 
initial budget of EUR 90 million for defence research and EUR 500 million for industrial development 
for the period 2017-2020 (taken together, this represents approximately 0.05% of the current Financial 
Framework), it will in its first phase only be able to support a limited number of collaborative research 
and development projects. 

What type of defence fund do we want for the future? A true European Defence Union would require a 
significant budgetary investment. 

Given  the  scale  of  existing  national  defence  research  budgets  –  France  and  Germany  are  each 
individually  spending  more  than  EUR  1  billion  per  year  on  defence  research  –  and  the  high  costs  of 
developing cutting-edge defence technologies, including for cyber-defence, the research window of the 
Fund would need an estimated budget of at least EUR 3.5 billion over the period to make a substantial 
difference.  

Likewise, at least around EUR 7 billion would be needed between 2021 and 2027 to co-finance part of 
the cost of defence industrial development. This would allow leveraging a significant total investment 
for the development of defence capabilities of  at least EUR 35 billion over seven years. This would 
correspond to 14% of national spending on defence capabilities. It would  be a major step  towards the 
target  agreed  by  Member  States  in  the  European  Defence  Agency  to  use  35%  of  their  equipment 
spending for collaborative projects.  

The  European  Defence  Fund  has  the  potential  to  provide  an  important  boost  to  the  EU's  strategic 
autonomy and the competitiveness of Europe's defence industry. However, due to the limitations of the 
Treaties the EU budget is not able to cover all EU areas of action in the field of security and defence. A 
separate funding mechanism of around EUR 10 billion for the 2021-2027 period would significantly 
increase  the  EU's  ability  to  financially  support  operations  with  defence  implications.  This  would 
compare to up to EUR 3.5 billion under the current period. 

Two  years  after  the  Paris  Agreement,  the  EU  also  needs  to  remain  firmly  in  the  lead  in 
fighting  climate  change  and  ensuring  a  smooth  transition  towards  a  modern,  clean  and 
circular economy. The experience with climate mainstreaming should be taken into account. 
The  EU  must  also  make  good  on  its  commitment  to  the  United  Nations  Sustainable 
Development Goals. The EU budget also supports Europe's unique social market economy. 
Economic  and  social  realities  differ  across  Europe,  from  employment  and  poverty  rates  to 
social  protection  systems.  The  EU  budget  will  need  to  deliver  on  the  promises  made  by 
Leaders  at  the  Gothenburg  Social  Summit.  This  means  further  developing  the  social 
dimension of the Union, including through the full implementation of the European Pillar of 
Social Rights, and supporting young people and the mobility of European citizens. Adequate 
resources  will  be  required  to  improve  employment  opportunities  and  address  the  skills 
challenges, including those linked to digitisation.  

7 

 
 
OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

How best to support the mobility of young people? 

After  30  years,  Erasmus+  has  helped  nine  million  young  people  to  study,  train,  teach  or  volunteer  in 
another country, boosting their chances on the labour market. The current Erasmus+ programme 2014-
2020  has  a  budget  of  EUR  14.7  billion  (around  1.3%  of  the  overall  size  of  the  current  Multiannual 
Financial Framework), which can only offer learning mobility opportunities for less than 4% of young 
people living in Europe.  

There  is  a  strong  consensus  for  the  need  to  step  up  mobility  and  exchanges,  including  through  a 
substantially  strengthened,  inclusive  and  extended  Erasmus+  programme.  Depending  on  the  level  of 
ambition, several scenarios could be envisaged: 

Doubling the number  of young  people in  the EU  participating  in Erasmus+  to  reach 7.5%  of  young 
people across Europe would require an investment of EUR 30 billion in the next Multiannual Financial 
Framework (over a seven year period). 
Providing  the  opportunity  for  1  in  3  young  people  to  participate  in  an  Erasmus+  learning  experience 
abroad would require a budget for the 2021-2027 period in the order of EUR 90 billion.  

State-of-the-art connectivity of digital, energy and transport infrastructure is key to Europe’s 
territorial,  social,  and  economic  cohesion.  Europe  must  embrace  the  potential  of  innovation 
and  seize  the  opportunities  it  brings.  In  particular,  technological change  and  digitisation  are 
transforming  our  industries  and  the  way  we  work,  as  well  as  our  education  and  welfare 
systems. Europe lags behind on the road towards a digital economy and society.  The digital 
investment  gap  not  only  undermines  Europe's  innovation  and  growth  capacity  but  also  its 
potential  to  respond  to  emerging  societal  needs.  Unlocking  online  opportunities  and 
completing the Digital Single Market is therefore a key priority of the Union.  

OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

How best to power Europe's digital transformation? 

EU support for Europe's data infrastructure, connectivity and digital skills amounts to around EUR 35 
billion over the seven-year period. This is provided through the European Regional Development Fund 
(EUR 17 billion), the Research and Innovation Framework Programme (EUR 13 billion), the European 
Social Fund (EUR 2.3 billion), the Connecting Europe Facility (EUR 1 billion) and the Creative Europe 
Programme (EUR 1 billion).  

Maintaining or even lowering current investment levels would risk compromising the EU's ability to 
remain  competitive  in  key  industrial  and  service  sectors  such  as  industrial  production  and  machinery, 
financial services, health care, transport, energy or the automotive industry. Underinvestment in digital 
skills  would  further  widen  the  gap  between  demand  and  available  expertise,  while  automation  will 
replace traditional tasks. This would translate into lower jobs and growth prospects, sub-standard public 
services and higher vulnerability to cybersecurity threats. 

Doubling the amounts currently invested in the digital economy to around EUR 70 billion over the 
period 2021-2027 would deliver strong progress towards smart growth in areas such as high quality data 
infrastructure,  connectivity  and  cybersecurity.  It  would  enable  the  roll-out  of  new  trusted  and  secure 
services  in  e-health,  e-government  or  mobility.  It  would  help  secure  European  leadership  in 
supercomputing,  next  generation  internet,  artificial  intelligence,  robotics  and  big  data.  This  would 
reinforce the competitive position of industry and businesses in Europe across the digitised economy. It 
would also have a significant impact on filling the skills gap across the Union.  

8 

 
 
 
The EU budget provides a launch pad for researchers and their teams to pursue research and 
stimulate innovation. Europe also needs to help create the conditions for companies to scale 
up. Developing mid-cap companies and small and medium-sized enterprises beyond the start-
up phase remains a challenge. Many entrepreneurs leave Europe in search of better conditions 
to  grow.  Research  and  innovation  are  crucial  for  our  future.  They  are  the  only  way  to 
simultaneously and sustainably tackle low economic growth, limited job creation and global 
challenges such as health and security, food and oceans, climate and energy.  

OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

How best to boost competitiveness through  
research and innovation? 

For  advanced  economies  like  Europe,  research  and  innovation  make  the  difference  in  enhancing 
productivity and boosting competitiveness. The future EU budget must therefore allow the EU to invest 
in  the  drivers  of  innovation  enabling  European  industry  to  grow  and  thrive.  The  Union  is  currently 
spending close to EUR 80 billion for its Horizon 2020 Research and Innovation Framework Programme 
over 2014-2020. What research budget should it have in the future? 

Maintaining  or  even  lowering  current  investment  levels  would  not  address  the  problem  of 
underfunding.  This  would  have  knock-on  effects  on  national  and  private  investment,  and  undermine 
efforts to reach the target set by the Europe 2020 strategy of investing 3% of Gross Domestic Product in 
research  and  development.  The  Union  would  fall  further  behind  compared  to  the  world  leaders. 
Research support to other EU policies would be reduced.  

An increase in the Framework Programme by 50% to EUR 120 billion would create an estimated 
additional 420,000 jobs by 2040 and increase Gross Domestic Product by around 0.33% over the same 
period.  This  would  continue  the  growing  trend  of  recent  EU  Research  and  Innovation  budgets  and 
ensure an acceptable share of high-quality proposals funded. It would increase the Union's world-wide 
attractiveness for leading researchers and tackle weaknesses in innovation and scale-up opportunities. It 
would support progress on priorities such as digital, energy, climate and health.  

Doubling the Framework Programme to EUR 160 billion would create an estimated 650,000 jobs by 
2040 and add around 0.46% to Gross Domestic Product over the same period. It would enable the EU to 
emerge  as  a  global  leader  in  large-scale  initiatives,  preparing  full  market  deployment  of  solutions  in 
areas  like  batteries,  infectious  diseases,  smart  and  clean  buildings  and  vehicles,  decarbonisation 
technologies, circular economy, solutions for plastic waste and connected/automated cars.  

With the economy expanding at above 2% annually, we are now turning the page on the EU's 
worst economic and financial crisis. The euro area has enlarged to 19 Member States and the 
euro is the second most used currency in the world. All but one of the EU-27 Member States 
are  legally  committed  to  join  the  euro  area  at  some  stage.  Financial  markets  have  regained 
their pre-crisis strength and recent improvements, including the establishment of the Banking 
and Capital Markets Union, give us the opportunity to fix the roof while the sun is shining.  

9 

 
 
OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

How can the EU budget underpin a genuine  
Economic and Monetary Union? 

In December 2017, the Commission set out a vision of how the euro area and the Union as a whole 
could  be  strengthened  using  the  EU's  budget  –  both  today  and  tomorrow.  Four  specific  functions 
were  presented:  to  support  structural  reforms  at  national  level;  to  facilitate  convergence  for  Member 
States on their way to joining the euro; to provide a backstop for the Banking Union; and to develop a 
stabilisation function, bringing together different EU and euro area level funds and instruments, to help 
maintain  investment  levels  in  the  event of  large  asymmetric  shocks.  These  functions require  a  rethink 
that  goes  over  and  above  the  constraints  of  the  current  EU  budget.  For  instance,  this  could  be  done 
through synergies with the European Investment Bank and a future European Monetary Fund. However, 
our budget post-2020 will also need to play its part:  

The  reform  delivery  tool  and  the  convergence  facility  will  need  to  be  able  to  provide  strong  support 
and  incentives for a broad range of reforms across Member States. A budget line in the order of at 
least  EUR  25  billion  over  a  seven-year  period  would  provide  critical  mass  and  help  avoid  a 
concentration of funding on a few Member States only. 

The  stabilisation  function  is  to  be  built  progressively  over  time,  relying  on  back-to-back  loans 
guaranteed  by  the  EU  budget,  loans  from  the  European  Monetary  Fund,  a  voluntary  insurance 
mechanism  based  on  national  contributions  as  well  as  a  grant  component  from  the  European  budget. 
The amounts required from the EU budget would not necessarily need to be very high but would need to 
be significant enough to, for example, reduce the interest burden of the loans and provide incentives to 
properly implement the support scheme.   

Cohesion  policy  is  the Union's  main  investment  policy to  reduce  disparities  among  regions 
and  Member  States  by  offering  equal  opportunities  to  people  across  Europe.  It  is  a  major 
driver  of  job  creation,  sustainable  growth  and  innovation  in  Europe’s  diverse  regions.  By 
providing  incentives  for  reform  through  a  stronger  link  with  the  European  Semester,  in 
particular  the  Country  Specific  Recommendations,  the  future  cohesion  policy  could 
strengthen its role as a driver for the modernisation of our economies.  

10 

 
 
OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

What level of ambition for an efficient cohesion policy? 

Cohesion  policy  is  a  concrete  expression  of  solidarity  with  less  economically  developed  parts  of  our 
Union.  Its  purpose  is  to  foster  economic,  social  and  territorial  cohesion.  Support  from  the  European 
Structural and Investment Funds is currently available to all EU Member States. Should this continue or 
should  the  policy  be  limited  to  less  developed  regions  and/or  Member  States?  If  eligibility  is 
maintained for all, what should the level of ambition be? 

If the eligibility for support from the European Regional Development Fund, the European Social Fund 
and  the  Cohesion  Fund  were  to  be  maintained  for  all  Member  States  and  all  regions,  efficiency gains 
could  be  achieved  by  modulating  aid  intensities  and  better  targeting  support.  If  current 
expenditure  levels  of  around  EUR  370  billion4,  accounting  for  almost  35%  of  the  Multiannual 
Financial Framework, were maintained, this would allow a strong focus to be maintained on investment 
across  all  regions  in  areas  like  innovation, industrial transformation,  transition to clean  energy, climate 
action, and better employment opportunities. 

If  the  European  Regional  Development  Fund  and  the  European  Social  Fund  were  to  end  support  for 
more developed and transition regions, this would amount to a reduction of approximately  EUR 95 
billion over the period, accounting for more than a quarter of current allocations from those funds. This 
corresponds to around 8.7% of the current Multiannual Financial Framework. In this scenario, support 
for  regions  in  Austria,  Belgium,  Denmark,  Finland,  mainland  France,  Germany,  Ireland,  the 
Netherlands, Sweden and many regions in Italy and Spain would be discontinued. 

If  support  were  limited  even  further  to  cohesion  countries,  investment  for  less  developed  regions  in 
France,  Italy  and  Spain  would  also  need  to  be  discontinued.  This  would  amount  to  a  reduction  of 
approximately EUR 124 billion over the period, accounting for around 33% of the current allocations. 
This corresponds to around 11% of the current Multiannual Financial Framework. 

In scenarios 2 and 3, support for economic, social and territorial challenges would have to be taken over 
by national, regional and local authorities in line with the principle of subsidiarity.   

Scenario 1: Support for 
all European regions 

Categories of regions 

  Less developed: GDP/head 
< 75% of EU-27 average 

  Transition: GDP/head >= 
75% and < 100% of EU-27 
average 

  More developed: 

GDP/head >= 100% of EU-
27 average 

Scenario 2: Support for 
less developed regions and 
cohesion countries 

Scenario 3: Support for 
cohesion countries only 

Potentially eligible regions 

Potentially eligible regions 

  Regional support 
  Cohesion Fund support 
  Other regions 

  Regional support 
  Cohesion Fund support 
  Other regions 

4  Around  EUR  12  billion  of  that  amount  are  preallocated  to  the  United  Kingdom,  corresponding  to 

approximately 3% of the cohesion envelope over the period.  

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
A  modernised  Common  Agricultural  Policy  will  need  to  support  the  transition  towards  a 
fully sustainable agricultural sector and the development of vibrant rural areas. It must ensure 
access to safe, high quality, affordable, nutritious and diverse food. A  modernised Common 
Agricultural  Policy  must  enhance  its  European  added  value  by  reflecting  a  higher  level  of 
environmental and climate ambition and addressing citizens' expectations for their health, the 
environment and the climate. Europe needs a smart and resilient agricultural sector based on a 
strong socio-economic fabric in rural areas.  

OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

What level of ambition for an efficient Common Agricultural Policy? 

In  the  2014-2020  framework,  the  Common  Agricultural  Policy  mobilises  around  EUR  400  billion  to 
finance  market  measures,  direct  payments  for  farmers  and  rural  development  programmes  in  order  to 
promote  sustainable agriculture and viable rural economies. Direct payments represent around 70% of 
this  amount.  Rural  development  programmes  support  investment,  training  and  more  resource-efficient 
agricultural  production  and  are  currently  worth  around  EUR  100  billion  over  the  period.  These 
programmes are co-financed by Member States. Through the Common Agricultural Policy, the Union is 
helping  to  address  structural  problems  in  rural  areas,  such  as  a  lack  of  attractive  employment 
opportunities  or  skills shortages.  Creating new  value  chains  such  as  clean  energy and bio-energy,  and 
helping rural areas to profit from its scenic value are among the key objectives of these efforts.  

Discussions are ongoing as to how to make best use of direct payments. A prominent suggestion is to 
reduce and  better target direct payments, in line with the objectives of the policy. Today, 80% of direct 
payments go  to 20% of farmers. Ways to reduce differences of agricultural support between Member 
States are also being discussed. Changes to the system of direct payments could provide an opportunity 
to  focus  payments  on  expected  results,  such  as  sustained  agricultural  production  in  less  profitable  or 
mountainous regions, a focus on small and medium sized farms, investments in sustainable and resource 
efficient production systems and better  coordination with rural development measures.  
Maintaining  expenditure  levels  of  around  EUR  400  billion5  over  the  period  for  the  Common 
Agricultural  Policy,  corresponding  to  approximately  37%  of  the  current  Multiannual  Financial 
Framework, would through better targeting allow support in particular for small and medium sized 
farms to be increased with positive knock-on effects for rural areas.  

A reduction of support for the Common Agricultural Policy by 30% would represent around EUR 120 
billion over the period of the next Multiannual Financial Framework, or approximately 11% of the current 
Multiannual Financial Framework. This scenario could see average  farm income drop by more than 10% 
in a number of Member States and potentially more pronounced income drops in specific sectors.  

A reduction of support for the Common Agricultural Policy by 15% would represent around EUR 60 
billion over the period of the next Multiannual Financial Framework, or approximately 5.5% of the current 
Multiannual Financial Framework. In this scenario, the reduction  of average farm incomes would be more 
limited but could still have a noticeable impact in certain sectors depending on the choices made. 

These scenarios cannot be seen in isolation. Any reduction in direct payments should be accompanied by 
better  targeting  the  remaining  budget,  for  example  through  an  increased  focus  on  small  and  medium 
sized farms and better  coordination with rural development measures. 

The Union must also be able to deliver on its international goals. The Union and its Member 
States  are  collectively  the  world’s  biggest  providers  of  development  assistance.  EU  citizens 
expect Europe to play a leading role in the world, to promote good governance, democracy, 
the rule of law and human rights, and sustainable economic development. They want Europe 
to  project  stability  and  security,  in  particular  in  Europe’s  immediate  neighbourhood.  They 
want Europe to provide the critical mass to tackle the root causes of global challenges such as 
irregular  migration  and  violent  extremism.  They  want  Europe  to  support  sustainable 

5   Around  EUR  27  billion  of  that  amount  are  preallocated  to  the  United  Kingdom,  corresponding  to 

approximately 7% of the total Common Agricultural Policy.  

12 

 
 
 
                                                            
development, the eradication of poverty, and the promotion of better governance and the rule 
of  law,  including  tackling  corruption  and  organised  crime.  They  want  Europe  to  respond  to 
crises  whether  they  be  man-made  or  natural.  They  want  Europe  to  lead  multilateral 
discussions  on  matters  of  world-wide  concern,  to  continue  to  promote  a  rules-based  global 
order, and to foster co-operation in areas of common interest, from the economy, to energy, 
peace and security, defence and climate action.  

At  the  same  time,  instability  and  conflicts  in  our  southern  neighbourhood  and  beyond  have 
been  aggravated  by  the  global  economic  crisis.  This  has  exacerbated  migratory  pressures 
with  more  people  than  ever  on  the  move  in  the  region.  This  will  remain  a  reality  and  a 
challenge. We must consolidate and reinforce the external dimension of our efforts to tackle 
migration and provide support to growth and job creation.  

In  this  context,  we  should  look  for  intelligent  synergies  with  international  financial 
institutions  and  national  promotional  and  development  banks,  in  order  to  make  sure  that 
scarce resources are spent effectively and private investments mobilised where possible. The 
European Sustainable Development Fund, the core of the EU's External Investment Plan, is a 
model that could be expanded in the future.  

OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

How best to project our interests abroad? 

In future, the Union will need to be equipped with instruments that  allow it to deliver on existing and 
new  ambitions  and  challenges.  In  the  2014-2020  framework,  the  budget  dedicated  to  external  action 
amounts  to  around  EUR  66  billion.  It  represents  around  6%  of  the  current  Multiannual  Financial 
Framework. Furthermore, the European Development Fund, currently outside the Union budget, is the 
main instrument for providing development assistance to African, Caribbean and Pacific countries and 
to  overseas  countries  and  territories.  The  total  financial  resources  of  the  11th  European  Development 
Fund amount to around EUR 31 billion for the period 2014-2020.  

In future: 

An increase of the current volume of financing for external instruments beyond EUR 100 billion 
over  the  period  would  allow  the  EU  to  meet  the  existing  and  new  ambitions,  which  range  from 
international  cooperation,  migration  management,  investment,  governance,  human  rights  and  rule  of 
law,  to  promoting  the  Sustainable  Development  Goals,  humanitarian  assistance,  crisis  response  and 
conflict  prevention.  Particular  attention  will  need  to  be  given  to  supporting  the  EU's  strategy  for  the 
Western Balkans as well as the EU's stabilisation efforts in its neighbourhood and in Africa.  

A  significant  simplification  and  streamlining  of  external  instruments  could  further  enhance  the 
effectiveness  and  efficiency  of  the  external  relations  budget.  This  could  include  the  integration  of  the 
European Development Fund in the Multiannual Financial Framework, provided that this is reflected in 
the overall expenditure ceiling and that existing flexibilities are preserved.  

The  budget  for  external  relations  should  also  be  seen  against  the  backdrop  of  the  EU's  and  Member 
States’  collective  commitment  to  devote  0.7%  of  Gross  National  Income  to  Official  Development 
Assistance by 2030. This would entail an additional effort in the next Multiannual Financial Framework 
in the order of EUR 40 billion over seven years, without the participation of the UK. This assumes that 
the EU would maintain its current share of 20% of Official Development Assistance.  

13 

 
 
 
 
 
 
4. Modernising the EU Budget  

The priorities and policy options set out above illustrate the choices to be made for the future 
EU  budget.  These  choices  will  determine  the  size  and  ambition  of  the  first  Multiannual 
Financial Framework of the Union at 27. They will define the level  of ambition  for Europe 
and to what extent the Union is able to live up to the promise of the Bratislava Agenda.  

The next Financial Framework needs to be sufficiently large in size and sufficiently flexible 
in nature. It needs to be large enough to manage new priorities and deal with the withdrawal 
of the United Kingdom. The shortfall resulting from the United Kingdom's withdrawal should 
be  covered  in  equal  measure  by  "fresh"  money  and  savings  in  existing  programmes.  It  will 
need to combine proportionate savings and redeployments within the EU budget with a 
willingness to provide additional resources to deliver on new priorities.  

It is also clear that the impact of the European budget depends not only on its size but also on 
the  design  and  implementation  of  policy  programmes.  European  added  value,  enhanced 
performance and simplification are the keys to a modern and effective EU budget. Further 
streamlining  of  rules  and  procedures  will  help  to  achieve  this  aim.  Europe's  spending 
programmes must reflect our determination to make sure that every euro is spent in the most 
efficient way possible and that results are quickly felt on the ground.  

This  requires  making  best  use  of  instruments  such  as  guarantees,  loans  or  financial 
instruments. The reinforced European Fund for Strategic Investments is for example playing 
a  key  role  in  catalysing  private  investments  throughout  Europe.  By  investing  jointly  in 
research,  innovation  and  infrastructure,  we  have  been  able  to  create  jobs  and  growth  while 
tackling the global challenges of the day, from climate change, to science, transport, energy 
and space policy.  

The  successful  use  of  these  instruments  requires  a  clear  strategy  and  a  more  streamlined 
approach.  Grants  and  subsidies  will  continue  to  be  needed  for  projects  that  do  not  generate 
revenue,  like  an  Erasmus+  exchange  or  humanitarian  assistance.  However,  guarantees  and 
financial instruments can leverage the budget wherever there is a market interest.  

OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

How to do more with less through financial instruments? 

The  Commission's  Reflection  Paper  on  the  Future  of  EU  Finances  underlined  the  importance  of 
guarantees and financial instruments in helping to do "more with less". The European Fund for Strategic 
Investments  is  for  example  expected  to  mobilise  more  than  EUR  500  billion,  a  major  boost  to  the 
European  economy.  However,  the  current  landscape  of  EU  market-based  instruments  is  fragmented, 
with  almost  40  financial  instruments  and  three  budgetary  guarantees  and  guarantee  funds  managed 
centrally, which amount to a share of around 4% of the current Multiannual Financial Framework. In the 
area  of  small  and  medium-sized  enterprises  alone,  there  are  seven  financial  instruments  managed 
centrally and several hundred in shared management. There is clear scope for rationalisation and greater 
efficiency. 

One option to improve the efficiency and impact of instruments aiming at investment support in the EU 
could be their integration within a single investment support instrument. This would further reinforce 
the European Fund for Strategic Investment and have a positive impact on investment levels, economic 
growth and employment across the EU.  

A wider use of financial instruments and budgetary guarantees could more than double the investments 
mobilised over the next Multiannual Financial Framework up to EUR 2 trillion.    

14 

 
 
Budgetary  flexibility  is  another  key  principle  that  should  underpin  the  next  Multiannual 
Financial  Framework.  This  will  be  essential  to  adapting  to  new  needs  and  unstable 
geopolitical  and  domestic  conditions.  Building  on  the  existing  mechanisms,  special 
instruments  will  remain  crucial  for  dealing  with  emerging  challenges  like  migration  or 
humanitarian  assistance.  In  addition,  there  is  a  strong  argument  for  re-thinking  existing 
mechanisms to  ensure that allocated budgets effectively support European  priorities. This  is 
not always currently the case, since a part of the budgetary commitments provided for in the 
Multiannual  Financial  Framework  are  later  cancelled.  This  can  happen  for  a  number  of 
reasons,  such  as  delays  in  getting  projects  off  the  ground,  formal  mistakes  in  project 
implementation or errors in claiming costs. As a result, the EU budget is not being used to its 
full  potential  to  support EU  objectives  and  provide  European  added  value.  This  is  a  missed 
opportunity to support our common priorities.   

OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

How to make the most of decommitted funds? 

Currently, funds that have been committed to the EU budget but which are  ultimately not spent in the 
implementation  of  EU  programmes  are  cancelled.  These  resources  reduce  the  annual  calculations  of 
Member  States’  gross  national  contributions  compared  to  the  full  implementation  of  budgetary 
commitments.  

Instead  of  cancelling  these  amounts,  they  could  be  used  as  a  Union  reserve.  This  reserve  could  be 
deployed  to  achieve  common  priorities  and  respond  to  common  challenges.  Current  estimates  suggest 
that  around  EUR  21  to  28  billion  could  become  available  through  this  mechanism  over  a  7-year 
period.  Such  amounts  could  have  been  used,  for  example,  in  2015  to  finance  the  European  Fund  for 
Strategic Investments and address the investment gaps that opened up as a result of the financial crisis. 
This would have been done instead of cutting valuable programmes like Horizon 2020 or the Connecting 
Europe Facility. Similarly, the reserve could have been used in 2016 to support the establishment of the 
Facility for Refugees in Turkey, which required the use of all the flexibility in the EU budget as well as 
separate  contributions  by  Member  States.  It  would  also  have  allowed  more  funding  to  be  mobilised 
swiftly to address the migration crisis.  

In  today's  fast-changing  world,  unpredictable  events  will  occur  with  increasing  frequency.  The  Union 
Reserve  would  allow  a  more  swift  and  decisive  reaction  to  such  developments.  We  will  still  be 
implementing the next Financial Framework almost ten years from now. This long-term stability is an 
asset but also a constraint. A Union Reserve would provide a powerful and flexible new tool to tackle 
unforeseen events and respond to emergencies in areas such as security and migration.  

Finally, as part of the public debate, it has been suggested that the disbursement of EU budget 
funds could be linked to the respect for the values set out in Article 2 of the EU Treaty and 
in particular to the state of the rule of law in Member States. Some have gone further, arguing 
that serious breaches of EU law should have consequences and should lead to the suspension 
of disbursements from the EU budget.  

The  Union  is  a  community  of  law  and  its  values  constitute  the  very  basis  of  its  existence. 
They permeate its entire legal and institutional structure and all its policies and programmes. 
Respect  for  these  values  must  therefore  be  ensured  throughout  all  Union  policies.  This 
includes the EU budget, where respect for fundamental values is an essential precondition for 
sound  financial  management  and  effective  EU  funding.  Respect  for  the  rule  of  law  is 
important for European citizens, as well as for business initiatives, innovation and investment. 
The European economy flourishes most where the legal and institutional framework adheres 
fully to the common values of the Union.  

15 

 
 
 
OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

Should we make EU funding more conditional? 

The potential of the EU budget can only be fully unleashed if the economic, regulatory and administrative 
environment in the Member States is supportive.  

This is why, under the current Multiannual Financial Framework, all Member States and beneficiaries are 
required to show that the regulatory framework for financial management is robust, that the relevant EU 
regulation is being implemented correctly, and that the necessary administrative and institutional capacity 
exists  to  make  EU  funding  a  success.  In  addition,  policy  conditionality  can  foster  the  cooperation 
between  Member  States  in  areas  where  economies  of  scale  or  externalities  are  significant.  New 
provisions were also introduced under the current Multiannual Financial Framework to avoid situations 
where the effectiveness of EU funding is undermined by unsound economic and fiscal policies.  

The  new  Multiannual  Financial  Framework  is  an  opportunity  to  look  at  whether  these  principles  have 
created a solid platform for results. It is also the moment to consider how the link between EU funding 
and the respect for the EU's fundamental values can be strengthened.  

Any such mechanism would however need to be transparent, proportionate and legally watertight. While 
it could in principle apply to all relevant policies involving expenditure from the EU budget, any financial 
conditionality  would  need  to  be  precise,  proportionate  and  require  a  sufficient  connection  between  the 
conditions  imposed  and  the  aim  of  the  funding.  This  debate  will  also  need  to  consider  the  impact  of 
possible breaches of fundamental values or the rule of law at national level on the individual beneficiaries 
of  EU  funding,  such  as  Erasmus  students,  researchers  or  civil  society  organisations,  who  are  not 
responsible for such breaches6.  

5. Financing the EU Budget 

The  debate  on  the  post-2020  Financial  Framework  will  cover  not  only  what  the  EU  budget 
should be used for, but also how it will be financed in future. The revenue side of the budget 
has  become complicated and the link between the goals  of the EU budget and the way it is 
funded has become progressively weaker.  

Sources of financing of the EU budget 

% of Gross National Income 

1.2% 

1.0% 

0.8% 

0.6% 

0.4% 

0.2% 

0.0% 

Financial contributions 
Customs duties 
Statistical Value Added Tax-
based own resource 

Gross National Income-based own resource 
Other revenue 

6   This  would  follow  the  logic  of  Article  7(3)  of  the  Treaty  on  European  Union,  which  provides  that  any 
suspension of rights of Member States "shall take into account the possible consequences […] on the rights 
and obligations of natural and legal persons." 

16 

 
 
 
                                                            
A reform of the revenue side of the EU budget would help to focus the debate on objectives 
and on those areas where the EU can deliver real added value7. 

OPTIONS FOR THE FUTURE FINANCIAL FRAMEWORK 

What could new Own Resources bring to the EU budget? 

Emission Trading System: The European Emissions Trading System is the cornerstone of EU climate 
policy. A number of allowances are auctioned by Member States and purchased by companies to cover 
their  greenhouse  gas  emissions.  A  share  of  the  proceeds  from  the  auctioning  of  allowances  could  be 
made  available  for  the  EU  budget.  Depending  on  the  market  prices  for  allowances,  a  share  of  the 
revenues  generated by the Emission Trading System could generate estimated revenues between EUR 7 
billion  and EUR 105 billion over seven years.  

VAT-based Own Resource: Value Added Tax is a consumption tax assessed on the value added to all 
goods and services sold in the EU. Today, the Own Resource based on that tax relies on very complex 
statistical calculations. A reformed Own Resource could be levied from a simplified Value Added Tax 
base. Revenues from the current VAT-based Own Resource are currently around EUR 105-140 billion 
over seven years and  could be adjusted by calibrating the call-rate in function of required levels. 

Common Consolidated Corporate Tax Base: Large companies greatly benefit from the Single Market. 
The Common Consolidated Corporate Tax Base is a single set of common rules for the calculation of 
companies’  taxable  profits  in  the  Union.  A  contribution  based  on  a  harmonised  corporate  tax  base, 
possibly  including  a  digital  component,  would  reinforce  the  link  between  the  benefits  of  the  Single 
Market and the financing of the Union. Each Member State would retain the possibility to tax its share 
of the profits at its own national tax rate. Depending on the model chosen and the call-rate applied, a tax 
linked  to  the  common  consolidated  corporate  tax  base  could  bring  between  EUR  21  and  EUR  140 
billion over seven years, not including expected revenue from the decrease of  tax evasion. 

Seigniorage is the term used to describe the revenue which central banks and governments accrue from 
issuing  money.  Since  monetary  income  of  the  European  Central  Bank  for  the  issuance  of  the  euro  is 
directly  linked  to  the  Economic  and  Monetary  Union,  it  could  be  considered  as  a  possible  new  Own 
Resource.  An  amount  corresponding  to  a  share  of  the  net  profits  arising  from  national  central  banks' 
shares in euro area monetary income paid out to national treasuries, could be made available for the EU 
budget as a form of national contribution. A similar logic was applied in respect of the income generated 
by  the  European  Central  Bank  and  the  national  central  banks  from  accumulated  Greek  Government 
bonds when in 2012 Eurogroup Ministers agreed on a transfer of the equivalent of the income generated 
by  the  Eurosystem  holding  (European  Central  Bank  and  national  central  banks)  of  Greek  government 
bonds  to  Greece.  Depending  on  the  percentage  applied,  estimated  revenues  from  seigniorage  could 
range between EUR 10.5 billion (10%) and EUR 56 billion (50%) over seven years.  

New Own Resources could be used to forge an even more direct link to Union policies8. This 
could  notably  be  the  case  to  support  sustainability  objectives,  the  Single  Market  and  the 
Economic  and  Monetary  Union.  For  example,  a  share  of  the  revenues  from  the  Emission 
Trading System could help support EU sustainability goals. The Value Added Tax-based Own 
Resource  should  be  simplified  and  should  take  account  of  the  ongoing  reform  towards  a 
single European Value Added Tax area. An Own Resource based on a share of revenue from 
the  relaunched  common  consolidated  corporate  tax  base  would  strengthen  the  link  between 

7   See the report on “Future financing of the EU” presented in January 2017 by a high-level group set up jointly 

by the European Parliament, the Council and the European Commission and chaired by Mario Monti.  

8   Changes  to  the  Own  Resources  Decision  needed  to  reform  the  system  would  require  unanimity  in  the 
Council, after consultation of the European Parliament, and ratification by all Member States in accordance 
with  their  Constitutional  requirements.  Such  changes  have  been  made  before  as  part  of  the  package 
accompanying  each  new  Multiannual  Financial  Framework.  Changes  in  the  Own  Resources  ceiling  are  in 
any event be likely to be required to cover financial liability linked to loans or financial facilities guaranteed 
from the EU budget, the new stabilisation function and the possible integration of the European Development 
Fund in the Multiannual Financial Framework. 

17 

 
 
 
                                                            
the benefits of the Single Market and the financing of the EU budget. A share of the income 
earned by the European Central Bank for the issuance of banknotes is another example of a 
possible new source of revenue for the EU budget. Further Own Resources, including those 
mentioned in the Monti report, are being looked at in more detail. 

The withdrawal of the United Kingdom will present an opportunity to radically simplify the 
revenue  side  of  the  budget.  The  rebate  previously  granted  to  the  United  Kingdom,  and  the 
rebates received by other Member States contributing to the financing of the United Kingdom 
rebate, made the revenue side of the budget more complex and less transparent. There is now 
a  strong  case  for  eliminating  all  such  corrections  as  part  of  a  fair  and  balanced  budget 
package. 

6. The importance of the right timing 

A swift political agreement on a new, modern EU budget will be essential to demonstrate 
that the Union is ready to deliver on the positive political agenda outlined in Bratislava 
and Rome.  

This would show that, following the withdrawal of the United Kingdom in 2019, the Europe 
of  27  is  unified,  has  a  clear  sense  of  purpose  and  direction,  and  is  ready  to  deliver.  And  it 
would  give  the  best  possible  chance  for  new  programmes  to  hit  the  ground  running  on 
schedule on 1 January 2021, turning political objectives into quick results on the ground. 

An early agreement is not only politically desirable. It is also a practical imperative. All our 
partners  and  beneficiaries  of  EU  funding  as  well  as  national  and  regional  authorities  need 
legal  and  financial  certainty.  They  need  time  to  prepare  the  implementation  of  the  new 
programmes. The late adoption of the current Financial Framework led to significant delays in 
the  launch  of  the  new  programmes  and  consequently  to  the  achievement  of  our  funding 
priorities.  

The  opportunity  cost  of  such  delays  is  high.  A  seamless  transition  to  the  new  Multiannual 
Financial Framework will be vital to maintain the momentum of the economic recovery, and 
to allow the Union to continue to act swiftly and decisively in the many areas where speed of 
response is key to success. 

We must therefore make sure that the experience of the current framework is not repeated.  

Agreement  on  the  next  Multiannual  Financial  Framework  in  2019  would  not  only  send  a 
signal of a strong and united Europe of 27 that is able to deliver convincingly, it would also 
ensure predictability and continuity of funding to the benefit of all.  

18 

 
 
WHY DO DELAYS MATTER? 

The  launch  of  the  2014-2020  European  Structural  and  Investment  Fund  programmes  was  significantly 
delayed.  Legislation  for  the  sectoral  programmes  was  only  finalised  in  December  2013  following  an 
agreement  on  the  Multiannual  Financial  Framework  in  the  first  half  of  that  year.  This  has  delayed  the 
adoption  of  the  detailed  rules  needed  to  make  the  programmes  work  on  the  ground,  as  well  as  the 
subsequent negotiation of the Partnership Agreements with the Member States.  
As a consequence, investments were delayed, as was the support for much needed projects and reforms. 
This  came  in  addition  to  an  important  reduction  of  commitment  appropriations  at  the  beginning  of  the 
current period.  

   Evolution of commitment ceilings between 2000 and 2020 (current prices) 

% of EU GNI 

1.30% 
1,30%

1.25% 
1,25%

1.20% 
1,20%

1.15% 
1,15%

1.10% 
1,10%

1.05% 
1,05%

1.00% 
1,00%

0.95% 
0,95%

0.90% 
0,90%

0.85% 
0,85%

1.27% of GNP = 1.24% of GNI  
excl. Financial Intermediation Services  
Indirectly Measured (FISIM) 

1.23% of GNI  
incl. FISIM 

1.20% of GNI  
(European System of Accounts 2010) 

'00-'06 average 
1.09% 

'07-'13 average 
1.12% 

Commitment
Commitment 
ceilings
ceilings 

'14-'20 average 
1.03% 

2015 revision 

Delays have real consequences for people. 

The legal acts for the Asylum, Migration and Security Funds were only adopted in 2014. This meant that 
to the designation of authorities and adoption of programmes only came in 2015. As a result of the delay, 
Member  States  were  not  able  to  launch  projects  in  time.  This  impacted  on  reception  and 
accommodation  capacities  in  Member  States  and  the  management  of  borders.  The  delays  made  it 
very difficult for the Greek administration to use EU funding to prepare for the crisis in  2015. Shelters 
were  not  ready.  Conditions  to  receive  refugees  were  poor  at  a  time  people  in  need  of  protection  were 
pouring  into  the  islands  between  June  and  September  2015.  At  the  same  time,  other  Member  States, 
including  Sweden  and  Austria,  did  not  have  EU  funding  at  their  disposal  to  help  accommodate  people 
coming  through  the  Balkan  route.  The  EU  had  to  use  emergency  assistance  to  support  these  Member 
States in these challenging times. 

19 

 
 
 
 
 
 
 
A number of international actions under the Erasmus+ programme could not be achieved in 2014 due to 
the late adoption of the last Financial Framework. This meant that around 25-30,000 exchanges between 
students and teachers from our Member States and our partner countries planned for 2014 could 
not take place that year. If such delays were to occur for the whole programme, as many as 1,000,000 
young people would not be able to benefit from an Erasmus+ exchange in 2021. 

Delays in implementing the next Research Framework Programme would imply the loss of around 5,000 
research jobs per month (around 3-4% of overall EU research jobs) and an additional 7000 jobs in the 
wider economy. More than 200 research publications would be lost for the same period, including around 
100 high-impact articles.  

Delays  in  selecting  projects  in  the  early  stage  of  implementation  of  the  cohesion  programmes  would 
mean  more  than  100,000  projects  would  not  be  able  to  start  on  time.  The  areas  impacted  include 
business support, energy efficiency, health care, education and social inclusion.  

A  number  of  large-scale  infrastructure  projects  would  also  be  strongly  impacted  by  delays.  Space 
programmes like Galileo or Copernicus have long investment cycles. They therefore need predictability 
when it comes to procurements. An ongoing procurement process for a number of Galileo satellites will 
be concluded in 2019 and can only be fully implemented once the new legal and budgetary requirements 
are fully in place.  

Other  examples  of  the  negative  effects  of  delays  in  agreeing  a  new  financial  framework  include  Rail 
Baltica. The project will build a crucial railway link into the Baltic States and should be completed by 
2025/2027. The project must be able to launch the major procurements it needs for construction in 2021. 
This  is  crucial  for  the  completion  of  a  project  that  will  help  connect  five  million  people  in  the  Baltic 
States to the rest of Europe. The high-speed rail link will cater at the same time for freight flows all the 
way from Finland to Germany, the Benelux and the Adriatic.  

The  Brenner base tunnel  is  planned  to be  completed  by  2027, with  the  rail  engineering works  due  to 
start  under  the  next  MFF.  It  is  a  crucial  project  to  shift  half  of  the  2.2  million  trucks  of  the  Brenner 
motorway to rail. This will cut down on pollution in the precious valleys between Munich-Innsbruck and 
Verona.  

The Fehmarn Belt between Denmark and Germany, the Evora-Merida railway link that will finally 
connect  Lisbon  and  Madrid,  the  Lyon-Torino  base  tunnel  that  will  connect  the  high-speed  railway 
networks  of  France  and  Italy  are  also  all  due  to  be  completed  by  the  end  of  the  next  Multiannual 
Financial Framework.  

Such projects cannot afford to see delays in planning or procurement simply because of the late adoption 
of the next Multiannual Financial Framework.  

CONCLUSION 

The post-2020 Multiannual Financial Framework will be a litmus test for the European Union 
at 27. When Leaders meet to take decisions on the future of Europe in Sibiu, Romania on 9 
May 2019, the Union of 27 must be a Union of action. Decisive progress on the Financial 
Framework  by  then  would  show  that  the  Union  can  bridge  the  gap  between  political 
priorities and the delivery of tangible results for all Europeans. 

A  timely  agreement  on  a  new,  modern  Financial  Framework  will  only  be  possible  with  the 
strong  guidance  of  EU  Leaders  and  close  engagement  from  the  outset  with  the  European 
Parliament.  The  European  Council  meetings  in  October  2018  and  December  2018  will  be 
crucial milestones in this process. 

The Commission is ready to play its role to the full. We have been listening to EU institutions, 
Member  States,  national  Parliaments  and  representatives  of  all  the  many  stakeholders  who 
have a stake in the future budget. We will continue to listen in the months to come. All the 
options  and  figures  cited  in  this  Communication  are  illustrative  and  intended  to 
stimulate  an  open  debate.  They  do  not  represent  the  Commission's  definite  position. 

20 

 
 
 
Final  decisions  on  the  Multiannual  Financial  Framework  will  be  for  European  Leaders  to 
take, with the consent of the European Parliament.  

Our proposals will expand on the ideas presented in this Communication and will provide a 
solid  basis  for  a  timely  agreement  by  all  Member  States  with  the  consent  of  the  European 
Parliament.  They  will take  as  their  starting  point  the  priorities  that  the  Leaders  have  agreed 
together.  

The  proposals  will  demonstrate  clearly  what  these  priorities  mean  in  financial  terms. 
Maintaining  this  link  is  essential  for  the  credibility  of  the  future  EU  budget.  If  the  Union 
decides to do less, a smaller budget will suffice.  

But wherever the Union decides to do more, the financial consequences must follow.  

Europeans expect a strong Union able to face the challenges of the future and a budget that 
can deliver for them. Leaders must play their part in meeting these expectations. 

The Commission invites Leaders to: 

  support a new and modern Multiannual Financial Framework, which serves a 

Europe that protects, empowers and defends;  

  stand  fully  and  firmly  behind  the  priorities  agreed  on  16  September  2016  in 

Bratislava and on 25 March 2017 in the Rome Declaration,  

  acknowledge  that  in  order  to  translate  these  priorities  into  financial  terms,  a 
budget  of  sufficient  size  is  necessary  which  is  backed  by  an  intelligent 
combination of proportionate savings, redeployments and fresh resources; 

  support  a  reform  of  the  revenue  side  of  the  EU  budget  as  part  of  a  balanced 
overall  package  for  the  next  Multiannual  Financial  Framework,  eliminating 
corrections  and establishing  a closer link with  concrete policy objectives of  the 
Union; 

  express their commitment to work closely with the European Parliament and the 
European  Commission  on  the  concrete  proposal  for  the  Multiannual  Financial 
Framework with an understanding that the Commission presents its proposal by 
early May 2018 at the latest. 

  commit to making decisive progress on the Multiannual Financial Framework by 
their meeting in Sibiu on 9 May 2019 in order to get the Europe of 27 off to the 
best possible start. 

21