COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL AND THE COUNCIL Time to decide on the Union’s financial framework for 2021-2027 The European Commission’s contribution to the European Council meeting on 17-18 October 2019
Date: 2019-10-09
Institutions: European Commission, Secretariat-General
Subjects: budget policy, budgetary resources, commitment of expenditure, draft budget (EU), financial management, financing of the EU budget, general budget (EU), multiannual financial framework

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  EN 

   EUROPEAN COMMISSION  Brussels, 9.10.2019  COM(2019) 456 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL AND THE COUNCIL     Time to decide on the Union’s financial framework for 2021-2027                  The European Commission’s contribution to the European Council meeting      on 17-18 October 2019  
 
 
TIME TO DECIDE ON THE UNION’S FINANCIAL FRAMEWORK 
FOR 2021-2027 

1.  Time to deliver 

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

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

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

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

2.  A budget that is up to the task 

The  financial  framework  for  2021-2027  must  provide  the  resources  necessary  to  drive  forward  the 
positive  agenda  agreed  in  Rome  and  Sibiu.  This  is  a  unique  opportunity  to  translate  into  action  the 
priorities identified in the Strategic Agenda of the European Council and the political guidelines of the 
Commission’s President-elect Ursula von der Leyen. The overall level of the future framework must 
match  the  Union’s  ambitions,  while  also  fairly  reflecting  the  budgetary  consequences  of  the 
withdrawal of the United Kingdom. 

The Commission proposed a long-term budget equivalent to 1.114% of EU 27 gross national income. 
Some have argued for the budget to be limited to 1.00%, while others have supported the European 
Parliament’s  call  for  a  larger  budget  of  up  to  1.3%.  It  is  essential  to  view  these  figures  in  context. 
Today, the EU long-term budget for 28 Member States is equivalent to 1.03% of EU 28 gross national 
income,  including  the  European  Development  Fund.  However,  removing  spending  in  the  United 
Kingdom brings this to 1.16% of EU 27 gross national income. This is the right point of comparison. 

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The size of the EU budget as a percentage of EU gross national income (GNI) 

0.03% 

0.02% 

0.03% 

0.03% 

0.03% 

0.03% 

1.25% 

1.09% 

1.12% 

1.00% 

1.13% 

1.11% 

Average 
1993-1999 

Average 
2000-2006 

Average 
2007-2013 

Average 
2014-2020 

Commitments ceiling in % EU GNI 
*2014-2020 estimated commitments  
(UK expenditure excluded) in % EU 27 GNI 
** European Development Fund integrated (‘budgetised’) 

Average 
2014-2020, 
EU-27* 

2021-
2027** 

European Development Fund 

The  level  proposed  by  the  Commission  already  represents  a  reduction  compared  to  the  current 
situation. This is a realistic response to the impact of the departure of a major contributor to the EU 
budget, but also provides an essential funding boost for new and emerging priorities.  

A long-term budget of this size would not result in significant and unsustainable increases in Member 
States’ contributions. The increase in national contributions of about a third by 2027 compared to 2020 
levels  is  mainly  a  consequence  of  inflation  and  real  growth,  which  will  lead  to  similar  increases  in 
national  budgets  over  the  period.  The  remainder  is  partly  a  consequence  of  the  withdrawal  of  the 
United Kingdom from the EU and partly driven by reinforced investment in common priorities such as 
research, digitalisation, climate, migration, security and defence, as well as the Union's external action. 

Further  significant  cuts  would  prevent  the  Union  from  delivering  on  its  priorities  and  have  an 
immediate impact on the level of EU support in the regions and for Europe’s farmers, students, and 
researchers. It would open up a serious gap in relation to the Strategic Agenda agreed by the European 
Council in June 2019. 

The European Council therefore needs to urgently define a realistic range of outcomes for the 
overall level of the EU budget. Departing significantly from the balance struck by the Commission 
proposal  would  have  real  consequences.  A  larger  budget  would  allow  the  Union  to  achieve  more 
together but would put additional pressure on national contributions, although reforming the system of 
financing  the  EU  budget  as  the  Commission  has  proposed  would  mitigate  this  effect.  Conversely,  a 
smaller  budget  would  have  a  damaging  impact  on  the  Union’s  capacity  to  deliver  efficiently  on  the 
Strategic Agenda and the Union's priorities. It would undermine the modernisation of our policies and 
our ability to address urgent new priorities. 

3.  A fairer approach to financing the EU budget 

Successful programmes with strong EU value added benefit all, regardless of where the investment is 
made.  Moreover,  the  benefits  of  Union  membership  extend  well  beyond  budgetary  receipts.  This  is 
why  the  narrow  focus  on  'net  balances'  is  seriously  flawed.  This  is  a  budget  for  all  Europeans, 
investing in areas where pooling resources at EU level can deliver what national budgets cannot. 

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Today, the contribution that each Member State makes to the EU budget does not reflect solidarity or 
relative prosperity. The addition of rebates and corrections over time has resulted in a system that is 
opaque  and  unfair.  Member  States  benefiting  from  rebates  contribute  a  lower  share  of  their  income 
than  the  other  Member  States.  The  richest  Member  States  pay  least  as  a  percentage  of  their  gross 
national income per capita. 

National contributions as a percentage of gross national income (GNI) 

average 

2020 
EU28: 0.81 
EU28: 0.81 

average 

2027 
EU28: 0.81 
EU27: 0.91 

0.85 

0.70 

0.91 

0.90 

2020

2027

Member States benefiting from corrections 
Member States below average EU GNI/capita 

The withdrawal of the United Kingdom and expiry of other corrections will automatically bring an end 
to  the  current  complex  system  of  rebates  and  corrections.  This  is  appropriate,  not  least  because  the 
logic that  applied  at  Fontainebleau is  no longer  relevant today.  In  1984,  the  United Kingdom  was  a 
relatively poor Member State and the budget was dominated by agricultural transfers. The situation is 
very different now: the Member States benefiting from rebates are among the most prosperous in the 
Union and EU expenditure has significantly evolved and become more diversified. The Commission 
has therefore proposed that rebates be phased out over a five-year period. It is time for the European 
Council to agree on a fairer and more transparent system in which the same rules apply to all. 

The  European  Council  should  also  provide  the  necessary  impetus  to  the  ongoing  work  on 
identifying new sources of financing for the EU budget. Introducing new sources of revenue has a 
dual  benefit.  It  would  help  to  forge  a  closer  link  between  the  budget  and  policy  priorities,  such  as 
climate policy. It would also help to mitigate the increase in national contributions.  

There  is  now  broad  support  among  Member  States  for  a  new  own  resource  based  on  non-recycled 
plastic packaging waste. Support for a new own resource linked to the EU Emissions Trading System 
is  gaining  traction.  The  President-elect  of the  European  Commission  has  also announced  she  would 
propose legislation to extend this system to the maritime sector and reducefree allowances allocated to 
the aviation sector over time. Other possible sources of revenue could also be explored.  

It  is  widely  recognised  among  stakeholders  that  the  current  situation  is  no  longer  sustainable.  The 
European Parliament has made clear that reform of the own resources system and the diversification of 
revenue  sources  will  be  an  essential  factor  in  its  decision  to  grant  consent  on  the  future  financial 
framework. Work should be completed swiftly to prepare the ground for the final decisions on 
new own resources as part of a balanced agreement. 

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4.   A modern, result-oriented budget for the future 

Modernisation  must  be  the  hallmark  of  the  future  financial  framework.  This  requires  revisiting  the 
balance between spending areas and redesigning programmes to maximise their effectiveness and the 
support they give to policy priorities. The debate on the size of the budget cannot be separated from its 
design: funding is only useful if it is well-targeted and efficiently implemented. 

A  modern  budget  means  a  new  balance  between  spending  policies.  The  European  Council  must 
therefore  ensure  that  the  balance  proposed  by  the  Commission  is  maintained  in  the  final 
agreement, with new priorities being given a more prominent weight.    

Evolution of the main policy areas in the EU budget 

60%

50%

40%

30%

20%

10%

Common agricultural 
policy and fisheries 

Economic, social and 
territorial cohesion 

New and reinforced 
priorities 

Administration 

0%
1988-1992
Source: European Commission 
*Adjusted for 1995 enlargement 

1993-1999

1995-1999*

2000-2006

2007-2013

2014-2020

2021-2027

The  European  Council  should  also  support  the  modernisation  of  cohesion  policy  and  the 
common agricultural policy, which will continue to play a vital role in shaping Europe’s future. The 
Commission has proposed to modernise these essential pillars of the EU budget so that they continue 
to evolve in line with new priorities – including stronger climate and environmental ambition – and the 
changing economic and social realities.  

The next financial framework must moreover put strong emphasis on policy coherence, on reinforcing 
the  link  between  funding  and  policy  priorities,  and  on  ensuring  that  the  conditions  are  in  place  for 
programmes to deliver to maximum effect. This must be a modern, result-oriented budget.  

The  European  Council  should  signal  strong  support  for  measures  to  help  the  budget  deliver 
more effectively and to reinforce the link between programmes and the Union’s policy priorities. 
Such stronger link should in particular be achieved through: 

  An ambitious approach to climate action: a target of at least 25% of spending contributing to 
climate  objectives  is  ambitious  and  can  be  credibly  delivered  through  sectoral  targets  and  the 
mainstreaming of climate action in all relevant financial programmes. In addition, credible climate 
proofing provisions are important to ensure policy coherence. Concentrating a critical mass of EU 
support  on  climate  action  and  introducing  a  new  allocation  criterion  in  cohesion  linked  to 
greenhouse gas emissions will also allow the EU budget to contribute more fully to the Union’s 
policy priorities. The ‘Just Transition Fund’ announced by the Commission's President-elect will 
further strengthen the focus on achieving a fair and efficient climate transition.  

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  A  comprehensive  budgetary  response  to  the  challenges  of  migration:  this  will  require 
significantly  increased  resources  both  for  internal  and  external  instruments,  strong  support  for 
Member  States  and  regions  facing  the  greatest  challenges  and  pressure,  and  enhanced 
responsiveness so that funds are quickly targeted where and when most needed.  

  Putting the full weight of the EU budget behind essential national reforms and investment 
priorities  agreed  through  the  European  Semester  process.  Similarly,  a  strong  link  between 
cohesion policy funding and the economic governance of the EU should be maintained to ensure 
efficient  budgetary  implementation.  New  instruments  like  the  budgetary  instrument  for 
convergence and competitiveness for the euro area will also catalyse essential structural reforms 
and investment.  

  Reinforced support for the implementation of the European Pillar of Social Rights through 
an expanded European Social Fund Plus focused on investment in people and social cohesion.  

In  addition,  a  strengthened  toolkit  for  the  protection  of  the  EU  budget  in  case  of  generalised 
deficiencies  in  the  rule  of  law  is  an  essential  feature  of  the  future  financial  framework.  This  is  a 
protective mechanism covering all expenditure areas to ensure that the EU budget is efficiently spent, 
and not a sanction directed against particular Member States.  

5.  Conclusion – the path to an agreement  

The  negotiations  on  the  future financial  framework  are  approaching  the  moment  of  truth.  Technical 
work  since  the  Commission  presented  its  proposals  in  May  2018  has  progressed  at  unprecedented 
speed and provides a solid platform for the final phase of work. However, time is now extremely tight. 
Many steps remain to be taken before the new programmes are due to be launched on 1 January 2021. 
Without a swift agreement in the European Council, delays to essential investments and projects could 
be even longer than at the beginning of the current period, with a real impact on the beneficiaries of 
EU funding throughout the Union. 

The political objective of an agreement in the European Council by the end of the year is challenging, 
but achievable. The next step is for the October European Council to provide political guidance on the 
key issues outlined in this Communication. These issues are tightly interwoven: the key to success will 
be finding a fair and balanced package that combines: 

  an overall level of funding commensurate with the Union’s shared priorities; 

  a modern budget with the right balance between policies and a strong focus on EU added value; 

  a more transparent approach to financing the EU budget and the introduction of new sources of 

revenue to support priorities and reduce the burden on national contributions; and 

  greater policy coherence, by tightening the link between funding and policy priorities and 

strengthening the toolkit for protecting the budget. 

The Commission calls on the European Council to give clear orientations on these points, taking 
full account of the views expressed by the European Parliament. 

In  addition,  the  European  Parliament  and  the  Council  should  continue  to  take  forward  work  on  the 
sectoral  financial  programmes  as  swiftly  as  possible,  building  on  the  considerable  progress  already 
made. 

The  Commission  remains  fully  committed  to  working  closely  with  the  European  Parliament,  the 
European  Council  and  the  Council  to  bring  these  vital  negotiations  to  a  timely  and  successful 
conclusion.  

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