Debate: Presentation by the Council of its position on the draft general budget -  financial year
Date: TUESDAY, 13 SEPTEMBER 2022
Speaker: Jiří Georgiev
Language: EN

Let me start by saying that this is the year the preparation of the Council position has not been business as usual. The current times are not ordinary at all. Russia’s aggression against Ukraine has shaken the geopolitical landscape we live in drastically. It impacts the lives of Ukrainians, the future of the people that depend on the food and energy supply from Ukraine and Russia, and also of the citizens in our own countries.  The long-term consequences of the war are still unpredictable, but the short-term impact we all experience – the need to help the Ukraine, to care about the support to third countries and in our region, the all time high energy prices, the historical inflation levels and the fears of our people about their future.  In this situation, we the budgetary authority, that’s the Council as well as the European Parliament, face an important challenge in our discussions on the budget for the next year – how to best use the available money in view of the significant new challenges and uncertainties that lie ahead.  Do we establish a budget for next year, assuming nothing is happening in the world? Or do we have the courage to make choices, to reprioritise, to backroad some policies and reinforce others, and to create some margins in the budget to allow the Union to act?  We are waiting for the Commission’s indication on how the EU budget could be used to face the new challenges. We all are waiting for the amending letter expected in early October and an indication from the Commission to deal with the situation in Ukraine.  For the Council, this incomplete budget proposal from the Commission received in this particular context has led to a prudent and conditional position. We created margin to face the inevitable contingencies. If more is needed, we are ready to reprioritise and to look at our position again. But the Council has already preserved all initiatives and programmes that are key for dealing with the current situation.  Let me be clear once more. We are living in unprecedented times and in a very complex and difficult geopolitical and economic environment. There is limited money available. The national economies are struggling and the bill is getting bigger. So we need to be smarter, more courageous than in normal times and consider carefully where the money should go. Some people may say we want to keep what we have and new challenges should be financed with new money. Such an approach ignores the economic reality.  Today, budgets at national level are also struggling to cope with this perfect storm with high inflation levels and an energy crisis. It is difficult to see how Member States’ contributions to the EU budget would increase if the EU would not do what is done at the national level – reprioritise.  Having said this, the Presidency will do its utmost to conclude a budget for next year that will take the EU forward, focusing on the main objectives of the Union and on benefits of our citizens.  Dear Vice-President, ladies and gentlemen, let me now go into more detail on the Council’s position.  We have worked on the Commission’s proposal since it was presented on 7 June. I am pleased to say that, after careful reflection, the Council has reached a well-balanced position that it adopted with unanimity on 6 September. The Council position foresees amount of EUR 183.95 billion in commitment appropriations and EUR 165.74 billion in payment appropriations. They correspond respectively to 1.13% and 1.01% of the EU gross national income and ensure a quick and substantial progression of the main beneficiary programmes.  Several remarks on operational expenditure. For headings 1, 2B, 3, 4 and 5, while no changes are proposed to headings 2A and 6, the Council proposes some adjustments in commitment appropriations to ensure sufficient margins to cover the financial needs to be addressed by the amending letter expected in the coming weeks, mainly regarding the Ukraine crisis. And to guarantee an appropriate rebalancing and stabilisation of programmes, particularly those subject to top-ups by Article 5 of the MFF Regulation, or receiving significant additional appropriations from the assigned revenues from Next Generation EU.  In our proposal, we also suggest avoiding the use of Article 15(3) of the Financial Regulation in 2023 and backload the amount that was established under MFF agreement to the second part of the MFF period.  I would like to stress the fact that the large number of key programmes across all headings have been accepted at the level of the Commission’s draft budget. This is the case, for instance, for programmes under economic, social and territorial cohesion and for agriculture, which represent the largest budget shares as well as for all external action instruments.  As regards payment appropriations, most of the proposed savings are a consequence of reductions of non-differentiated appropriations and of a proportionate amount corresponding to the cuts on commitment appropriations.  Several remarks on administrative expenditure. Let me start by saying that we are disappointed because the Commission did not make any proposals in the draft budget 2023 to contain the expenditure of heading 7. As a result of the salary increase foreseen for 2022, the ceiling will be broken not only in 2023, but also in the following years. As a solution, the Commission has proposed the use of the flexibility instrument under heading 7, but the Council considers such instruments not to be appropriate for this purpose, as it is to be used for one of unforeseen and other bigger problems the Union may be facing.  Moreover, as I pointed out in my introduction, the EU faces many new challenges, and the Council considers that the little flexibility that exists in the MFF should be reserved to deal with these issues. On this basis, the Council has made the necessary adjustments to avoid the use of the flexibility instrument under heading 7.  As an alternative, the Council suggests reducing the institution’s budget by applying a horizontal approach with an increase of the standard abatement rate. The proposed adjustment corresponds in total to EUR 62.5 million and fully replaces the use of the flexibility instrument. We have not applied this adjustment to the budget of the European Parliament in line with the gentleman’s agreement.  Nevertheless, we expect in the upcoming negotiations also the European Parliament will contribute to stabilising heading 7. This would alleviate the burden on all the others and ensure equal treatment. It’s a shared responsibility for all institutions to exercise self-restraint, especially within the context of high inflation rates.  In particular, we call on the Parliament to reconsider its proposal to increase its establishment plan. Council is of the opinion that the first step to contain the expenditure under heading 7 is to respect stable staffing levels in units which are inevitable in all organisations should be compensated within the existing establishment plans.  Concerning decentralised agencies, we propose to adjust lines for non-salary-related expenditure for those agencies at cruising speed with an increase higher than 2%. However, we have been sensitive to current events and we didn’t propose any adjustments to decentralised agencies that received increases related to the Ukrainian crisis or to COVID response. Agencies institutes of phasing in or with new tasks are not adjusted.  Several remarks on special instruments. The Council proposes to maintain the appropriations entered in the draft budget 2023 for the solidarity and emergency aid reserve, the European globalisation adjustment fund and the Brexit adjustment reserve. However, as already said, the Council proposes not to use the flexibility instrument under heading 7.  It’s also worth noting that four Council statements are attached to our position. One concerning sufficient payment appropriations in the area of agriculture and cohesion. One on various elements not accounted for when establishing the Council’s position. One on Article 241 of the Treaty on the Functioning of the EU as regards the automatic salary update and one of the European Parliament’s own section of the budget. The Council will reassess its position once the Commission presents all the missing elements in its letter of amendments to the draft budget, which is expected at the beginning of October.  Honourable Members, let me conclude by saying that today’s debate I hope will mark the beginning of a series of constructive and open exchanges, which will allow us to reach a balanced and meaningful compromise on the budget for 2023. Without deviating from our common goals, we need smart spending and we will have to prioritise and demonstrate our strong commitment to Europe.  It’s time for the budget authority to make tough choices with the limited resources at hand and the increasing needs. I am convinced that we will be able to find a common position within the agreed time frame.