EU budget 2014-2020

The European Commission launched its new Communication 'The Multiannual Financial Framework: The Proposals on External Action Instruments' on 7 December 2011.

The Communication outlines the Commission’s proposal for EU spending on EU external action and for the external action instruments for the new Multiannual Financial Framework (MFF), for the period 2014-2020, including the Development Cooperation Instrument (DCI).

The core principle of the proposal is a more differentiated approach to partnerships and aid allocation driven by the country context, and through different forms of cooperation such as blending grants and loans from international financial institutions, including the European Investment Bank. This had already been outlined in the European Commission's Agenda for Change Communication launched in October 2011.

The Communication includes a list of 19 countries to which the EU will stop its bilateral aid but which will remain eligible for thematic and regional cooperation programmes. In addition, the EU will engage in new types of partnership with these countries, in particular through the Partnership Instrument.

The Communication also proposed increased flexibility of the instruments in order to further increase the EU’s capacity to respond to unforeseen events and a very close

This follows the Communication on the next EU Multiannual Financial Framework launched on on 29 June which contained the Commission’s proposal on the structure and priorities for the EU budget from 2014 to 2020 and proposed an increase in external spending from €56 billion to €70 billion.

Bond and CONCORD broadly welcomes the new European Commission proposal, but an over focus on economic growth should not threaten aid to the world’s poorest and support to social sectors such as health and education.

Read CONCORD's press release.

What is Bond doing?

The Bond European Policy Group is leading Bond work on the MFF, working closely with CONCORD to target the European Commission, the European Parliament and the member states. Bond members had an initial planning meeting on 5 July with presentations by Mikaela Gavas from ODI and Dave Smith from DFID. Bond is working with CONCORD to prepare a comprehensive position to respond to the EC Communication. If you would like to get involved please contact Romina Vegro.

What is the Multiannual Financial Framework?

The Multiannual Financial Framework (MFF) constitutes the major overhaul of the EU budget, negotiated at seven-year intervals. For each programming period, the MFF establishes the maximum amount and the composition of EU expenditure. It imposes a dual ceiling on expenditure: one for total expenditure and one for each category of expenditure.

EU expenditure is currently defined under five headings:

Sustainable Growth - this part of the budget is subdivided into (a) Competitiveness for Growth and Employment and (b) Cohesion for Growth and Employment - 44.4% of total expenditure
Preservation and Management of Natural Resources (this includes the Common Agricultural Policy, Fisheries Policy and related areas) - 42.7% of total expenditure
Citizenship, freedom, security and justice - 1.2% of total expenditure
The EU as a global player - 5.7% of total expenditure
Administration - 5.8% of total expenditure

In the present MFF, Official development assistance (ODA) is included under Heading 4. The European Development Fund (EDF) that constitutes one third of European Commission’s ODA and covers the African, Caribbean and Pacific countries (ACP) is not currently included in the MFF. The possible integration of the EDF in the EU Budget (so called EDF budgetisation) will also be part of the debate on the future MFF.

Timeline and decision making process

Following the release of the European Commission's Communication on the MFF, the Council and the European Parliament will start discussing the proposal and negotiating an agreement. The process should draw to a close by the end of 2012 for the MFF to be implemented from 1 January 2014. The MFF will be adopted unanimously by the Council after receiving consent by the European Parliament, the Parliament’s decision will be taken by plenary vote.

Key issues

The discussion on the next MFF will take place at three different levels:

The first big question will be around the level of the member states’ contribution to the EU Budget. The own resources ceiling for the current Financial Perspectives is set at 1.24% of GNI. It is likely that most member states will want to lower the percentage significantly with the risk that the EU might not have enough resources to deliver on its commitments, including development ones.
The second level of discussion will be around EU priorities and how to distribute resources among the different headings.
The third level will be on the way the expenditure for external actions is managed and about the financial instruments that will be put in place.

The main political priorities for the next MFF are likely to include sustainable growth and jobs within the EU, climate and energy, the Common Agricultural Policy (CAP) reform and the role of the EU in the world.

From a development perspective the MFF negotiations are a crucial opportunity to influence the discussion around the amount of resources that will be available for development. We would want to look at the percentage of the total budget allocated to Heading 4 and within that at the amount allocated to development, as well as quantity and quality of EC aid and the possibility of using freed up CAP funds for development.

Another key point relates to the coherence between different elements of expenditure in the EU’s budget to ensure that expenditures in one category (e.g. CAP or fisheries) does not undermine expenditure in another category (e.g. development) and to climate change financing and the development, security and foreign policy nexus. Finally we would want to influence the discussion around the development financial instruments that will emerge from the MFF negotiations.