The Multi-annual Financial Framework 2014-2020

MFF 2014-20

© European Commission 11

The Multi-annual Financial Framework 2014-2020

A budget for Europe 2020

Janusz Lewandowski Commissioner for Budget and Financial Programming of the European Commission

MFF 2014-20


Challenges• Lisbon Treaty : more responsibilities

• Connect Europe better

• Unstable neighborhood

• Austerity climate

• Financial crisis interventions

• Response to natural disasters

MORE EUROPEFOR THE SAME MONEY!

Responses• European logic fully geared to Europe 2020 strategy

• Modernised budget - output oriented, simplification, conditionality, leveraging investment

• Limited in size, but redesigned - savings in some areas - more to areas that matter - multi-purpose expenditure

• Budgetary rigour, administrative limits

• New legitimacy of traditional policies

EU Budget = policy in numbers

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1. Background on financial frameworks and EU budget

2. Overall volume

3. Overview of expenditure side

4. Own resources and corrections

Overview of the presentation

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History

• The Financial Framework (previously ‘financial perspective’) was created in 1988 to create financial stability and ensure budgetary discipline

• Currently we have the 4th MFF (2007-2013), after the 2 package proposals DELORS I (1988-1992) and DELORS II (1993-1999), and Agenda 2000 (2000-2006)

• Since the Treaty of Lisbon (1-12-2009), the MFF became legally binding through a regulation and cannot just be laid down in an Interinstitutional Agreement (IIA).

• In the Council, the 27 Member States must unanimously adopt a regulation on the MFF with consent of the European Parliament

Why do we need a multi-annual financial framework (MFF)?

MFF 2014-20


• The MFF defines maximum amounts (‘ceilings’) by category of expenditure (‘headings’).

• Any expenditure must have a legal basis.

• Allows predictability of EU expenditure

The MFF provides a 7-year framework for the annual budget It structures the amounts outlined for each EU policy in each

legal basis (e.g. agriculture, structural funds,…)

What is the multi-annual financial framework (MFF)?

MFF 2014-20


0,0

2.000,0

4.000,0

6.000,0

8.000,0

10.000,0

12.000,0

14.000,0

FR

DE

ES IT PL

UK

BE

EL

PT

HU

RO CZ

NL

AT

LT

LU

SE IE DK FI

SK

BG

EE

LV SI

CY

MT

0,0%

1,5%

3,0%

4,5%

6,0%

7,5%

1a. Competitiveness 1b. Cohesion 2. Natural resources3a. Freedom, security, justice 3b. Citizenship 4. The EU as a global partner5. Administration 6. Compensation % GNI

In million € In % GNI

EU funds’ beneficiaries 2009

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Overall figures for 2014-2020 MFF

Commitments€ 1025 Billion

1,05%of GNI

Payments € 972 Billion1,00%of GNI

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What does constant in real terms mean?

MFF Commitments:• Level of 2013 x 7 years

= € 1025 Billion in 2011 prices= 1.05 % of GNI

• Outside the MFF: € 58.5 BN in 2011 prices

MFF Payments:• € 972 Billion = 1.00 % of GNI

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Ambitious, but realistic…

2007-2013 2014-20201. Smart and Inclusive Growth 445,5 490,9 10,2%Of which Competitiveness 77,8 114,9 47,7%Of which infrastructure 12,9 40,0 209,7%Of which cohesion policy 354,8 336,0 -5,3%2. Sustainable Growth: natural resources 421,1 382,9 -9,1%Of which Market related expenditure and direct payments 322,0 281,8 -12,5%3. Security and Citizenship 12,4 18,5 49,9%of which Freedom, Security and Justice 7,6 11,6 53,0%of Citizenship 4,8 6,9 44,9%4. Global Europe 56,8 70,0 23,2%5. Administration (including pensions and European schools) 56,9 62,6 10,1%Of which administrative expenditure of EU institutions 48,4 50,5 4,2%6. Compensations 0,9Total appropriations 993,6 1.025,0 3,2%In % of EU-27 GNI 1,12% 1,05%

COMPARISON MFF 2007-13/2014-20EUR billion in 2011 prices

Difference (in %)

MFF 2014-20


Decreasing payment share

0,85%

0,90%

0,95%

1,00%

1,05%

1,10%

1,15%

1,20%

1,25%

% of EU GNI

'93-'99 average 1.18%

'00-'06 average 1.06% '07-'13 average 1.06%'93-'99 average1.06%

'00-'06 average0.94%

1.27% of GNP ≡ 1.24% of GNI excl. FISIMfrom 1.20% to 1.27% of GNP

1.23% of GNI incl. FISIM

Own Resources ceiling

Payment ceiling of Financial Framework('14-'20 COM proposal)

Payments actuallyexecuted/appropriations

'14-'20 average 1.00%

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Development of CAP and cohesion share in the budget between 2013 and 2020

20%

25%

30%

35%

40%

45%

2013 2014 2015 2016 2017 2018 2019 2020

Common agricultural policy Cohesion policy

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Despite restraint - significant re-distribution in key policy areas

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

2007-2013 54,9 9,1 12,9 11,5 58,9

2014-2020 80,0 15,2 50,0 18,5 70,0

Research and innovation

Education and culture

Infrastructure funding

Security and citizenship

Global Europe

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Connecting Europe

• Energy, transport and digital networks

• Cross-border multi-country investments to the benefit of internal market

• Strong co-ordination with cohesion policy

• Proposed use of EU project bonds

Connecting Europe Facility 40 EUR billion

( + 10 EUR billion earmarked under Cohesion Fund)

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Cohesion policy proposal

EUR billion2011 prices

Cohesion Fund* 68.7

Less developed regions 162.6

Transition regions 39.0

More developed regions 53.1

Cooperation 11.7

Extra allocation for outermost and northern regions 0.9

Total ** 336.0

Multiannual Financial Framework 2014-2020

*Cohesion Fund will earmark 10 billion EUR for the new Connecting Europe Facility

** ESF minimum share: 25%

• Three categories of regions – Less developed regions (GDP per capita

< 75% of EU average)– Transition regions (GDP per capita

between 75% and 90%)– More developed regions (GDP per capita

> 90%)

• Cohesion Fund for Member States with GNI per capita <90%

• Territorial cooperation

• Concentration on poorer and weakest regions

• Stronger conditionality

• Thematic concentration

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• Declining share in the EU budget until 2020

• Greening of CAP - direct aid 30 % linked to environment measures

• Progressive convergence towards EU average:

– Close 33% of the gap with 90% of EU average– Financed by all Member States above the average

• Market measures: Emergency Mechanism

• European Globalisation Fund to help farmers adapt to globalisation

Agriculture

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Change of Direct Payments between 2013 and 2020

€/ha 2013 €/ha 2020 Change

Highest increase of all Member States

87 144 66%

Highest reduction of all Member States

462 431 -7%

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• Budget under restraint

– Staff reduction up to 5%

– Efficiency gains (increase working hours to 40 a week)

– Reviewing certain benefits in line with similar trends in Member States

• Administrative expenditure discipline for all EU institutions

Administrative expenditure*

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• Commission proposal :– End statistical VAT own resource as of 2014– Introduce 2 new own resources

• Financial Transaction Tax• VAT resource

– Radically simplify the system of corrections

• In comparison with current system – Simpler– Fairer– More transparent

A new own resources system

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New structure of own resources

Share of Own Resources Types in Total Own Resources Payments

29%

78%

40%

0%

61%

0%

56%

12%

60%

10%

44%

10%

0%

20%

40%

60%

80%

100%

1978 1988 2013 2020

Traditional own resources + new OR

GNI resource (1978 MS Financial Contributions)

VAT resource

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• Commission proposal – Proposal for a Council Directive on FTT adopted

on 27/9/2011 complemented by proposals in the area of own resources.

– Financial transaction tax (FTT) to be introduced on 1/1/2014.

– Applicable tax rates defined in the Directive. – The revenue arising from the FTT can be wholly or

partly used as own resource for the EU budget.

EU taxation of financial sector

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• Advantages of the FTT– Ensure that financial institutions make a fair contribution to covering

the costs of the recent crisis.– Ensure even taxation of the sector vis-à-vis other sectors.– Disincentive for overly risky transactions and complement regulatory

measures.– Avoid fragmentation in the internal market for financial services. – FTT more efficient at EU than at national level.– Support in European Parliament, national parliaments, NGOs and

public at large (Eurobarometer: 61% in favour and 50% or more in 20 Member States)

As a new revenue stream the FTT will contribute to budgetary consolidation of Member States by reducing their contributions to the EU budget. All MS will benefit in line with their GNI.

EU taxation of financial sector

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• Commission proposal– Maximum rate in OR decision: 2%– New VAT resource from 1/1/2018 at the latest. Effective rate: 1 %

• Advantages– Link EU VAT policy and EU budget– Part of wider revision of VAT systems: fight against VAT fraud and

reinforce harmonisation of VAT systems

Combining the 2 new OR – Critical mass to reduce contributions to EU budget– Ensures fair distribution of impact on Member States – Link to EU policies

VAT

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• Commission proposal

– Replace all corrections mechanisms by a system of fixed annual lump sums for 2014-2020

– Based on Fontainebleau principle:"any member State sustaining a budgetary burden which is excessive in relation to its

relative prosperity may benefit from a correction at the appropriate time."

• Advantages

– Fairness - equal treatment of the Member States

– Simplicity and transparency

– Lump-sum correction mechanism to correspond to MFF duration

– Avoids perverse incentives for expenditure

Correction mechanisms

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Correction mechanisms

Average annual lumpsum

2014-2020

GROSS AMOUNT

DE 2500NL 1050SE 350UK 3600

TOTAL 7500

(in million of euro / in current

prices)

LUMPSUMS ADJUSTED FOR RELATIVE PROSPERITY

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• Timing of negotiations:

– 2011: Preparatory work under PL presidency

– June 2012 (DK pres) : Council level

– December 2012 (CY pres): Agreement on new MFF regulation between European Parliament and Council

– 2013: Adoption by co-decision of new legal bases

Abolish VAT-based own resourceWay ahead

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Thank You

Multiannual Financial Framework

The Multi-annual Financial Framework 2014-2020

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