An analysis of the agreement on the Multiannual Financial Framework 2014-2020

An analysis of the agreement on the Multiannual Financial Framework 2014-2020
Working Paper

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After two and a half years of intense and complicated negotiations, the European Parliament, the Council and the Commission reached an agreement on the much expected Multiannual Financial Framework 2014-2020 (MFF 2014-2020). Though the MFF 2014-2020 focuses on growth and job creation, for the first time in the EU’s history, the overall amount of the MFF will be lower (3.5%) than those in the previous financial period (2007-13). During the past months several governments of Member States, in particular the net contributors, fought hard to reduce the spending ceilings, arguing that national governments had also been forced to approve austerity budgets. Others, together with the European Commission and the European Parliament, considered the EU budget a tool to simulate growth and jobs in Europe’s stagnant economy and argued for a stronger MFF.

Although the Lithuanian Presidency considered the agreement on the MFF 2014-2020 one of its main achievements, the final negotiations did not concern the overall ceiling and the content of the MFF, which had already been agreed at the European Council on 7-8 February 2013. Nevertheless, there were some important modifications which accommodated several of the European Parliament’s demands. The agreement completed the last step in a long negotiation process, which comprised the following phases:

  1. The preparation of the EC’s proposal, from 2007 to 2011. The budgetary negotiation process started with a broad public debate on the EU budget. The so called ‘EU budget review’ followed the EU Council Conclusions of November 2005. Several new ideas came up, aimed at refocusing the EU’s spending priorities and the financing of the EU budget. Some of these ideas (such as the concept of EU added value and a financial transaction tax) were later incorporated by the European Commission in its proposals for the MFF 2014-2020. Moreover, in this pre-negotiation stage several Member States positioned themselves regarding the future EU budget, basically repeating the positions expressed in the previous MFF negotiations.
  2. The presentation phase, from June 2011 to March 2012, in which the European Commission presented and explained its proposals for the MFF 2014-2020 to the Member States, and national delegations expressed their own positions.[1]
  3. The negotiating phase, from March 2012 to January 2013, in which the EU Presidencies and the European Council President tried to narrow the gap between Member States on key issues.[2]
  4. The final stage, which started with the European Council of 7-8 February 2013, at which an agreement on the MFF 2014-2020 was reached by the Member States.[3] The Council and the EP then reached a political agreement on the MFF on 27 June but it took until 19 November 2013 to approve the ceilings at the plenary session of the Parliament. The EP gave its consent only until the contentious issues related to the funding gaps in the 2013 budget could be solved and the budget for 2014 was agreed at the Conciliation Committee on 12 November. The European Parliament, the Council and the Commission signed on 25 November 2013 the inter-institutional agreement (IIA) on budgetary discipline, on cooperation in budgetary matters and sound financial management. On 2 December the Council adopted the regulation laying down the MFF 2014-2020 following the European Parliament’s consent on 19 November.

The formal adoption of the MFF regulation and the IIA allows the Council and the EP to conclude their work on the more or less 70 spending programmes, which have either been concluded or are in the process of being finalised. The legislative act on the revenue side, the Own Resources Decision, must be ratified by the Member States, in accordance with their constitutional requirements once adopted by the Council, after having received the European Parliament’s opinion.

Although the agreement foresees a very tight budgetary framework for the EU and the MFF 2014-2020 will have less resources available than the MFF 2007-2013, it also includes new elements. This confirms the evolutionary character of the EU budget as well as the increasing role of the European Parliament in the financial decision-making process at the EU level. This paper presents the main figures of the agreement and its principal innovative elements, in addition to answering the question: who are the winners and losers from the negotiation process? All figures should be treated with caution because the figures on the MFF represent only the maximum level of EU spending and could be modified by the annual budgetary negotiation –although, according to the final agreement, unspent money in one year could be passed on to the next financial year and should be prioritised for employment measures–.

Mario Kölling
Centre of Political and Constitutional Studies.

Cristina Serrano Leal
PhD, Qualified State Economist.

[1] Mario Kölling & Cristina Serrano Leal (2012), ‘Austerity vs Stimulus: The MFF 2014-20’s Role in Stimulating Economic Growth and Job Creation’, ARI nr 24/2012, Elcano Royal Institute.

[2] Mario Kölling & Cristina Serrano Leal (2012), ‘The negotiation of the Multiannual Financial Framework – Budgeting Europe 2020 or Business as usual?’, ARI nr 68/2012, Elcano Royal Institute.

[3] Mario Kölling & Cristina Serrano Leal (2013), ‘The Multiannual Financial Framework 2014‐20 from a Spanish Perspective: Net Beneficiary or Successful Balancing Act?’, ARI nr 7/2013, Elcano Royal Institute.