The Multiannual Financial Framework (MFF) is the long-term EU budget framework that translates the political priorities of the Union into financial terms for a period of at least five years (the current MFF and the new proposed MFF 2014-2020 cover a period of seven years). Annual budgets have to comply with the MFF. The financial framework sets the maximum amount of commitment appropriations in the EU budget each year for broad policy areas ("headings") and fixes an overall annual ceiling on payment and commitment appropriations.
The MFF imposes budgetary discipline ensuring that the Union's expenditure develops in a predictable manner within the limits of its own resources. It constitutes a very important multiannual instrument for ensuring that the Union’s policy objectives are adequately promoted in a long term perspective and that there is continuity towards achieving the priorities set for the benefit of the Union as a whole. It also facilitates agreement on the annual EU budget between the two branches of the EU budgetary authority, which are the Council and the European Parliament.
The negotiations on the new MFF were launched with the publication of the European Commission proposal for the new MFF “A Budget for Europe 2020” on 29 June 2011.
The General Affairs Council (GAC) has the responsibility for the conduct of the discussions on the MFF whereas the relevant Council formations are responsible for the work on the legislative proposals relating to specific policies. COREPER has the responsibility for preparing the work of the GAC on this dossier, taking into consideration the work carried out in other relevant Council formations. A Friends of the Presidency Group (MFF) assists COREPER. It works under its direction and reports back to it.
Following the method successfully used in previous negotiations, work in the Council is being conducted through a “Negotiating Box” reflecting the outcome of the debates held in the GAC and outlining the structure of the conclusions of the European Council.
Article 312 of the Treaty for the Functioning of the European Union provides that the MFF is laid down in a Regulation adopted unanimously by the Council after obtaining the consent of the European Parliament, which is given by a majority of its members. This process means that the European Parliament adopts or rejects the whole package without the possibility of any amendments.
A key feature of the Commission’s proposal on the new MFF is the focus on the goals of the Europe 2020 Strategy. A significant increase of the funds for competitiveness is proposed (+52% compared to the current period 2007-2013). In parallel, it is proposed to reduce the funds to the two big traditional policies, the Cohesion Policy (-8,6%) and the Common Agricultural Policy (-11%). It is also proposed that a new mechanism, the Connecting Europe Facility (CEF) is financed with €40 bln to be supplemented by an additional €10 bln from the Cohesion Fund, in order to support projects in the area of Transport, Energy and Digital networks. The new MFF consists of 5 Budget categories as follows:
- Smart and Inclusive Growth (48% / €491 bln of which Competitiveness €114,9 bln, Cohesion Policy €336 bln and CEF €40 bln)
- Sustainable growth: Natural resources (37% /€382,9 bln of which Market related expenditure and direct payments €281,8 bln and Rural Development €89,9 bln)
- Security and Citizenship (1,8% / €18,5 bln)
- Global Europe (6,8% / €70 bln)
- Administration (6,1% / €62,6 bln)
The overall commitment ceiling proposed by the Commission for the 2014-2020 period is €1.025 billion.
The Treaty requires the Union to balance the expenditure and revenue of the budget. Currently, there are three resources for the financing of the EU budget, with the GNI resource providing by far the largest income:
- Traditional own resources (TOR) consisting of duties on imports of products from non-EU states and sugar levies (approx. 15%)
- The statistical value added tax (VAT) resource (approx. 11%)
- The resource based on gross national income (GNI) (approx. 74%).
The Commission has proposed reforming the own resources system in the future, with the introduction of a European VAT resource and a financial transactions tax (FTT), whilst at the same time simplifying the system of rebates and corrections in order to contain the contributions of those Member States that would otherwise face a budgetary burden which is excessive in relation to their relative prosperity.
The negotiations of the Multiannual Financial Framework will be a high priority for the Cyprus Presidency, aiming to take the negotiations further at Council level, in order for it to be brought at the European Council for a final agreement. In this respect, the Cyprus Presidency will work in close cooperation with the President of the European Council. The Presidency will also engage closely with the European Parliament in order to facilitate the adoption of the entire package. The overall goal is a modernized, fair, efficient and solitary EU budget, aiming at financing the priorities of the Union, primarily at creating growth and employment across the Union.
Negotiations will take place in parallel and in a coordinated manner with those on the various EU sectoral policies, laying the ground for the smooth finalisation on relevant discussions connected with the MFF negotiations.
In addition to the General Affairs Councils, an informal meeting of the Ministers for European Affairs will be held in Cyprus on the 30th of August, entirely devoted to the MFF.