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M as Multiannual Financial Framework


The Multiannual Financial Framework

The Multiannual Financial Framework (MFF) is the European Union’s long-term budget which sets the limits for EU spending – as a whole and also for different areas of activity – over a period of usually seven years. The MFF has been established for different purposes: aligning EU spending with its political priorities; ensuring EU budgetary discipline, making adoption of the annual EU budget easier, and adding predictability to EU finances. Its long-term approach helps to make the EU’s policies (such as Common Agricultural Policy, Cohesion Policy, etc) and programmes (such as Erasmus+, LIFE, Creative Europe, etc.) more effective.

The MFF breaks EU expenditure down into broad categories – ‘headings’ – which correspond to the EU’s priorities and areas of action. For each year covered by the MFF there are fixed limits of expenditure, or ‘ceilings’. The purpose of these limits is two-fold: to manage the overall size of the EU budget, and to protect the sums foreseen for the various areas of action which reflect the EU’s long-term priorities.

In fact, the EU’s annual budgets are always established within the MFF limits. In practice, the commitments and payments are usually budgeted below the respective MFF ceilings. The difference, or ‘margin’, between the ceilings and the budgeted amounts provides room for maneuver in case of unforeseen needs – such as crises and emergencies – as well as changing circumstances.

The MFF 2021-2027: the Commission’s proposal

As the current MFF covers the period 2014-2020, on 2 May 2018 the European Commission adopted its MFF package proposal for the next MFF 2021-2027. It consisted in particular of proposals on both expenditure (MFF regulation) and revenue (own resources decision).

The Commission’s proposal for the period 2021-2027 foresees:

  • €1,135 billion in commitments (in 2018 prices) – which represents 1.11% of the gross national income (GNI) of the EU27 Member States (the UK is not included);
  • €1,105 billion in payments (in 2018 prices) – which represents 1.08% of the GNI of the EU27.

Regarding expenditure, key elements of the Commission proposals included:

  • increased funding for areas such as digital transition, young people, external border management, migration and asylum, research and innovation, security and external action;
  • a reduction for the Common Agricultural Policy (CAP);
  • a reduction in cohesion spending but an increased role for cohesion policy in supporting economic reforms and the long-term integration of migrants;
  • a new mechanism to protect the EU budget from financial risks linked to generalised deficiencies regarding the rule of law in the member states.

Regarding EU revenues, the Commission proposed, among other things:

  • phasing out of all rebates – the money that certain Member States can claim back from their contributions to the EU budget;
  • reducing the amount Member States keep to cover costs of collecting customs revenues – from 20% to 10%:
  • simplifying the current value-added tax (VAT) own resource;
  • introducing new sources of revenue – linked to the EU emissions trading system, the amount of non-recycled plastic packaging waste in each Member State, and the possible common consolidated corporate tax base.

Thus, the Commission proposed to reduce the number of programmes (such as Erasmus+, COSME, LIFE, etc.) by more than a third – from 58 to 37 – bringing fragmented funding sources together into newly integrated programmes and streamlining the use of financial instruments.

The Commission MFF’s proposal will be used as a basis for negotiations with the Council and the European Parliament to conclude the decision-making process, expected for the end of the current year or the beginning of 2020. The elections of the new European Parliament and the consequent constitution of the new Commission will play a key role in this sense.