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European Parliament and Council negotiators reach compromise agreement on future EU budget

13 November 2020 | Trading

 

Following ten weeks of intense negotiations and 12 trilogues, an EU budget for 2021-2027 moved a step closer to a conclusion. The agreement covers the next Multiannual Financial Framework (MFF 2021-2027), Recovery Fund and new own resources. The compromise will need to be endorsed formally by both institutions, but while agreement in the Parliament may now be secure, it is not sure that there will be a smooth passage in Council.

In the compromise, Parliament obtained €16 billion on top of the package agreed by heads of state or government at their summit in July. €15bn will reinforce flagship programmes to protect citizens from the COVID-19 pandemic, provide opportunities to the next generation, and preserve European values. €1bn will increase flexibility to address future needs and crises.

The summer negotiations of heads of government took a gruelling four-and-a-half days, the new money was not as much as the parliament wished to secure, but with the start of the new funding period fast approaching (1 January 2021) it was urgent to make progress. 

The plan is to fund this increase in large part through new ‘own resources’, that is to say resources that come from the European Union’s revenue rather than national budgets. 

 

New Own Resources

The EP negotiators have devised a roadmap to introduce new Own Resources during the next seven years. The roadmap is incorporated into the ‘Interinstitutional Agreement’, a legally binding text. 

In addition to the plastics-based contribution as of 2021, the roadmap includes an ETS (Emissions Trading System)-based Own Resource (from 2023, possibly linked with a carbon border adjustment mechanism), a digital levy (from 2024), and an FTT-based Own Resource as well as a financial contribution linked to the corporate sector or a new common corporate tax base (from 2026).

 

Orbán threat

Hungarian Prime Minister Viktor Orbán has written to the president of the European Commission threatening to veto any agreement on the budget, because of an agreement reached last week on attaching ‘rule of law conditionality’ on the receipt of any funds.

The compromise agreement on the rule of law reached last week ensures that the conditionality is not just applied when EU funds are misused directly, but also apply to systemic issues like a member state respecting democracy, equality, and respect for human rights including the rights of minorities. There is a specific article that clarifies the scope and lists examples, such as threatening the independence of the judiciary. 

The mechanism can be triggered not only when there is a breach, but also when there is a serious risk that EU funds could finance actions that are in conflict with EU values. 

MEPs were also keen to defend the final beneficiaries who can file a complaint to the Commission via a web platform and who MEPs insisted shouldn’t suffer because of the failings of their government. 

As Hungary is one of the largest beneficiaries of EU funding, it is thought that they will not want to obstruct agreement on the overall budget. 

 

EU Flagship programmes

The parliament’s top priority was to secure an increase for flagship programmes that were at risk of being underfinanced following the European Council’s July 2020 agreement, jeopardizing the EU’s commitments and priorities, notably the Green Deal and the Digital Agenda.

The additional funds will be drawn mainly from amounts corresponding to competition fines (which companies have to pay when they do not comply with EU rules), this is in line with Parliament’s long-standing request that money generated by the European Union should stay in the EU budget.

Thanks to this compromise, the European Parliament has tripled in real terms the envelope for EU4Health, ensured the equivalent of an additional year of financing for Erasmus+ and ensured that research funding keeps increasing.

 

Checking how Next Generation EU funds are spent: Enhancing budgetary scrutiny

Concerning the expenditure of Next Generation EU funds, Parliament secured that the three institutions will meet regularly to assess the implementation of funds. The expenditure will be spent in a transparent manner and Parliament, together with Council, will check any deviation from previously agreed plans.

The recovery instrument (Next Generation EU) is based on an EU treaty article (Art. 122 TFEU) which does not provide for a role for the European Parliament. EP negotiators have also obtained a new procedure, setting up a “constructive dialogue” between Parliament and Council on legal acts linked to the new instrument.

 

Source: EU Reporter