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Mid-term review of the Multiannual Financial Framework

Communication from the President of the European Commission on the Mid-Term Review of the Multiannual Financial Framework, 07/02/2024

Last year, the Commission submitted a request for an additional budget (see Link n°104) to finance, among other things, aid to Ukraine and internal and external action on migration. The 27 Member States accepted a large part (80%) of the Commission’s very modest proposal, in particular to provide aid to Ukraine, at a time when the United States seems to have failed to do so for the time being. These additional funds, apart from their weakness, are provided without being accompanied by an increase in the human resources budget. This is all the more worrying given that the Commission gave up €2.5 billion of its human resources budget at the start of its mandate. This time it asked for an additional €1.9 billion, which it did not receive. The Commission has made no comment on this (see our President’s press release).

Dear colleagues,

Today the European Parliament, the Council and the Commission negotiation teams reached a provisional agreement on the first ever revision of the Multiannual Financial Framework to increase its financial capacity. This follows the extraordinary European Council of last week, where the 27 Heads of State and Government unanimously reaffirmed Europe’s unwavering commitment to stand with Ukraine and to support the most urgent priorities the Commission presented in June.

I am profoundly pleased that the priorities identified by the Commission and 80% of the requested funding are covered by the agreement. The revision that we proposed and that is now provisionally endorsed by the co-legislators will equip the EU budget with the necessary means to continue delivering on our priorities for Europe and for our partners. This is a truly remarkable achievement. One that has required extensive negotiations and, at times, difficult decisions. One that would not have been possible without your hard work, unparalleled dedication, and tireless efforts. One that you ought to be extremely proud of, just like we are extremely proud of your achievement. 

The revised budget now allows us to put in place a new Ukraine facility with an overall capacity of €50 billion for grants, loans and guarantees. This will, in turn, allow us to effectively support Ukraine’s immediate needs, recovery and modernisation on its path towards the EU in the next 4 four years. The revised budget will also provide us with an additional €9.6 billion to reinforce our policies and our actions on the internal and external dimensions of migration, and to help our partners in the Western Balkans, the southern neighborhood and beyond. Separately, the new Strategic Technologies for Europe Platform (STEP) will help secure the EU’s long-term competitiveness on critical technologies with an estimated investment impact of up to €50bn across the EU through the targeted and effective mobilisation of key existing programs. Lastly, the revised budget further reinforces our Union’s capacity to help Member States in their response to natural disasters, and to deploy humanitarian assistance where it is most needed around the world.

Thank you again sincerely for your excellent work.

Best regards,

Ursula VON DER LEYEN
President of the European Commission

See this article in the Link n°106

2024 budget : Largely insufficient agreement

Largely insufficient agreement and mid-term review of Multiannual Financial Framework (MFF) still not adopted

On 10 November, the European Parliament and the Council adopted the European budget for 2024. This budget will make it possible to respond in part to the more urgent needs of the European Union and its neighbours, as well as to the consequences of the crisis in the Middle East. However, the mid-term review of the MFF is urgently needed and the outlook for the coming years remains bleak, especially for heading 7, which was cut at the beginning of the Commission’s mandate on its own proposal.

We are delighted that the 2024 budget was approved during a conciliation procedure between the European Parliament and the Council. For 2020, the agreement provides for €189.4 billion in commitments and €142.6 billion in payments. This will allow the budget to continue to support the recovery of the European economy through its various programmes, to finance needs arising from geopolitical tensions, notably in Ukraine and the Middle East, and to ensure the functioning of the European institutions. 

However, this budget remains insufficient to meet the financial needs of the European Union for three main reasons.

First, it does not allow our institutions to function properly in the face of geopolitical crises. The budgetary authority has taken a restrictive approach in line with the Council’s position, leaving the EEAS underfunded by €114 million without additional staff, and the budgetary situation in 2024 is likely to be complicated.

Second, the revision of the multiannual financial framework proposed by the Commission in June 2023 has still not been adopted. These new resources are needed to address urgent needs that cannot be met within the ceilings of the current MFF. In particular, the EU needs to be given the resources to deal with the consequences of Russian aggression in Ukraine, migratory pressures, responses to natural disasters and the need for critical technologies to guarantee its strategic autonomy.  

This also means that Heading 7 (Administration), for which an additional allocation of 1.9 billion was foreseen, is likely to exceed the financial ceiling as a result of the automatic application of the method. This amount is necessary because 2.5 billion was cut at the beginning of the Commission’s mandate.  This withdrawal deprived it of any room for manoeuvre to deal with new tasks, in a context of inflation. As a result, additional budgetary resources will be sought through the planned sale of the Commission’s 23 buildings.

Finally, the budgetary outlook beyond 2024 remains very worrying. The European Commission will have to make interest payments on the joint loan contracted with the financial markets to finance the Recovery and Resilience Plan (Next Generation EU). The special instruments have already been used to the maximum and the remaining margins are very small, around less than €1bn.  Given the rise in interest rates and the relative reluctance of Member States to increase public debt, the European budget for 2025 will therefore be an austerity budget, which could lead to cuts in all areas, including administrative expenditure.

U4U insists that the Commission and the European Parliament fight to ensure that the very modest proposal for the revision of the multiannual financial framework presented by the Commission in June 2023 is adopted without any cuts.

See this article in Link N°104

Mid-term review of the multi-annual budget: an increase, but still insufficient

We are counting on the European Parliament to ensure that this proposal is swiftly adopted

The Commission has shown budgetary realism and courage in its proposal to revise the multiannual financial framework with the aim of increasing the existing EU budget by several tens of billions of euros. These increases, which we have been calling for since the first day of the Commission’s mandate, concern firstly budgetary support for Ukraine to meet its immediate needs and to kick-start its reconstruction (€50 billion). Secondly, the protection of external borders (€15 billion), which in reality is aid to neighbouring countries to keep or take back migrants. Finally, financial support of €10 billion in the form of guarantees will be earmarked for the creation of the STEP (Strategic Technologies for Europe Platform) aimed at subsidising critical industries and technologies in order to reduce the EU’s dependence on China.

To finance these proposals, the Commission has put new resources of its own  on the table to make the European budget somewhat more independent of Member States’ financial contributions through the creation of new European taxes, notably a tax on imported carbon emissions and a tax on multinational companies. The revenue from these taxes will go directly into the European budget.  All that awaits now is for the Council to give its unanimous approval.

Overall, we support the Commission’s proposal to increase both the volume of its expenditure and its  own resources. However, we feel that this is still insufficient to meet structural investment needs, in particular to finance the European Green Pact, which might require a second recovery plan financed by issuing common debt, following the example of the Next Generation EU plan adopted as a matter of urgency during the pandemic crisis.  

As far as operating expenditure is concerned, the Commission is proposing to increase the ceiling for Heading 7 by €1.9 billion, essentially to cope with the increased costs associated with the new tasks entrusted to the European Union and the rising energy prices and high inflation.  The Commission is seeking 600 additional staff posts (of which +100 from as early as 2024). Moreover, if we include the other institutions and the needs linked to cyber-security, we reach an additional 885 posts between now and 2027. As a reminder, at the start of its mandate the Commission had previously decided to reduce the EU’s HR operating budget by €2.5 billion.

Even if these new budgetary requests are granted,  the European administration’s resources will nonetheless remain under pressure. For the 2024 budget, it will be possible to cover needs through the special instrument (SMI). However, the successive budgets up to 2027 will still not be sufficient to cover operating expenditure, i.e. salaries, pensions, upkeep of buildings and so on. There  is high volatility in the macroeconomic data, which creates unpredictability in financing  expenditure. Nevertheless, all available forecasts indicate that the volume of credit as approved in December 2020, based on a 2% deflator, is largely insufficient and requires a much greater increase than that proposed by the Commission. If we want a viable budget, we need more flexibility (because 75% of the existing margins have already been used) in order to deal with crises and other unforeseen needs, and an increase in the ceilings for the entire multiannual financial framework, including Heading 7.

The battle for the budget is about defending the European project which necessarily requires a proper financing of its entire European civil service.

We are counting on the European Parliament not only to support the Commission’s demand, but to increase its proposed amount.

29/06/2023

Budget 2024

Our Staff Regulations as they stand enable us to act in favour of all categories of staff: our problem is
budgetary.

We have all already paid the price for the reforms of 2004 and 2014. Some more than others.
These reforms resulted in a significant reduction in direct and indirect pay, as well as savings on
pensions. They have also increased disparities and job insecurity without offering the means to
mitigate these negative impacts. What’s more, the compensatory measures obtained during
the negotiations were cancelled during subsequent reforms.
Budget savings have continued under the current Commission, which has in particular reduced the
amount earmarked for heading 7 (salaries, pensions, European Schools, etc.). The Court of
Auditors’ 2019 report points to the negative effects of the two reforms of the Staff Regulations
on the attractiveness of the civil service: let’s not deprive ourselves of our talent and diversity!
At the last meeting between the trade union organisations and Commissioner Hahn’s cabinet,
assurances were given that the Commission does not intend to accept an opening up of the
Staff Regulations, always accompanied by further cuts. The Commission also intends to ask for
an additional budget, which is necessary to carry out its tasks in the current context, and also
to finance measures that increase staff cohesion by correcting the most glaring disadvantages
of the most precarious categories, while safeguarding the achievements of the civil service:
retirement, method, promotion, etc.
We support this political position by Commissioner Hahn because it is favourable to all staff.

26/01/2023

Budget: The Commission must obtain an increase in the
Community budget to meet the many current challenges

At the start of its mandate, the Commission sacrificed 2.5 billion of its operating budget, having
been unable or unwilling to resist pressure from the Member States.
As a result, it has found itself with no room to manoeuvre in the face of the pressing urgency o f
unforeseeable events.
For example, with a reduced operating budget, the Commission has had to deal with the
management of the recovery plan, the health crisis, the management of the group purchase of
vaccines and the energy crisis – by confronting it with solutions that can only be relevant at
European level. Finally, the war on Europe’s doorstep requires substantial funding to, for example,
take in refugees, help Ukraine and one day rebuild its economy.
In addition to these “multiple crises”, there has been the resurgence of inflation and its
consequences for the management of the “method”. Planned to initiate salary increases of 2%,
given the inflation projections, it has had to allow for increases of 2.5% before the 4.5% increase
in December 2022.
If inflation remains high in 2023 and 2024, the Commission will have to propose additional savings in order to implement the method.
Given the sacrifices already made by staff, it would be preferable to obtain an additional budget to better meet our new obligations and to implement measures that will increase staff cohesion.
To achieve this, the European Parliament and public opinion must be informed of what is really at
stake in order to obtain this additional budget.

We need to act quickly.

19/11/2022

Budget 2023

EU draft general budget 2023

The declaration of the Common Front of Commission trade unions against a new reform of the
Staff Regulations and in favour of an increase in the Union’s budget
On 13 July, the 27 Member States published a brief joint declaration
e x p r e s s i n g concern about the state of Europe’s
public finances. At issue: the very high inflation that is eating away at the EU’s multiannual
financial framework, which came into force in 2021 and is scheduled to run until 2027.
The Member States are asking the Commission to provide them with an updated estimate of
the budget revenue expected for 2023, and to contain its administrative expenditure. The
Commission is therefore invited to present, by the end of September 2022, any proposal that
w o u l d reduce administrative expenditure. Among other things, they are
calling for changes to the system for paying civil servants, ending automatic indexation to inflation
in this kind of exceptional situation.
This is a challenge to our Method for adjusting salaries, which could lead to a reopening of the
Staff Regulations, jeopardise the guarantees obtained during previous reforms of the Staff
Regulations, and even lead to further drastic cuts in our benefits.
At the last meeting between the trade unions and professional organisations and
Commissioner Hahn on 14 June, the latter undertook, at their request, not only that the
Commission would not present a proposal to reform the Staff Regulations, but also that the
Commission would ask for an increase in the budget to meet the challenges ahead.
U4U continues to oppose the reform of the Staff Regulations and calls for an increase in
the budget. U4U calls on the Commission to keep its promises.
Following a joint meeting of the unions, this opposition to any reform of the Staff Regulations was
communicated, also in writing, as a Common Front to Commissioner Hahn in the note below.
This note also calls for an increase in the European budget to meet the many new challenges.

Note to Commissioner Hahn

More info :

Meeting between trade unions and Commissioner Hahn’s cabinet: good news!

On 21 September, the trade union organisations met David Muller, Commissioner Hahn’s Head of Cabinet, at his request.

Following the Declaration of the Budget Committee of the European Council of 13 July on the draft General Budget of the European Union for the financial year 2023 and the inter-union note sent to Commissioner Hahn on the subject (above), the Head of Cabinet wished to inform the unions of the Commissioner’s response to the Member States regarding this Declaration.

At this meeting, we were reaffirmed that :

  • the method will be applied in full in December 2022 and thereafter ;
  • the Commission will not propose a reform of the Staff Regulations and will therefore resist pressure from certain Member States;
  • the Commission intends to ask the European Parliament and the Council for additional budgetary means and human resources in order to meet the current challenges.

Finally, U4U, like other trade unions, stressed the importance of social dialogue.

U4U is calling for a social agreement between the Commission and the trade unions in order to discuss, before decisions are taken, any savings to be made, as well as measures to promote social cohesion among staff, in particular for those in precarious categories and colleagues from the Grand Duchy of Luxembourg, among others.

2021-2027 financial framework and EU budgets

MFF: Trade Unions meet Commissioner Hahn  (Jan 2021)

Update on the MFF at 16/11/2020   MFF & other financial instruments  

Viewpoint: Cornerstone calculations, the EU’s response to the COVID crisis, or getting it right

MFF: Macroeconomic legislative framework for a stronger impact on Europe’s real economy and greater transparency in decision-making and democratic accountability (draft report 11/03/2021)

GRASPE Conference: EU budget support for European recovery with Mr Gert Jan Koopman, DG Budg (Oct 2021)

The agreement reached on 20 July at the European Council between the Heads of State and Government on the next Multiannual Financial Framework (MFF) for the period 2021-2027.

During the previous financial programming period (2013-2020), the ceiling set for administrative expenditure was €70.79 billion (Heading V of the MFF) out of a total budget of €1083 billion. It should be noted that this heading (which in the future MFF will become Heading VII) is subdivided into two: €56.74 billion for administrative expenditure and €14.05 billion for pensions and the European Schools. What is the situation now?

During the previous financial programming period (2013-2020), the ceiling set for administrative expenditure was €70.79 billion (Heading V of the MFF) out of a total budget of €1083 billion. It should be noted that this heading (which in the future MFF will become Heading VII) is subdivided into two: €56.74 billion for administrative expenditure and €14.05 billion for pensions and the European Schools. Where do things stand now?

In 2018, the Juncker Commission proposed a budget of €1134.5 billion[2] for the next MFF. This text proposes an allocation of €76.06 billion for Heading VII. The College is proposing a budget of €58.55 billion for administrative expenditure, which is a relatively small increase on the previous MFF. For staff pensions and for the European Schools (ES), the proposed budget amounts to €17.06 billion to meet the Union’s obligations in the area of pensions, with large numbers of staff retiring from the institutions.

The Heads of State’s agreement of 20 July 2020[3] is a clear step backwards compared to the College’s proposal of May 2018. The MFF amounts to €1074.3 billion over 7 years, including €73.00 billion for Heading VII (6.79% of the budget). While the part relating to staff pensions and ES is very slightly down on the European Commission’s proposal (€17.00 billion compared with €17.06 billion in the 2018 proposal), it should be noted that the Union’s administrative expenditure (excluding pensions and ES) is down sharply (-€2.55 billion over 7 years), with an amount set at €56.00 billion instead of the €58.55 billion proposed in 2018, and even down on the period 2013-2020, when the budget for administration was set at €56.74 billion.

As a result, the Member States have decided to make savings of more than 4.5% in the area of administrative expenditure, not counting inflation over fourteen years (between 2013 and 2027), which can be estimated at at least 15%. The latest news is that the German Presidency is even proposing savings of €3 billion in heading 7.

It should be noted that at the same time, the EU budget will fall from €1083 billion for the 2014-2020 period to €1074.3 billion between 2021 and 2027. This represents a slight decrease (-0.9%), which does not bode well in the current period of pandemics and the ensuing recession.

This austerity cure, once again imposed on the European budget by the Union’s Heads of State and Government, despite the Commission’s proposal, will not be without consequences. It is likely to have an impact on the capacity of the European institutions to act, at a time when the Member States are asking more and more of the Union (recovery plan, new programmes, etc.).

The institutions will have to compensate for the €2.5 billion in savings (or even €3 billion) with measures that are not yet known to staff.

Furthermore, the reduction in the share of subsidies in the recovery plan does not bode well for combating the economic crisis either. It should also be noted that no provision has been made for human resources within the framework of the recovery plan, even though the Commission will be largely responsible for its implementation.

U4U calls on the Commission :

  • not to allow a reduction in the Union’s budget for the next financing period ;
  • not to allow a reduction in Heading VII of the EU budget;
  • not to carry out any new reform of the Staff Regulations which would reduce the attractiveness of the European civil service and its effectiveness in the long term;
  • to maintain pay levels and protect pensions;
  • to guarantee a sufficient budget to ensure the proper functioning of the European Schools and their development;
  • to negotiate any measures concerning teleworking and buildings, in the context of existing bodies.

Staff representatives meet Commissioner Hahn

The Commissioner responsible for human resources and the budget very recently wished to meet all the chairmen of the Commission’s staff committees as well as all the chairmen of the 5 trade unions representing the Commission (Alliance, USF, G-2004, FFPE and U4U/RS).

The President of U4U began by pointing out that he shared the culture of compromise mentioned by the Commissioner: the interests of staff can only coincide with those of the institution. This culture of compromise must be nurtured by both parties, as the interests of one cannot go without the interests of the other.

For U4U, the main issue, which will dominate all others in 2020, is that of the Union’s budget. If not the amount defended by the European Parliament (1.3% of the Union’s GDP), then at least the amount proposed by the Juncker Commission (1.11%). The budget envisaged, for example by the Finnish Presidency (between 1.03% and 1.08%), is not sufficient to safeguard the civil service’s ability to act and meet our political objectives. We also need to provide the European project with the means to implement the actions financed in conjunction with other financial instruments and bodies, and within this framework, guarantee the Commission’s capacity to act and allow democratic control by the European Parliament.

In this context, social dialogue within the Commission must be intensified. The new structure of the Commission presented by Ursula von der Leyen seems complex (cf. Graspe 37) and deserves to be explained further, major restructuring is underway and must involve the social partners, and work is underway on staff issues, as attested by the speeches of the other staff representatives.

As the Commissioner who asked us the question pointed out, our main fear concerns the state of European integration. Although President Juncker was right when he said that his Commission was the Commission of the last chance, the worst was narrowly avoided, but the political situation has not improved for all that. We must therefore mobilise.

Jan 2020

EU and eurozone budget 2019

With Brexit at the top of the agenda, the completion of the Banking Union and the eurozone budget are being sidelined, with consequences that are not trivial…..

The European Council on 18 and 19 October 2018 will be devoted to the Brexit as well as to migration and European security issues. This should not blind us to the fact that, despite the urgency, the last European Council (June 2018) did no more than record the disagreements between the finance ministers on completing the Banking Union and confirmed the Franco-German failure on the eurozone budget, which is necessary for it to function properly.

This is a decisive issue for the well-being of the Union’s citizens and against the imbalances and inequalities accumulated after the crisis. The technical nature of the debate on monetary union must not be used as a pretext for excluding this issue from democratic debate.

An important step was taken in 2014 with the Europeanisation of banking supervision and mechanisms for resolving bank failures. But much remains to be done to consolidate the fundamentals of the Banking Union, and hence the Monetary Union, namely the introduction of two instruments of solidarity and risk pooling that have been under discussion for a long time: a credit line “of last resort” in the event that the Bank Resolution Fund replenished by the banks is insufficient, and the “European Deposit Insurance Scheme” covering individuals and businesses reducing the risk to savers in the event of a crisis.

This lack of progress is the result of a fundamental divergence, with Germany, the Netherlands and other “northern” countries opposing this mutualisation before a significant reduction in risk has taken place, even though this reduction is already well underway, according to the ECB itself. What’s more, the extra confidence that such pooling would generate would speed up the reduction of bad debts, reduce the risk of a crisis spilling over from one country to another and act as a powerful stabiliser for the system.

Nor did the June European Council support the suggestion of a proper eurozone budget, even in the minimal form of the Merkel/Macron Meseberg declaration, which envisaged an amount too small to be macro-economically significant (according to the Chancellor “at the lower end of the range of double-digit billions” over seven years) and for which strategic decisions would be taken by “the eurozone countries”, i.e. the collective of finance ministers. This is a setback for President Macron, who suggested in his Sorbonne speech that governance should be based on “a common minister and rigorous parliamentary control”.

The refusal to give the eurozone a substantial budgetary capacity highlights a fundamental inconsistency. The banking system has a public function (payment, savings and credit to the economy and the public sector) whose added value far exceeds financial profitability.

However, resolving a banking crisis involves the European and national authorities in an asymmetrical way. At this stage, only the national authorities have the budgetary autonomy to support social cohesion and economic activities, whereas the banks operate on a transnational scale and the procedures for resolving a banking crisis are decided at European level. The mode of governance towards which the Union continues to move is based on the illusion that the European level will be able to sustainably prevent and manage financial crises in a politically sustainable way without having substantial budgetary autonomy, the use of which is detached from national political contingencies, as the Obama administration was able to do in 2009 with a federal recovery plan of 5 to 6% of GDP, under the sole responsibility of the federal chambers.

It is true that the governments of the eurozone seem willing to strengthen the European Stabilisation Mechanism (ESM), which is a “European” budgetary capacity designed to cushion macroeconomic or financial shocks. But the governance of the ESM is strictly intergovernmental: its financial commitments are ultimately subject to approval by national parliaments. It completely ignores the question of the democratisation of the eurozone, in particular the collective responsibility of the finance ministers for their decisions, which affect all the citizens of the eurozone, whereas each of them only has to assume individual responsibility towards their national parliament.

The result is sub-optimal solutions, to the detriment of deficit countries, as national authorities are reluctant, especially in times of crisis, to consider the impact of their actions on neighbouring countries. The ESM does not replace a Community intervention instrument.

But even cooperative solutions that would seem optimal from the point of view of the financial stability of the eurozone will not reconcile the working classes with European integration, or halt the rise of anti-European movements. To get EMU out of its rut and ensure broad and lasting support for it, we need first and foremost to change the paradigm guiding national and European economic policies and put the fight against inequality back at the centre of priorities. Initially, this might simply involve adopting the recommendations of the IMF or the OECD that Germany and the Netherlands increase their public investment and promote higher pay rises. But this will clearly not be enough to lay the foundations for a Social Union.

Olivier Bodin is an economist, Michael Vincent is an expert in financial regulation and a member of the Observatoire de l’économie of the Fondation Jean-Jaurès. Published on EURACTIV

October 2018