What is the Multiannual Financial Framework or MFF?
The Multiannual Financial Framework (MFF) is not the EU budget. The MFF lays out the priorities of EU financial planning, which means it lays out for a seven-year period how much the EU intends to invest in which areas. Thus, above all, it is an expression of the political priorities set.
The annual EU budget plan is adopted in line with the provisions of the MFF. The European Commission then executes the budget plan in cooperation with member states and under the control of the European Parliament.
Why does the EU need a Multiannual Financial Framework (MFF)?
The MFF is designed to help ensure that EU spending is predictable and to ensure budgetary discipline. The seven-year term is also long enough to determine whether the joint measures are effective.
This long-term perspective is also important for potential recipients of EU funds or authorities that are involved in financing projects. The budget authorities of the EU member states also depend on long-term planning.
What form does the consultation process take?
It takes several years before a new MFF is adopted. The process begins when the European Commission presents the package for the MFF. For the period 2021-2027, the Commission originally presented a proposal in May 2018. Alongside the MFF, the package included the draft Own Resources Decision.
The second step is for the General Affairs Council to consider the package. This body is made up of the European affairs ministers of the EU member states. Together they establish which political guidelines the EU should pursue over the term of the next MFF. The priorities thus identified are then passed on to the European Council as a basis for negotiation. In the European Council, the heads of state and government deliberate on the contents of the MFF Regulation, which must then be adopted unanimously.
The next step is for the European Parliament to address the Regulation. It may accept or reject the Regulation, with majority voting, but it may not alter it. The final step is for member states to ratify the MFF, i.e. accept the Regulation in a binding manner.
What does the new MFF look like?
The heads of state and government agreed that in view of the unprecedented crisis, which the EU is suffering through no fault of its own, exceptional efforts were needed to support the European economy.
After four days of discussions in Brussels, they agreed on a MFF worth 1.8 trillion euros. Between 2021 and 2023, 750 billion euros of this sum is to be made available to a recovery fund that is to address the economic consequences of the COVID-19 pandemic. 390 billion euros are to take the form of grants and 360 billion will be provided as loans.
Within the scope of negotiations on the MFF, additional funds were also approved for Germany. 650 million euros are to go to support the eastern German states, and the same sum again will be dedicated to rural development.
How does the recovery fund work?
The grants and guarantees allocated under Next Generation EU recovery plan will be tied to conditions. Cash will be disbursed in instalments and will be made conditional on reforms and on project progress. And there will be a focus on future-proofing: 30 per cent of spending is earmarked for climate-related action and digitalisation.
Ten billion euros, for instance, will be channelled into a Just Transition Fund. The programme is to help regions with traditional economic structures to attain the EU’s climate targets. Research too is to receive more support. A total of five billion euros is to be earmarked for the Horizon Europe scientific programme.
What is special about the new MFF?
The Next Generation EU recovery plan is the pivotal instrument for the EU’s economic recovery, along with the MFF 2021-2027.
For the first time ever the MFF contains an affirmation of commitment to the rule of law and a mechanism to protect the budget. In the case of contraventions, the European Commission is to propose concrete measures, which the Council will then confirm with qualified majority voting.
What priorities does the MFF set?
The new MFF for the next seven years provides a good foundation for jointly addressing the imperatives for the future. It brings together growth, innovation and the pledge of social cohesion. It also takes into account the long-standing fields of cohesion and agricultural policy.
The priorities laid out in the MFF include research, and stronger European cooperation in the field of migration policy. Security and defence policy too are covered.
Climate change mitigation plays a major part in the programmes of the MFF and the recovery plan. The quota for climate-related expenditure in the EU budget is to be increased from its current level of 20 per cent to 30 per cent. The MFF and recovery plan are also to be consistent with the objectives of the Paris Agreement on climate change, and specifically with the EU’s goal of achieving climate neutrality by 2050. It is also to help achieve the EU’s new climate target for 2030, which is to be stipulated before the end of the year.
Where do we go from here?
Individual legislative acts now need to be negotiated by the Council, and, most importantly, the negotiations with the European Parliament must take place. National parliaments too must approve the own resources decision, which is the basis for the unique architecture of the recovery fund. It is important that the funds be disbursed as swiftly as possible.