What is the EU Long-Term Budget?

The EU Long-Term Budget helps the EU to plan its money.
It is a plan for the next 7 years.
The plan will last from 2021 to 2027.
It plans what money is to be spent on.

The EU Long-Term Budget is also called the Multi-Annual Financial Framework or MFF for short.
The Long-Term Budget makes it easy to understand the top priorities for the EU.
The Long-Term Budget is not the same as the EU annual budget. It is important not to mix them up.
The EU annual budget is decided every year.

An annual budget is the way governments divide up the money they spend on different things each year.
But the EU annual budget must take into account the EU Long-Term Budget.
The European Commission is responsible for the EU annual budget.
The EU member states help with this.
And the European Parliament too.

Politicians work in the European Parliament.
The EU citizens decide which politicians work there.
They decide by voting for them.
These politicians can then vote on EU decisions in the European Parliament.

Why does the EU need a Long-Term Budget?

There is a special reason for the EU Long-Term Budget.
It is important that the EU knows in advance how much money it can spend.
This helps the EU to plan its spending better.
It also helps the EU to keep to its annual budget.
This is called budgetary discipline.
This means making sure that money is spent in a sensible way.
It also means keeping to agreed spending limits.

It is a good idea to plan the EU Long-Term Budget over 7 years.
Because it helps the EU to check that it has met the targets from the EU Long-Term Budget.
It also helps the EU to see if the programmes have been successful.
The EU supports many important things by giving money.

For example, it supports the fishing industry in the EU member states.
The money is given out over this 7 year period.
This helps people to plan better.
It also helps government agencies.
They divide up the money among the different projects.

Many government agencies can support projects with money from the EU.
The money is also called “funding”.
Research projects are a good example.
Lots of projects can get funding.
So government agencies need to know how long the money from the EU lasts for.
It lasts for 7 years in the Long-Term Budget.
This helps them to plan how to use the money.

Each member state also has its own annual budget.
The member states need to make their own long-term plans about EU money too.
Because they pay towards the EU’s Long-Term Budget.
But they also get money from the EU.

How does the EU decide on its Long-Term Budget?

It is a long process.
It takes a few years to agree a new EU Long-Term Budget.
Firstly, the European Commission has to choose which programmes to include in the EU Long-Term Budget.
Then everyone will know what the money will be used for in the next 7 years.

The EU Long-Term Budget for 2021 to 2027 was announced in May 2018.
The EU Long-Term Budget includes more than programmes.
It has another part called the Own Resources Decision.
The Own Resources Decision is a decision made by the EU.
Member states have to pay “Own Resources”to the EU.
The Own Resources Decision says how much money the member states have to pay.
The Long-Term Budget also plans how much money EU member states must pay for the Own Resources Decision.

There is still a lot more work to do before the EU Long-Term Budget is finally agreed.
The EU General Affairs Council still has to discuss the programmes in the Long-Term Budget.
The EU General Affairs Council is made up of all the foreign ministers from the different EU member states.
They work together to decide the political guidelines for the EU Long-Term Budget.
Political guidelines are the basic principles of EU policies.
For example, the policies which help to ensure peace.
This is a political guideline.

The European Council can then vote on the recommended priorities.
Priorities in the EU Long-Term Budget include:

  • the programmes
  • the political guidelines

Every single person in the European Council must agree on the contents of the EU Long-Term Budget.
The European Council is made up of all the heads of government of the EU member states.
They all have to agree on the EU Long-Term Budget.
The EU Parliament is only allowed to discuss the EU Long-Term Budget after this.
The EU Parliament then has to vote on it too.
But no one can change the EU Long-Term Budget now.

The EU Parliament must either agree on it or reject it.
Lastly, the EU member states ratify the EU Long-Term Budget.
Ratify means to officially accept an agreement.
So each EU member state must agree to the EU Long-Term Budget.

What does the new EU Long-Term Budget include?

We have never had to face a crisis like COVID-19 before.
This is why all the heads of government of the EU member states are in agreement.
They want the economy to get special support.
They talked about this for 4 days.
They then came to an important decision.

The new EU Long-Term Budget will be very big.
It will be almost 2 thousand billion euro.
When this is written out as a number, it has 12 zeros!
The number looks like this:
2, 000, 000, 000, 000 euro

The plan is to use some of the money to make a Recovery Fund.
The Recovery Fund will have 750 thousand million euro.
A recovery fund is money that is given for a good cause.
The good cause is the recovery of the EU economy.
This is needed because the economies in EU countries have been weakened by the COVID-19 crisis.
390 million euro are planned for supporting the EU member states.
The remaining 360 million are available as credit for member states that have been especially badly affected.

Germany will also get money from the EU Long-Term Budget.
650 million euro are planned to help the eastern part of Germany.
Money will also be given for developing areas in the countryside.

Planning for the EU Long-Term Budget started at the beginning of 2018.
But the plan needed to be changed because of COVID-19.

A new proposal for the EU Long-Term Budget was made on 27 May 2020.
The European Commission proposed that the EU Long-Term Budget should be changed.
It said that the Recovery Fund should be part of the EU Long-Term Budget.
The Recovery Fund is called “Next Generation EU”.

How does the Recovery Fund work?

The money in the Recovery Fund is divided out according to specific rules.
The money goes to support lots of different projects.
The money is paid in instalments.

An instalment is a small amount of money that you pay out from a larger ‘pot’ of money.
You pay these small amounts slowly until the pot is empty.
The projects must make progress.
Their progress decides if they get money.
30% of the Recovery Fund is used for projects that will help in the future.
Examples are projects that will help protect the climate.
And projects that will help develop the growth of digital technology.
Digital technology is used to make life better.
One example is using tablets in schools.

Another 10 thousand million euro will be used for the “Just Transition Fund”.
This is a programme for regions with traditional economic structures.
A traditional economic structure describes companies which are run in an old-fashioned way.
Most of these companies are not very climate friendly.

Traditional economic structures get more financial support.
This is to help them become more climate friendly.
This will also help the EU to meet its climate protection targets.
Money is also given to help scientific research.
5 thousand million euro will be used for a scientific programme.
This scientific programme is called “Horizon Europe”.
Its goal is to provide money for the research.

What is special about the new EU Long-Term Budget?

The Recovery Fund – which is also called “Next Generation EU”– is a very important programme.
The new EU Long-Term Budget for 2021 to 2027 is also a very important programme.
Both programmes are necessary.
They will make sure the economy can recover from the COVID-19 crisis.

It is the first time that all EU member states have to agree to the rule of law.
The rule of law means that all the EU countries must obey the current laws.
The EU can penalise countries that do not obey the laws.
If a country breaks the rule of law, the European Commission suggests the penalty.
The EU Council then has to agree with the penalties that have been suggested.
The EU Council has to take a vote on the penalties.
A majority has to agree to the penalties.

What are the most important points in the EU Long-Term Budget?

It lasts for 7 years.
It is a good way for the EU to share projects to improve things in members states in the future.
The new EU Long-Term Budget will help:

  • the economy to grow
  • people to design more innovations
    • An innovation is a new invention or a new way of developing things.
  • help improve social cohesion across the EU.
  • Social cohesion is when different social groups get on well together.

The new EU Long-Term Budget also focuses on the following areas:

  • Cohesion
    • This aims to help all the EU member states work well together.
    • Some EU countries have strong economies.
    • Some EU countries have weaker economies.
    • When the countries work well together, the strength of their economies is not important.
  • Agricultural policy
    • The agricultural policy decides all the general rules for farming

Other priorities in the EU Long-Term Budget include:

  • Making sure all the EU countries work together to decide immigration policy.
  • Immigration policy decides what happens to immigrants who come from other countries.
  • The defence and security policy
  • This decides things such as protecting the EU member states.
  • Or helping during natural disasters.

Climate protection is very important in the EU Long-Term Budget and the Recovery Fund.
Until now, the EU had planned to spend about 20% of its Long-Term Budget on climate protection.
This new EU Long-Term Budget plans to spend 30% on climate protection.
The climate protection goals in the EU Long-Term Budget are intended to match the goals in the Paris Climate Agreement.

Nearly every country in the world agreed on the Paris Climate Agreement in 2015.
The main goal of the agreement is to reduce global warming.
Industry has changed the world’s climate a lot.
It is getting warmer everywhere.
This can be dangerous for people, animals and plants.

The EU wants to be climate neutral by 2050.
Climate neutral means that the climate stops getting warmer because of humans.
The EU hopes there will soon be an agreement on new climate protection goals.
People want to meet the new goals by 2030.

What will happen next?

Firstly, the European Council needs to discuss and decide all the conditions for the EU Long-Term Budget.
The European Parliament and the European Council will then discuss and decide the conditions together.
The parliaments in the EU member states then need to agree on the “Own Resources.”
EU member states pay contributions to the EU each year.

These contributions are the “Own Resources”.
The “Own Resources”are the most important part of the Recovery Fund.
The money needs to be paid quickly.
This is very important for the European Union.