Under new circumstances – The future MFF and the COVID-19 pandemic

• Robert Demendi
• 4. May 2020

The “Multiannual Financial Framework” (MFF), for the period 2021-2027, presented by the European Commission on 2nd May 2018, constitutes the future priorities of the European Union (EU) and thus also the contributions of the Member States.

The traditional policy areas of cohesion policy and the Common Agricultural Policy (CAP) remain at the heart of the MFF proposal, receiving more than 60% of the budget. Nevertheless, their share is expected to decrease compared to the current MFF. Other priorities, such as external border management, the security and defence policy and the “Erasmus+” exchange programme shall also receive greater financial support in the future. In order to finance all of this, savings would have to be made elsewhere and financial resources would have to be reallocated, as with Brexit, the United Kingdom, one of the largest contributors, left the EU. The traditional distributional conflicts between individual policy areas and the Member States, which run along the dividing line of “net contributors” and “net recipients”, mean that the MFF proposed is highly controversial. For example, the contributions, which are calculated on the basis of the gross national product of the EU27, are a controversial issue between the Member States and also between the European Commission and the European Parliament, which also has to agree to the proposed MFF. The proposal of the European Commission (1.11%) is in contrast to that of the European Parliament (1.3%) and the Member States (1.0%-1.3%). These differences between the Member States have so far prevented an agreement in the European Council, as unanimity is required.

The COVID-19 pandemic is reshuffling the cards 

With the appearance of the coronavirus, the political situation changed fundamentally. Both the EU and its Member States are focusing primarily on cushioning the health, social and economic consequences of the pandemic. But medium and long-term consequences are not foreseeable yet. On this basis, the future MFF is under new circumstances. Accordingly, European Commission President Ursula von der Leyen announced a revised MFF for the beginning of May, which will be the “European response to the corona crisis” (European Commission 2020). The coming MFF should serve to initiate a massive investment programme and revive the European economy. Council President Charles Michel also took up the role of the MFF as an instrument for reconstruction. Nevertheless, an agreement by the end of the year is uncertain.

What happens if …?

Without an agreement, many EU programmes will expire and funding gaps will arise. But what option does the EU have to prevent this worst-case scenario? Without an agreement on a future MFF, this year’s budget will be automatically extended for 2021, according to Article 312(4) TFEU. However, not all EU programmes are automatically extended, as their basic acts expire on 31 December 2020, which prevents further funding of the programmes. The European exchange programme “Erasmus+” would be directly affected. However, agricultural direct payments would not expire and would continue to be paid as usual. The European Parliament takes this dilemma into account and called on the European Commission to draw up a “contingency plan” to extend the budget and to prevent the expiry of EU programmes. Whether a “double budget negotiation” will be initiated by the involved actors is currently still unclear.

It remains to be seen how a post-Corona EU budget will help to cope with the consequences of the pandemic. At the same time, challenges such as societal and technological transformation as well as sustainable economic growth must be taken into account in the future MFF. For example, the “European Green Deal” could be at the heart of the announced investment initiative and serve as a “green recovery” programme. In addition, the corona crisis could provide a “window of opportunity” to make the MFF more flexible, crisis-proof and a transformation tool.

References:

[1] European Commission (2020): Remarks by President von der Leyen at the joint press conference with President Michel on the EU response to the coronavirus crisis, [online], Available: https://ec.europa.eu/commission/presscorner/detail/de/statement_20_664, (16.04.2020).