Talks about the EU’s next multiannual financial framework are due to get serious soon. Here’s how the bloc’s long-term budget works and why the next edition might be the most important yet.
Next week, the European Commission is expected to publish its first major contribution to the looming talks about the EU’s next long-term budget, the multiannual financial framework (MFF).
How much should be spent on EU projects and who should pay what will all need to be decided. Last time, the spending amounted to 1.1% of the EU's gross national income.
It is always difficult to say how big an MFF budget actually is, as you have to qualify whether the figure is given in today’s prices or the prices of the day that the figure was first committed to paper.
That gives political entities like the Commission and pro-spending member state governments the chance to say that the budget has increased compared to the last one, even though its actual purchasing power might be the same or even less.
The 2014-2020 fund ended up being about €1 trillion, while the current pot that has powered spending since 2021 is roughly the same. That trillion has also been complemented by €750 billion in grants made available under the Next Generation EU programme.
Nearly a third of spending under the 2021-2027 period needs to be allocated to climate-related programmes. But what counts as climate-related is largely subjective. Given the current political trajectory, that provision is unlikely to be included in the new spending.
The MFF lasts for seven years, which puts it out of sync with the normal legislative cycle, which lasts five years. The logic behind this is to make sure budgets and spending are not totally in thrall to the political whims and vagaries of the day.
It would also be logistically difficult to hold elections, appoint the Commission and sign off on a new budget all within the same calendar year.
Nevertheless, that has not stopped the Parliament from campaigning in the past to align the cycles with one another to increase the political accountability of the budget talks. A 5+5 budget cycle that essentially lasts 10 years with a mid-term review has also been suggested.
It is unlikely that the current seven year cycle will be changed anytime soon, as anything budgetary related is too contentious to mess with.
MFF talks normally last a long time and are fraught with disagreement, as the 27 member state governments must unanimously agree on the final number and where the cash should be spent.
It is difficult to gauge what mood will prevail among member state governments this time around. Frugality has arguably allowed the likes of China and the United States to eat the EU’s lunch, so a bigger more ambitious budget might be on the cards.
Competitiveness is, after all, the buzzword of the year and in many cases, throwing money at the problem is an effective solution. It will be hard for governments to argue that spending should not evolve to meet the new geopolitical challenges the Union is facing.
The European Parliament will also have its say on the budget. Since the last one was agreed, the political makeup of the institution has shifted to the right and euroscepticism. It is not unlikely then that MEPs will advocate for a smaller budget as a result.
It will be yet another test of the pro-EU forces within the Parliament. Those that want more ambitious spending programmes will need to work together.
This new budget will run all the way up until 2034. Who knows what the EU will look like then, whether there will be new members and what priorities will be top of the agenda. That is why these MFF talks could well be the most crucial yet.
