Setting a framework for the next EU financial framework

Posted by

The current EU Multi-Annual Financial Framework, or MFF, lasts for seven years and runs until the end of 2020. Discussions have already begun about the next one.

Can we agree straight away on two problems?

First, seven years is too long, especially when the detail is agreed one or two years before the planning period even starts. EU ministers will find themselves in 2018 and 2019 discussing a framework that might run until the end of 2027. This is at a time when the world faces great uncertainties, and when the EU itself is making great decisions, still unsettled, about its future. 2027 feels like a distant horizon, the very long run. And as Keynes famously remarked, ‘in the long run, we are all dead’.

Secondly, it makes even less sense to have a financial framework cycle which is entirely unrelated to the parliamentary and political cycle of the EU. The current MFF was finally decided at the end of 2013, before the European Parliament elections of 2014, and the appointment later that year of the Juncker Commission. It will expire after the 2019 repeat of the same process. So, the Commissioners and the Parliament inherit a framework designed and approved by their predecessors – and fix one which will bind their successors.

These problems are easy to solve. The elections take place in 2019 and the new Commission starts later the same year, for a five year term. They will inherit a framework which runs for one further year, and could take that year to agree a new five-year framework, running from 2021 to 2025. Their successors repeat the process, and so on ad infinitum.

Adopting that simple solution would mean we could postpone the detailed negotiation until early in 2020. We could use the time till then to have a political discussion about the overall size and shape of future spending, in the context of the 2019 elections. Indeed, those questions might well be at the heart of the political debate, as they are in national elections in all the Member States.


Source: European Commission

Unfortunately, we may not be lucky enough to be offered the logical option. In that case, a different work programme will be required, namely to look at options for the long term. Here, a good guide is the ‘Reflection Paper’ published by the European Commission in June 2017, as an input into the discussion on the future of Europe. It builds on the White Paper on the future of the EU published by Jean-Claude Juncker in March 2017, and is usefully specific about the need to identify EU value-added in any discussion of the EU budget. Figure 1 summarises the argument. The paper says the EU has value-added with respect to public goods with a European dimension and also offers economies of scale. Specifically, the Reflection Paper says this could include

  • ‘Cross-border programmes . . . helping to remove sources of conflict and create new economic opportunities.
  • Transnational infrastructure, such as energy interconnectors . . , digital networks, research infrastructure or tunnels . ..
  • Investments made under cohesion policy in one region or Member State contribute to macroeconomic stability and increase the growth potential of the Union as a whole.
  • Control of the southern or eastern external borders clearly serves to protect the rest of Europe.
  • Aid and investment in partner countries allows the building of more resilient societies.
  • Open competition at EU level to fund science and innovation has increased excellence compared to national funding (eg. higher-impact scientific publications, number and quality of patents) and attracted global talent.
  • Other big projects and key enabling technologies, such as Galileo, Copernicus, ITER3 or high-performance computing can only be financed by pooling resources at EU level because of their very high financing needs.‘

This is not a bad starting point for thinking about the share of the budget devoted to external matters. Certainly, border control should be on the list, alongside better opportunities for legal migration. Research is also a global public good. The bullet on development is weak, however. It is not enough to say that the EU should invest to build resilient societies in partner countries. Development is a ‘shared competence’ in EU parlance, because all Member States have their own development programmes, in addition to those they fund through Brussels (and indeed through the UN in New York, the World Bank in Washington, and many other multilateral institutions). So, what is the comparative advantage of the EU institutions in this area, the Unique Selling Point?

That is a question we have thought about in the European Think Tanks Group, and also one addressed in core EU documents, like the Global Strategy and the European Consensus on Development. Economies of scale in financing are on our list, but also: the political weight of 27 countries acting together; the ability to link diplomacy, defence, trade, and aid; and the reduction in transactions costs achieved by pooling. The EU institutions also offer at least the potential of specialist expertise, for example in infrastructure, or in blending loans and grants through the European Investment Bank. And there is a history of political and institutional partnerships with different parts of the developing world, which facilitate political accountability: the recent AU-EU Summit is an example.

Thus, there is certainly a case for EU external action to feature prominently in the next financial framework – probably more prominently, given the state of the world, than in the present MFF.

However, we think a debate is needed on the purposes and orientations of the external action budget. The framing is provided by the Sustainable Development Goals, which provide a description of the destination to which the EU should contribute, though not necessarily a detailed roadmap. EU policy-making also needs to take account of the wider international debate about development finance, including the discussion in the Development Assistance Committee of the OECD about the definitions of aid. Obviously, decisions about external finance will need to recognise changing geo-politics, particularly the increasing concentration of poverty and humanitarian crises in fragile states with complex problems. And global challenges like climate change will need to be prioritised, as they are in the Global Strategy: climate change is an area where delivering a global public good requires coordinated collective action by all EU Member States, inside their borders and outside.

Last time round, there was a serious effort to simplify instruments, increase flexibility, devote more attention to results rather than spending, and concentrate resources where they were most needed, in least developed countries. There was also a debate about the justification for instruments being extra-budgetary, especially in the case of the European Development Fund. It appears from the Reflection Paper that similar themes will be present this time, specifically to simplify management and increase flexibility. Indeed, there have been proposals for a single external instrument, within the budget.

In the end, the MFF framework is just that, a framework not a formal budget. The annual budget cycle allows for a political debate about the details of spending, within agreed totals. Sometimes, this allows for the creation of new instruments, like the Emergency Trust Fund for Africa; but it can also sometimes propose cuts to treasured programmes, as was evident in the debate just recently about aid funding in the 2018 budget.

For this reason, it is worth remembering that Article 208 of the Treaty of the European Union provides a legislative guarantee of a focus on poverty reduction. It will be important to avoid the external budget being captured by those who wish to ‘instrumentalise’ it for EU domestic purposes, especially controlling unplanned migration, or for security.

* Author: Simon Maxwell, ETTG Chair

Leave a Reply