Negotiations relating to the EU’s Multiannual Financial Framework (MFF 2021-2027) and the Recovery Plan for Europe

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Publication Date 2018-
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Summary:

Overview of the negotiating positions of the European Commission, the European Parliament and the Council of the European Union (+ European Council) on the EU's Multiannual Financial Framework (MFF) for the period 2021-2027 - and later on a Recovery Plan for Europe - as well as related political discussion in search of an agreement.

Further information:

The Multiannual Financial Framework (MFF) sets the maximum level of resources for each of the seven major headings of EU spending for a period of seven years. In addition to a financial plan, it sets the EU’s long-term priorities.

The European Commission presented its position on the MFF 2021-2027 on 2 May 2018, which proposes a multiannual budget amounting to 1.11% EU27 Gross National Income (GNI). In response to this position, a Resolution from the European Parliament adopted in November 2018 argues that such proposal is insufficient and in turn estimates a ceiling amounting to 1.3% EU27 GNI.

The Council of the European Union took time to agree on a common position due to disagreements between Member States on size and other aspects of the MFF. While the European Council regularly touched upon the matter ever since a first discussion took place in February 2018, no specific effort to reach an agreement was developed until late 2019. Ahead of a seemingly important meeting on 17-18 October, the European Commission adopted a Communication highlighting the need for further work to be done by the co-legislators; the European Parliament also adopted a Resolution urging the Council to engage in negotiations to find an interinsitutional agreement.

On 5 December, the presidency of the Council of the European Union presented a so-called 'Negotiating Box' with a proposal amounting to 1.07% of EU27 GNI. The European Council meeting held later in the month did not produce an agreement between national leaders. Member States appeared generally divided between those vowing to shrink the overall multiannual budget, and those who fear such decision would affect provisions on agriculture and cohesion policy.

On 14 February 2020, the President of the European Council presented a revised proposal for discussion, setting the ceiling at 1.074% EU27 GNI.  A special European Council meeting later that month highlighted yet again the cleavage between Member States. Media reported on the difficulties in finding a compromise between those rejecting substantial cuts in certain areas and the so-called 'Frugal Four' defending a stricter line which would not go beyond 1% GNI.

The discussion was substantially affected by the COVID-19 (coronavirus) pandemic. On 27 May 2020, the European Commission tabled a revamped proposal for the MFF 2021-2027 in the framework of its Recovery Plan for Europe. The revised proposal incorporates the impact of an instrument (or fund) for economic recovery denominated Next Generation EU, which would be financed by money borrowed from the markets by the European Commission. The allocation and potential repayment of such funds reinforced the cleavage previously registered between Member States.

Under this new framework, the first round of negotiations between Member States was held at a video conference on 19 June 2020. Ahead of a special European Council summit, national leaders held a series of bilateral meetings to informally assert positions. On 10 July, the President of the European Council tabled a new Negotiation Box concerning the overall Recovery Plan for Europe. Media outlets reported increasing tension over adding rule of law as conditionality for access to budget funds.

An overall agreement concerning the elements of the Recovery Plan (MFF + recovery instrument) was eventually reached in the early hours of 21 July 2020, after national leaders extended the duration of the special summit. The deal includes the Next Generation EU - €390bn in grants and €360bn in loans - which is attached to a revamped MFF for 2021-2027 amounting to €1.074 trillion. The agreement was welcomed by the Commission and Parliament, despite warnings and regret shown over cuts proposed for some programmes and initiatives. A Resolution adopted by the plenary of the European Parliament on 23 July underlined the need for improvement before ratification of the compromise agreed by the European Council.

A phone call was held between the President of the European Commission, the President of the European Parliament and the chair of rotating Council President on 29 July. The aim was to prepare the next steps in the adoption of the Recovery Plan for Europe, namely the interinstitutional negotiations based on the political agreement reached by the European Council and the Resolution subsequently adopted by the Parliament. The first meeting of the trilogue talks was held on 27 August, followed by a second meeting on 7 September. The third round took place on 11 September. The conditionality attached to respecting rule of law became one of the main matters of these negotiations.

Negotiations continued into October and November, with co-legislators stuck on the rule of law matter. By the end of October, the Parliament put forward a so-called breakthrough proposal which aimed at bridging the gap between the two sides, but without immediate success. On 5 November, a political agreement was reached on a proposed rule of law mechanism aimed at safeguarding the EU budget. On 10 November, an informal agreement between the co-legislators was reached on the financial package comprising the MFF and the Recovery Plan for Europe.

On 16 November, Hungarian and Polish representatives refused to endorse the informal agreement reached in the previous week due to the rule of law mechanism. They were later joined by Slovenia in that opposition. The Council of the European Union a discussed the matter on 17 November, followed by a political discussion at the European Council videoconference on 19 November. Following a bilateral meeting on 26 November, Hungary and Poland agreed to stick to their position and called for changes to the rule of law mechanism.

Related Link(s)
Commentary and Analysis
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Swissinfo.ch, 12/11/2020: Poland threatens to veto EU 2021-2027 budget over rule of law condition https://www.swissinfo.ch/eng/poland-threatens-to-veto-eu-2021-2027-budget-over-rule-of-law-condition/46158798
EurActiv. 13/11/2020: Poland and Hungary unite to veto EU budget https://www.euractiv.com/section/politics/news/poland-and-hungary-unite-to-veto-budget/
The Guardian, 16/11/2020: EU faces crisis as Hungary says it will veto seven-year budget https://www.theguardian.com/world/2020/nov/16/eu-hungary-veto-budget-viktor-orban
Associated Press, 18/11/2020: Hungary sticks to veto of EU budget over rule-of-law issue https://apnews.com/article/viktor-orban-poland-summits-immigration-coronavirus-pandemic-2d2504e8fc22f451405b9314d97b0dae
RFE/RL, 18/11/2020: Hungarian PM Orban Accuses EU Of Using Budget To 'Blackmail' Over Immigration https://www.rferl.org/a/hungarian-pm-orban-accuses-eu-of-using-budget-to-blackmail-over-immigration/30956552.html
RFE/RL, 26/11/2020: Hungary, Poland Pledge Mutual Support For EU Budget Veto https://www.rferl.org/a/hungary-poland-pledge-mutual-support-for-eu-budget-veto/30970941.html
Politico, 26/11/2020: Hungary and Poland escalate budget fight over rule of law https://www.politico.eu/article/poland-hungary-budget-democracy-rule-law-orban-morawiecki-merkel/
EurActiv, 26/11/2020: Poland, Hungary propose two-track way out of EU budget deadlock https://www.euractiv.com/section/economy-jobs/news/poland-hungary-propose-two-track-way-out-of-eu-budget-deadlock/
Deutsche Welle, 26/11/2020: Hungary, Poland vow to veto EU COVID recovery fund mechanism https://p.dw.com/p/3ltBY
EUObserver, 26/11/2020: Von der Leyen tells Poland and Hungary to go to court https://euobserver.com/political/150193
Associated Press, 26/11/2020; Hungary, Poland uphold their veto to EU money mechanism https://apnews.com/article/budapest-viktor-orban-poland-coronavirus-pandemic-financial-markets-b19a49f0568922ee3710f70d5b5bcdbe
Reuters, 26/11/2020: Hungary's PM Orban rules out compromise in EU budget standoff https://uk.reuters.com/article/idUKKBN28626Y
Euronews, 27/11/2020: Hungary and Poland maintain united front blocking EU COVID-19 recovery fund https://www.euronews.com/2020/11/26/hungary-and-poland-maintain-united-front-blocking-eu-covid-19-recovery-fund

Official
General Secretariat of the Council: Multiannual financial framework for 2021-2027: negotiations https://www.consilium.europa.eu/en/policies/eu-budgetary-system/multiannual-financial-framework/mff-negotiations/
European Commission: EU budget for the future [Proposal May 2018] https://ec.europa.eu/commission/future-europe/eu-budget-future_en
European Commission: EU long-term budget 2021-2027 [Proposal May 2020] https://ec.europa.eu/info/strategy/eu-budget/eu-long-term-budget/2021-2027_en
European Parliament: Priorities: The EU's long-term budget https://www.europarl.europa.eu/news/en/headlines/priorities/eu-s-long-term-budget
European Parliament: Legislative Train Schedule: 2021-2027 MFF https://www.europarl.europa.eu/legislative-train/theme-budgets-budg/file-mff-2021-2027-mff
EPRS: Briefing, June 2019: Multiannual financial framework for the years 2021 to 2027: The future of EU finances https://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_BRI(2019)637979
Finnish Council Presidency: Press Release, 05/12/2019: Finnish Presidency proposes greater EU investment in building a sustainable future https://eu2019.fi/en/article/-/asset_publisher/suomi-esittaa-puheenjohtajamaana-eu-lle-lisapanostusta-kestavan-tulevaisuuden-rakentamiseen
European Parliament: Press Release, 19/02/2020: President Michel’s MFF proposal not acceptable for Parliament https://www.europarl.europa.eu/news/en/press-room/20200218IPR72822/
European Parliament: Press Release, 11/03/2020: Long-term EU budget: It is not possible to do more with less, say MEPs https://www.europarl.europa.eu/news/en/press-room/20200305IPR74186/
European Council: Statement, 10/07/2020: President Charles Michel presents his proposal for the MFF and the recovery package https://www.consilium.europa.eu/en/press/press-releases/2020/07/10/president-charles-michel-presents-his-proposal-for-the-mff-and-the-recovery-package/
Spain: La Moncloa (Government Presidency): News, 15/07/2020: Pedro Sánchez and Emmanuel Macron agree on need to reach agreement in July on financial package to speed up recovery following COVID-19 crisis https://www.lamoncloa.gob.es/lang/en/presidente/news/Paginas/2020/20200715_macron.aspx
European Parliament: Legislative Observatory: Procedure File for Resolution on the conclusions of the extraordinary European Council meeting of 17-21 July 2020 https://oeil.secure.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=en&reference=2020/2732(RSP)
European Parliament: Press Release, 23/07/2020: EU long-term budget deal must be improved for Parliament to accept it https://www.europarl.europa.eu/news/en/press-room/20200722IPR83804/
European Commission: Readout of the meeting between European Commission President von der Leyen, European Parliament President Sassoli and German Chancellor Merkel (29 July 2020) https://ec.europa.eu/commission/presscorner/detail/en/read_20_1428
European Parliament: Press Release, 27/08/2020: Future EU financing: Parliament and German Council Presidency kick off talks https://www.europarl.europa.eu/news/en/press-room/20200827IPR85805/
European Parliament: Press Release, 11/09/2020: Do not jeopardise future-oriented EU programmes, say EP’s budget negotiators https://www.europarl.europa.eu/news/en/press-room/20200911IPR86907/
European Parliament: Press Release, 18/09/2020: EU long-term budget: EP still fighting for a good agreement https://www.europarl.europa.eu/news/en/press-room/20200917IPR87313/
European Parliament: Press Release, 28/10/2020: EU budget talks: Council rejects Parliament’s breakthrough proposal https://www.europarl.europa.eu/news/en/press-room/20201026IPR90132/
European Commission: Press Release, 10/11/2020: EU budget: European Commission welcomes agreement on €1.8 trillion package to help build greener, more digital and more resilient Europe https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2073
European Parliament: Press Release, 10/11/2020: Compromise on long-term EU budget: EP obtains €16 billion more for key programmes https://www.europarl.europa.eu/news/en/press-room/20201106IPR91014/
Council of the European Union: Press Release, 10/11/2020: Next multiannual financial framework and recovery package: Council presidency reaches political agreement with the European Parliament https://www.consilium.europa.eu/en/press/press-releases/2020/11/10/next-multiannual-financial-framework-and-recovery-package-council-presidency-reaches-political-agreement-with-the-european-parliament/
European Commission: Questions and Answers on the agreement on the €1.8 trillion package to help build greener, more digital and more resilient Europe (11 November 2020) https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_2088

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