No decision on MFF budget at first attempt

Van Rompuy’s second attempt (HvR-II) at preparing draft conclusions on the EU’s multi-annual financial framework (MFF) for the European Council which failed to agree them at this week’s special European Council meeting can be summarised in two sentences: (a) within the overall budget, the reinstatement of much of the CAP spending cuts at the expense of all other budget headings (except Administration which stayed the same, though see below); and (b) separately, within Heading 1, a shift from competitiveness (Europe 2020) to cohesion spending.

The detailed figures are shown in the table below. The total budget (including extra-MFF spending) in HvR-II is maintained at exactly the same level as HvR-I but because emergency aid for humanitarian crises in developing countries is moved out of the MFF, the MFF total falls by just over €1 billion euro.

Europe 2020 spending (competitiveness) took the largest cut in absolute terms in HvR-II compared to his first draft conclusions. The administration budget remains untouched, although Euractiv reports that a number of additional provisions added in the new proposal were translated by a Council official as a cut by 7% of the salaries of staff in EU institutions.

Overall CAP budget

Instead, €8 billion of the cuts in the CAP Pillar 1 budget in HvR-I as compared to the Commission’s proposal were reinstated, leaving the Pillar 1 budget just €5 billion less than the Commission’s original proposal (although it also must bear the cost of agricultural crisis spending of up to €500 million per annum if such is needed over the MFF period).

No change was made to the proposed ceiling for Pillar 2 rural development spending. Nonetheless, a group of five countries received side-payments worth €2.37 billion (Austria, Italy, Luxembourg, Slovenia, and Finland) which will be sliced off the top of the rural development budget. Thus, the money available to be divided according to the agreed formula among all member states will be reduced by this amount.

Convergence between member states

The other innovation regarding CAP in HvR-II was with respect to the convergence of direct payments across member states. It included the commitment that all member states should attain at least the level of 196 euro per hectare in current prices by 2020. The EU-27 average payment per hectare in 2020 under the current CAP Health Check budget would be 268 euro. With the small cut (a little over 2% including provision for Croatia) pencilled in for direct payments in HvR-II, this would put a floor of 75% of the EU average payment per ha for member states. The beneficiaries are the three Baltic states, all of which would have payments below the 196 €/ha threshold under the Commission’s proposal (see figures in the table below), but which would be brought up to the level of the next lowest beneficiary Romania under HvR-II’s proposal.

Update 24 November: The MFF distribution key is that “All member states with direct payments per hectare below 90% of the EU average will close one third of the gap between their current direct payments level and 90% of the EU average in the course of the next period”. In the original post I interpreted the current direct payment literally as each country’s payment with the current CAP Health Check budget and distribution key (which gave rise to the odd result that Finland would be worse off under the HvR-II formula). On reflection, it seems to make more sense to interpret the current direct payment level as the payment per ha each country would receive with the current distribution key but with the total budget adjusted to reflect the HvR-II budget ceiling. This is now reflected in the figures in the table below.

Implications for CAP revision timetable

Although the negotiations failed (as they also did on the first occasion in preparing the current MFF), some progress was made. The cohesion budget could be sufficient to gain the agreement of the ‘Friends of Cohesion’ group, not least because of a series of side-payments in cohesion funding to countries in this group.

However, there remains a gap, some observers put it at around €30 billion, between the net contributors and the others. In the grand scheme of things, it’s a tiny amount, but hugely symbolic. The leaders agreed to meet again early in the new year to try to bridge this gap.

The failure to agree could have implications for the timetable for CAP reform. Under the current timetable, COMAGRI plans to vote on the compromise amendments to the Commission’s proposal on 23-24 January. A statement from MEPs on the EU Agriculture Committee on how the negotiations will progress from here is expected on Monday,

However, the CAP figures now appear to be oscillating around an agreed landing point which broadly implies a roll-over of CAP Pillar 1 payments, 30% greening and a sharp cut in Pillar 2 expenditures. That should be sufficient to allow COMAGRI to proceed with its voting in January, with a final vote in plenary in Parliament in March. It is not a promising starting point for the trilogue negotiations for those of us arguing for a reformed CAP.

This post was written by Alan Matthews