Preparing for the MFF Mid-Term Review

The EU budget is under increasing pressure in the face of both new and unexpected expenditure demands. Already, in the first two years of this Multiannual Financial Framework (MFF) period 2014-2020, virtually all of the flexibility instruments which were put in place have been fully utilised, in part to fund the incoming Commission’s flagship project for a European Fund for Strategic Investments, and in part in response to the large number of arrivals of asylum-seekers, refugees and migrants as well as the terrorist attacks in Europe. In total, around €12 billion has so far been mobilised under the various flexibility instruments, leading one commentator to observe that “the EU budget had been flexed to the maximum”.

However, as a briefing note on the MFF Mid-Term Review by the European Parliamentary Research Service points out, “…..most of the adjustments made to the MFF so far do not increase the overall MFF ceilings; they merely shift amounts already allocated and will have to be offset in full against margins in future financial years. This raises questions about the consequences of these measures for the functioning of the MFF through to 2020.

Indeed, the adopted 2016 budget figure for MFF Heading 3 Security and Citizenship is €2,957 million, which is €651 million above the technically adjusted MFF ceiling of €2,306 million foreseen for Heading 3 in 2016. A European Parliament study documents the resources already allocated to the refugee crisis and notes “Given the seriousness and the accompanying cost of the refugee and migration crisis, it is believed by all consulted that substantially increased resources will be required between now and 2020, compared to what is foreseen in the MFF”.

This context underlines the potential significance of the review/revision of the 2014-2020 MFF which is scheduled to take place later this year. I have described the background to this review/revision in this earlier post. Currently, it is the European Parliament which is making the running and trying to set the agenda for this review.

Last month, the Budgets Committee held a public hearing on the MFF mid-term revision and prospects for the EU budget in the second half of the MFF. The presentations of the three invited experts highlighted the narrow room for manoeuvre in the current MFF while also reiterating ‘old chestnuts’ such as the need for new own resources (currently under review by the Monti High Level Group on Own Resources which is expected to report before the end of the year), the fixation on net balances, and the re-emergence of a growing backlog of payments (Reste à Liquider or RAL).

Following the publication of a working document by the Budgets Committee last December, it is currently seeking input from the Parliament’s various Committees in order to prepare the Parliament’s position in advance of the Commission’s review expected in the second half of the year. The draft Opinions prepared by Committee rapporteurs are now available, including one for COMAGRI prepared by rapporteur Peter Jahr.

COMAGRI Draft Opinon on MFF Mid-Term Review

The COMAGRI draft Opinion seeks, not surprisingly, to maintain and even increase the MFF expenditure ceilings devoted to agricultural spending.

Insists that the current amount in Heading 2, as provided for in the current MFF, must remain at least at the same level; refers, in this connection, to Article 2 of the MFF Regulation, which clearly states that allocated national envelopes may not be reduced by the midterm revision;
Insists also that the amounts for direct payments in Heading 2 should be left untouched; points out that this is crucial for the income situation of many farmers, particularly in times of crises, and that the absorption rate per year is almost 100 %;

The draft Opinion also highlights the limited flexibility to respond to specific crises because the margins of CAP expenditure below the MFF ceilings are much lower than before:

Stresses that the fixed ceilings for the CAP until 2020 entail much lower margins than in the previous MFF, while the sector faces more challenges; stresses, in this regard, that any use of the margin must be exclusively to address the needs of the agricultural sector….
Warns that the current margin within the agriculture budget may prove insufficient, with market volatility, veterinary and phytosanitary risks and other unforeseen events making increasing demands on the budget to such an extent that the margin is expected to be depleted at the end of this planning period
Notes that any new priorities for the agricultural sector that arise during the current financial framework can only be funded through fresh resources; stresses, therefore, the increased need to ensure sufficient margins under Heading 2 in order to leave room for Parliament’s priorities;

Ultimately, the draft Opinion seeks additional resources for the CAP under a revised MFF:

Points out that the ever-increasing challenges faced by the CAP call for increased financial resources; calls, therefore, for an increase in the funding under Heading 2 in order to meet these challenges should they arise; calls also for adequate compensation measures to deal with unforeseen events and market failures resulting from political decisions;

At the same time, the draft Opinion rejects the idea that some expenditure currently financed under the CAP might be more appropriately funded at national or regional levels:

Strongly opposes any renationalisation of agricultural policies; stresses that the common nature of the EU’s agricultural policy avoids distortion of competition within the internal market and generates savings for European taxpayers;

At a time when other demands on the EU budget are so obviously growing, seeking additional funding for agriculture from that EU budget while ruling out a larger role for member states may not be the most coherent way forward. As the debate on the MFF moves forward, there is increasing focus on the need to ensure European Value Added in budget expenditure, even if this is a concept easier to define in theory than in practice. Can EU CAP expenditure be justified on these grounds?

This post was written by Alan Matthews

Picture credit: European Parliament reproduction permitted.

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