European institutions reach agreement on EU budget

EP budget negotiators and the Council Presidency have reached a compromise outlining a political agreement on future EU financing. After ten weeks of intense negotiations, Parliament’s budget negotiators agreed with the Council Presidency on the outline of an agreement on the next Multiannual Financial Framework and new Own Resources. The compromise needs to be endorsed by both institutions.

In the compromise, Parliament obtained €16 billion on top of the package agreed by heads of state or government at their summit in July. €15 billion will reinforce flagship programmes to protect citizens from the COVID-19 pandemic, provide opportunities to the next generation, and preserve European values. €1 billion will increase flexibility to address future needs and crises.

Parliament’s top priority was to secure an increase for flagship programmes that were at risk of being underfinanced under the European Council’s July 2020 agreement, jeopardising the EU’s commitments and priorities, notably the Green Deal and the Digital Agenda.

The additional funds will be drawn mainly from amounts corresponding to competition fines (which companies have to pay when they do not comply with EU rules), in line with Parliament’s long-standing request that money generated by the European Union should stay in the EU budget.

Thanks to this compromise, in real terms, the European Parliament inter alia triples the envelope for EU4Health, ensures the equivalent of an additional year of financing for Erasmus+ and ensures that research funding keeps increasing.

New Own Resources

Negotiators agreed to the principle that the medium- to long-term costs of repaying the debt from the recovery fund should neither come at the expense of well-established investment programmes in the MFF, nor result in much higher GNI-based contributions from member states. Therefore, EP negotiators have devised a roadmap to introduce new Own Resources during the next seven years.

This roadmap is incorporated into the ‘Interinstitutional Agreement’, a legally binding text. In addition to the plastics-based contribution as of 2021, the roadmap includes an ETS (Emissions Trading System)-based Own Resource (from 2023, possibly linked with a carbon border adjustment mechanism), a digital levy (from 2024), and an FTT-based Own Resource as well as a financial contribution linked to the corporate sector or a new common corporate tax base (from 2026).

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