Margarida Vasconcelos: The EU budget has been cut but not all good news

The EU's 2014-2020 budget is the first multi-annual financial framework (MFF) to be adopted under the Lisbon Treaty, which has conferred further powers on the European Parliament. The Treaty on the functioning of the EU provides that the Council of Ministers, acting unanimously, through a special legislative procedure (assent procedure) shall adopt the multiannual financial framework, but after obtaining the consent of the European Parliament. Consequently, the political agreement reached last February by all the EU member states in cutting, for the first time ever in the EU's history, the budget from its previous level, required the consent of the European Parliament. The MEPs have used, therefore, their strong negotiating position to negotiate compromises with the Council and to obtain concessions from the EU’s Member States. In fact, the Member States have made substantial concessions to the European Parliament in order to secure an agreement. The MEPs have not demanded changes to the overall spending ceiling negotiated by the EU leaders but they presented, their own demands for negotiations with the member states. The European Parliament has been particularly determinate to resolve the issue of unpaid bills from last year’s budget. In fact, the European Parliament has made clear that it wouldn’t give its formal consent to the MFF regulation covering the next period (2014-2020) unless it has an absolute guarantee that the outstanding payment claims for 2013 would be covered in full. At a time when most Member States are reducing public spending and introducing austerity measures the requests for further contributions to the EU budget have been described by the UK Government as "totally unacceptable”.  The Government does not support such requests for additional payment appropriations for the EU Budget. However, the UK was unable to veto it, as the request for extra funds can be approved if a qualified majority of member states supports it.


After several months of negotiations and after the European Parliament’s demands have been met by the member states, the MEPs approved on 19 November the EU’s long-term budget for 2014-2020. The EU budget for the next seven years is €960 billion in commitments and €908 billion in payments appropriations. The Council will formally approve the MFF on 2 December. It is important to recall that the European Commission proposed over one trillion Euros for the EU spending between 2014 and 2020 and due to David Cameron determination the EU budget has been cut for the first time in the EU’s history.

Although this year’s budget is €5bn below the European Commission’s original proposal for payment appropriations it is higher than the budget initially proposed by the Council, and, obviously, higher than the freeze demanded by the UK Government. The Council and the European Parliament reached an agreement on €150.90 billion in commitment appropriations and €132.84 billion in payments appropriations, which represents an increase of 2.9%, compared to the EU budget for 2012. Nevertheless, they issued a joint statement on payment appropriations for 2013, “acknowledging that they were “…aware that a draft amending budget may possibly be required as early as mid-2013.” In fact, they called upon the European Commission to present "at an early stage in the year 2013 a draft amending budget devoted to the sole purpose of covering the 2012 suspended claims (…) To ensure sound and accurate EU budgeting, the Council and the European Parliament will take position on this draft amending budget as quickly as possible in order to cover any outstanding gap". Consequently, we were already expecting the budget to be amended during 2013. Hence, although unacceptable, the draft amending budgets were not a surprise.

In March 2013 the European Commission requested €11.2 billion in extra funding from the member states “to reimburse beneficiaries of EU funded programmes completed across Europe in 2012 as well as to honour the Cohesion Policy claims that will fall due in 2013.” Last May, the European Commission, the European Parliament and the Council of Ministers, represented by the Irish presidency, reached a compromise deal on the draft amending budget for 2013, whereby the €11.2 billion proposed by the Commission would be paid in two tranches, €7.3 billion to be paid before summer then €3.9 billion in the autumn. The Government could not support and voted against such request for additional payments for the EU Budget. However, it was unable to veto it, as the request for extra funds can be approved if a qualified majority of member states supports it. The UK was therefore outvoted on draft amending budget for 2013. Hence, the Council agreed to provide €7.3 billion as a first instalment. The MEPs have stressed that the Council has solely agreed to pay €7.3 billion and they want to be ensured that €11.2 billion would be fully paid.

Then, the European Commission presented a draft amending budget No 8 for the year 2013, which updated the DAB 2/2013 for an amount of EUR 11,2 billion. Consequently, the Commission has demanded further EUR 3,9 billion in member states' contributions to the EU's present budget so it can reimburse beneficiaries of EU funded programmes, mainly for completed projects under the cohesion policy. The majority of the money, around EUR 3.1bn, will be used to pay bills sent in by Member States in the cohesion policy area whilst the remaining money will be spent on instruments to stimulate growth and jobs and to help the victims of major humanitarian crises particularly in Syria, Mali and the Horn of Africa.

The European Commission has stressed, “This amendment is particularly important, as it is a condition for the adoption of the next MFF” and called upon the budgetary authority, Council and the European Parliament, to swiftly adopt it. The member states had no choice but to adopt it. COREPER approved last month the 2013 EU budget increase by EUR 3.9 billion but tried to make it conditional on the European Parliament’s consent to the MFF, which was unacceptable for the MEPs. The UK government was unable to veto it. Due to QMV the government was outvoted again as it was when the Council adopted the Draft Amending Budget 2 for 2013 and agreed to provide further €7.3 billion to this year budget. The UK has tried to delay the adoption of the amending budget by refusing to add it to the agenda of the 19 October GAC Council. The Lithuanian Council Presidency has scheduled a extraordinary General Affairs Council for 30 October but then the draft amending budget was approved by written procedure on 25 October.

There was also draft-amending budget no 9, whereby the Commission asked member states to contribute with more money. This DAB entailed EUR 400.5 million, from the European Solidarity Fund, to cover the damages caused by natural disasters in Germany, Austria, the Czech Republic and Romania. The member states wanted this money to come out from savings in this year’s budget. Coreper agreed that such payments should be “covered by appropriations which the Commission expects not to be spent by the end of this year.” Obviously, member states were unwilling to contribute with more money to the EU budget. However, unsurprisingly the European Parliament and the European Commission wanted the money to come from further national contributions. They reached an agreement whereby “EUR 250.5 million is financed by redeployments in the 2013 budget and the remaining EUR 150 million in 2014.” The Council and the European Parliament have already formally approved this compromise deal.

In the meantime, the Commission has found out that there was a shortfall in revenue from customs duties and sugar sector levies (Traditional Own Resources) , as well as in the VAT-based contributions, as payments from these resources to the budget were far lower than initially forecast. Consequently, the European Commission put forward Draft Amending Budget No 6 whereby member states net budgetary burden increases by further EUR 2.7 billion.The Council adopted its position on this amending budget on 21 October by, fast track, approving a revision of the forecast of own resources. The European Parliament approved the Amending Budget 6 on 24 October after Martin Schulz, president of the European Parliament, have been contacted by Jose Manuel Barroso who asked to the MEPs to approve the it as a matter of urgency as the Commission was running out of funds to meet its financial obligations.

There is also Amending Budget 7 which entails an increase in the European Social Fund of EUR 150 million in commitments for France, Spain and Italy.

The Commission has therefore put forward nine amending budgets during this year, asking further contributions from member states amounting around €15 billion. This will cost UK’s taxpayers an additional €1.9bn, which is unacceptable. As Marta Andreasen MEP said, "Whilst this MFF represents a cut, the manner in which MEPs finally agreed was tantamount to blackmail.” She rightly noted, "If the EU spends too much, which they nearly always do, what is to stop them coming back and asking for more cash top-ups, supported by MEPs?"

The Council and the European Parliament also approved the 2014 EU’s draft budget. The European Commission has initially proposed €142.01 billion in commitments appropriations and €135.9 billion in payment appropriations, compared with €150.8bn and €144.3bn in the 2013 budget. Whereas the Council has agreed to a budget of EUR 135.00 billion in payments and EUR 142.23 billion in commitments the European Parliament proposed €143.1 bln in commitments and €136.4 bln in payments, which was not a surprise as the European Parliament always seeks a bigger budget for the EU than that proposed by the Commission and Member States. Then after 16 hours of negotiations, the Council, European Parliament and the Commission they agreed on a compromise deal which is lower than the European Parliament proposed figures but more than what has been proposed buy the member states. Hence, the 2014 budget amounts to €142.6 billion in commitments and €135.5 billion in payments.

The EU budget has been reduced, is 6.2% below this year budget, but the cuts are not sufficient. The Government particularly called for substantial reductions on Heading 5 (Administration) but due to QMV, it was unable to get a better deal. The Council and the European Parliament have already formally approved the compromise deal hence the 2014 EU budget has been adopted.

In the meantime the European Court of Auditors has published its report on the implementation of the 2012 EU Budget. This report, as previous reports, shows that there are serious errors and mistakes in the EU monitoring and accounting system, which is inadequate. The EU spending continues to be affected by “material error.” The Court has estimated the error rate for payments from the €138.6 billion 2012 EU budget at 4.8%. This means that €6.6bn, of which British taxpayers paid £800 million, was spent against EU rules governing the spending. There has been an error rate increase from 3.3 % in 2009 to 3.7 % in 2010 and 3.9 % in 2011.

It is important to note that the Commission, since 2000, has been working on a reform program to improve the management of the EU budget. It adopted an Action Plan to address the recommendations of the Court on how the Commission should improve its supervisory role of management and control systems in Member States for structural actions. However, year after year and nothing has changed and for 19th year the Court has not given the EU’s accounts a clean bill of health. In the meantime taxpayers' money is being spent in this failing project that is the EU.

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