Vulcan Insight

Money, money, money: the EU’s Multiannual Financial Framework showdown continues

21 February 2020

Every seven years, EU leaders descend on the European Council’s headquarters for a multi-layered, rhetorical fight-to-the-death ‘battle royal’ to agree the EU’s seven-year Multiannual Financial Framework (MFF) budget.

Following months of proposals and internal negotiations by the Commission, Council and Parliament, European Council President Charles Michel called for EU27 Heads of State and Government to descend on the Europa building to hammer out a final compromise in a special meeting of the European Council.

Preparing for the summit, Mr Michel held extensive bilateral meetings with each EU27 leader, and launched a revised draft budget proposal – also known as a ‘negotiating box’. Leaning on an earlier proposal put forward by the Finnish Presidency in the second half of last year, Michel’s revised plan foresees an overall seven-year budget of €1.095 trillion with national contributions of 1.074% of Gross National Income.

While Mr Michel’s proposal was received with scepticism by almost all parties, the so-called ‘frugal four’ countries (Denmark, Sweden, the Netherlands and Austria) outright rejected the proposal over the size of contributions (the four countries refuse to commit more than 1% of GNI), priority areas for funding such as agriculture, research and cohesion funding, and rebates.

As the first night of the summit drew to a close, the EU leaders appeared no closer to reaching a compromise, with a broad majority of leaders such as Belgium’s Sophie Wilmès, Luxembourg’s Xavier Bettel and the Czech Republic’s Andrej Babiš commenting that the frugal four’s position made “any discussion more difficult than necessary.”

While substantial differences persist between member states, Charles Michel’s offer has huge gaps with the European Parliament’s budget demands. The co-legislator, which must ratify the MFF and has already threatened to block any insufficient Council compromise, meanwhile seeks national contributions of up to 1.3% of GNI to finance significant action on tackling climate change and digitalisation, as well as coupling access to EU funds to the respect of the rule of law. In addition, the Parliament, which had been highly critical of the process leading up the 2014-2020 MFF, is pressuring member states to create new direct EU revenue streams such as taxes on carbon leakage, plastics or aviation.

Although EU leaders are required to find a compromise in the near future, as of Friday midday, no agreement seems within reach. All players continue to hold their cards close to their chests in the EU’s trillion-euro negotiation.