Lewandowski: Agreeing the budget was ‘extreme sports’

Janusz Lewandowski.jpg

The political agreement on the EU budget for 2014-2020 reached yesterday (27 June) was “extreme sports”, says Budget Commissioner Janusz Lewandowski, in an exclusive interview in which he explained the details that made the deal possible.

Janusz Lewandowski is the EU's budget commissioner. An economist, he served as minister of privatisation in Poland, a member of the Polish Parliament and was chairman of the Budget Committee in the European Parliament.

He spoke to EURACTIV Senior Editor Georgi Gotev.

The memo released on this subject is rather technical, so let me ask you point by point. On budget flexibility, we see a big difference with the agreement from last week. The previous proposal was that a total of €24 billion be transferred, with a €3 billion cap for the first three years, then the cap was to be increased by €1 billion annually, reaching €8 billion for the year 2020. Now it’s the other way around: there are no capping for the first years, but there is a cap of €7 billion in 2018, €9 billion in 2019 and €10 billion in 2020. Why is that?

I think this is a better way to provide real flexibility, because as it was demonstrated with the draft budget 2014, for payments we are obliged to go up to the ceiling. Now the only issue is about unspent money but rather about ceilings where capping doesn’t make sense. We are to exploit all the possibilities given in this multi-annual agreement because we are still paying out mainly commitments from the previous period. There is a very special composition for the annual budgets. For 2014 less than 10% is paying for new projects. The rest, €70 billion, is paying old obligations. And in order to reduce this mountain of what is called RAL (reste à liquider), outstanding commitments in English, we need really levels of payments that reach the expenditure ceilings.

So what is needed is to give some predictability for the remaining period, when we could have money shifting from one year to another, not only unspent money but also shifting unspent margins, hopefully [the “margins” are the difference between the authorised yearly expenditure ceilings as agreed in the Multi-annual Financial Framework, and the actual expenditures]. This is what we need.

The Commission’s position has been how to improve the budget to make it more operational, also for the future [budget] commissioner. And I think that with this solution political agreement we have an operational budget with flexibility on payments. The political agreement would have unlimited flexibility on payments between 2015 and 2017, up to the allowed ceilings of course, and capped flexibility in the subsequent years.

Parliament President Martin Schulz said the lack of flexibility prevented the spending of some €60 billion over the last budget period, which was reimbursed to member states. Should we expect a similar amount now to be mobilised for EU policies?

It is difficult to put a figure. But I already declared that with this flexibility, we can full use of the €908 billion overall expenditure ceiling that was agreed to at last February’s European Council on the MFF.

With this flexibility we are responding in an unusual way to something unusual, that has never happened before, namely a lower level of payments for 2014-2020 than in the previous period. There was this article 109 in the Council Conclusions [from 8 February] about full flexibility. The main issue of the negotiations was how to dress this mandate for this flexibility issue since future budgets will be lower at a time when the EU welcomes a new member states and has new responsibilities.

Our declaration was that with this level of flexibility, we can spend, we can consume the €908 of payments agreed. This is even more that we are consuming from the present budget, because indeed €60 billion were coming back to the member states because of unspent money, unused margins.

With the flexibility we have adopted, if there is good will, I can give assurance that we can fully exploit the full potential of €908 billion agreed for payments under the 2014-2020 budget. This has never happened before this is an extraordinary response to extraordinary, exceptional circumstances of the new budget. For the first time in history, a budget which represents less than we have now.

It’s also the first time in history and under extraordinary circumstances the EU is trying to tackle the problem of youth unemployment. Since this morning we have a text, which if I understand it correctly, provides for frontloading of the €6 billion allocated for this initiative [hours later leaders raised this amount to 8 billion], but also with some provisions so that its funding could continue over the remaining period. Can you explain?

The aim in the negotiations was to frontload, to deliver as soon as possible. That’s why we are not frontloading small amounts, but the €6 billion that were designed for combating youth unemployment, for 2014 and 2015. In addition, there will be a similar effort for research, Erasmus and SMEs.

The concern is: what happens after? The biggest resource we can have for the future period comes from the European Social Fund. This extended flexibility which we achieved today avoids the scenario in which the EU uses virtually all the funding for youth unemployment and then there will be nothing. This is also about flexibility of commitments. At the beginning of the financial perspective, we create a sort of reserve from unused commitments and margins, to be distributed for the remaining years of the financial years of the budget period.

The mid-term review is described in the memo in very few words, not quite understandable. Can you translate them?

According to today’s political agreement, the mid-term review will be obligatory. The other important element of the review is that the Commission will come with legislative proposals in 2016. So we are committed to make legislative proposals, we can investigate all the changes necessary for implementing the budget.

There is a sentence reading that "The Commission will also examine aligning its proposals for the next MFF with the political cycles of the Institutions". This means a five-year budget after 2005?

This was decided this morning [27 June]. The political cycles of the institutions are of five years, so in the future we shall go for five-year multi-annual Financial Frameworks.

Is there a risk that this could be legally challenged?

No, because the Treaty says “minimum five years”.

How about the draft amending budget for 2013. If I understand correctly, the Council commits to take a formal decision for the first tranche of €7.3 billion not later than 9 July, in a few days…

No later, but as indicated by President Schulz, the Council is welcome to explore all possibilities to formalise it earlier. That could be of course an important positive message to the Parliament. I am now absolutely sure, with this commitment at the latest on 9 July we would formalise what we have agreed politically. Nobody is challenging the €7.3 billion, it is only about formalisation, which is important for the Parliament. And the remaining part is the commitment to respect all the obligations and not to leave 2013 with a shortfall of money.

It is important not to poison the future, and this was a quite rational essential condition of the Parliament. This is also my problem, because without the formalisation of the 7.3 billion, we are running into real difficulties with payments in summer already.

I just spoke to MEP Ivailo Kalfin, who is the S&D rapporteur on the budget. He was quite categorical that an additional €3.9 billion is needed in autumn…

This is on the basis of what we were showing last year. We were able to show the amount of claims, legitimate claims, verified claims that we receive from member states themselves. And in autumn, we are also able to present an accumulation of legitimate bills we need to pay, because they are arriving before the end of October 2013. If something is arriving legitimate, verified, before the end of October, we need to pay. I’m sure we will have to present in autumn our update of bills, and as it was the case last year, member states cannot contest it. And I’m sure this is at least €3.9 billion.

So the Parliament figure is correct. But do you think that the text agreed means that countries would not contest the figure?

In autumn, we will be ready to present them bills. Legitimate bills sent by the member states themselves for completed EU funded projects, not just forecasts. Now we have a forecast, from April, what member countries expect to send us this year. But this is a forecast. In autumn we will be ready to show to anybody what is the value of verified bills we need to pay.

Was this a good compromise?

It’s the best possible under the exceptional, difficult circumstances. I remember 2005-2006, the round of talks over the financial perspective 2007-2014, I was on the side of the Parliament at that time.  And now I can compare this exercise with the present one, which is like extreme sports, really, under these conditions.

Do you like extreme sports?

I prefer racing and football.

Do you envy your colleagues from the Parliament? Their role is to demand more, that’s not very difficult.

That’s not fashionable now in Europe, to demand more, especially in the Nordic countries. For the South, for Eastern Europe, it is still fashionable, and they do need money to catch up. But for net payers, nobody is making a big career with demands for more.

But let me tell you why it is so important to have a deal now. Because in autumn everybody will be busy in the national parliaments with the national budgets. And this is not the season to discuss EU budget as well. That’s why it’s a matter of responsibility for European leaders to agree now, and not to confront the issue of how to finance Europe with really terrible debates in the majority of national parliaments about the budget for the next year.

Subscribe to our newsletters