EU budget for 2017: Cohesion down, security up

Vazil Hudák [Youtube]

Payments for cohesion are down by 23.94% in the 2017 draft budget compared to 2016, but payments for the heading “Security and citizenship” are up by 24.42%. The Parliament is yet to give its opinion on what looks like an unusual budget.

On 20 July 2016, the Council’s Permanent Representatives Committee agreed on its position on the 2017 EU draft budget for the upcoming negotiations with the European Parliament. Vazil Hudák, chief negotiator on the EU budget of the Slovak Presidency of the Council, said that more than ever it is necessary to ensure that the EU budget is focused on key priorities and enable the EU to address the challenges that it is facing.

“I believe the Council’s position responds to this necessity by offering appropriate means to stimulate growth, help creating jobs, reinforce security inside, and outside the EU and tackle the migration crisis. It also ensures good value for money by taking care that the financial resources match the needs,” Hudák said.

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Decrease in payments

The Council’s position, agreed to on the basis of a compromise text of the Slovak presidency, amounts to €156.38 billion in commitments and €133.79 billion in payments. This is a 0.9% increase in commitments and a 7.0% decrease in payments compared to the 2016 EU budget. The significant reduction of total payments is mainly due to two factors: the implementation of the programmes from the EU’s multiannual financial framework (MFF) for 2007-2013 has been finalised and the programmes of the MFF for 2014-2020 are not yet fully up and running.

Commitments are legal promises to spend money on activities whose implementation extends over several financial years. Payments cover expenditure arising from commitments entered into the EU budget during current and preceding financial years.

Boosting growth and creating jobs

The Council wants to spend the bulk of next year’s EU budget for measures supporting smart and inclusive growth, with €74.3 billion in commitments and €56.1 billion in payments. However, this represents a decrease in payments of 15,31% compared to 2016.

Actions financed under this heading include:

  • The EU’s research and innovation programme Horizon 2020 with €10.2 billion in commitments and €10.1 billion in payments, which is an increase by 6.9% and 0.7% respectively compared to the 2016 EU budget;
  • the European fund for strategic investments EFSI, also known as “the Juncker Plan”, with €2.7 billion in commitments (+ 29.5%) and €2.3 billion in payments (+341.3%);
  • Erasmus+, with €2.0 billion in commitments (+16.2%) and €1.9 billion in payments (+4.5%)
  • European aid for the most deprived (€546 million in commitments and €421 million in payments);
  • the youth employment initiative with €600 million in payments.

Addressing the migration and security crises

The Council wants the EU budget to continue to offer the high level of support that has provided since 2015, in order to help member states stem migration flows, protect EU external borders, and combat organised crime and terrorism.

The Council’s position provides for €5.2 billion in commitments for specific migration-related expenditures. This includes both internal actions, such as the effective management of migration flows, and external actions targeted at addressing the root causes of migration. It comprises €200 million for the EU emergency support mechanism that the Council set up on 15 March 2016 to help Greece and other member states overwhelmed by the arrival of large numbers of refugees. It also includes €750 million to reach the €1 billion contribution from the EU budget towards the €3 billion agreed for the Facility for Refugees in Turkey.

To ensure security in the EU the Council’s position contains €738.6 million in commitments and €747.7 million in payments for the Internal Security Fund. This is a 14.4% and 89.3% increase respectively compared to 2016. The aim is to further strengthen police cooperation, the prevention and combating of crime and crisis management.

To implement these priorities in full respect of the MFF for 2014-2020 the Council agreed to mobilise a number of special instruments, such as the global margin for commitments, the flexibility instrument and the contingency margin.

Cohesion down

Economic, social and territorial cohesion is the largest envelope in the “Smart and Inclusive growth” heading. Compared to 2016, the cohesion payments are down from €48.8 billion to €37.1 billion, or minus 23.94%.

Staff cuts

The Council will continue its efforts to consolidate EU administrative expenditure by making further cuts to its staff in 2017. Over the period 2013 to 2017, the Council will have reduced its staff by 5%, which translates into a total reduction of 157 posts. The Council notes that the majority of the other EU institutions have also achieved the 5% staff reduction target. The Council calls upon all remaining institutions to deploy the necessary efforts to meet this target by the end of 2017.

The 2017 budget looks unusual, but so are the times for the Union. What looks strange is that a proper mid-term review of the MFF, the 7-year budget for the period 2013-2020 didn’t take place. The midterm review was seen as the biggest chance for the Juncker Commission to make changes to the budget, which was proposed and adopted under the previous EU executive, led by José Manuel Barroso.

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A summary of the draft Council’s position is set out in the table and diagramme below:

  Description 1 2 2/1
Budget 2016
(AB No 1 to 2/2016 incl.)
Council position on DB 2017 Difference
c/a p/a c/a p/a c/a p/a
1 Smart and inclusive growth 69.8 66.3 74.3 56.1 +6,36% -15,31%
1.a Competitiveness for growth and jobs 19.0 17.4 20.7 19.0 +8,95% +8,89%
1.b Economic, social and territorial cohesion 50.8 48.8 53.6 37.1 +5,39% -23,94%
2 Sustainable growth: natural resources 62.5 55.1 58.7 55.0 -6,02% -0,15%
3 Security and citizenship 4.1 3.0 4.2 3.8 +4,84% +24,42%
4 Global Europe 9.2 10.2 9.3 9.2 +1,74% -9,22%
5 Administration 8.9 8.9 9.3 9.3 +3,67% +3,70%
MFF headings 154.5 143.5 155.8 133.4 +0,88% -7,04%
Special instruments 0.5 0.4 0.5 0.4 +1,78% +0,26%
Emergency aid reserve 0.3 0.3 0.3 0.3 +1,94% +1,94%
European globalisation adjustment fund 0.2 0.03 0.2 0.03 +2,00% -16,67%
European Union solidarity fund 0.05 0.05 0.05 0.05 +0,00% +0,00%
Total appropriations 155.0 143.9 156.4 133.8 +0,89% -7,02%

For 2015, the annual EU budget was of €145 billion - a large sum in absolute terms, but only about 1% of the wealth generated by EU economies every year.

The annual budget is subject to limits established by the multiannual financial framework (the 7-year EU budget).

The annual budget is decided democratically as follows:

  • The European Commission proposes a budget.
  • The national governments (acting through the EU Council), and the European Parliament approve the proposal. This becomes next year's budget.

The lion's share of the EU budget supports growth and jobs. Another significant share goes on agriculture and rural development.

The top expenditure areas for 2015 were:

46% – smart and inclusive growth in the EU, subdivided into:

  • 34% – helping underdeveloped EU regions and disadvantaged sections of society
  • 12% – making European firms more competitive.

41% – producing safe and secure food supplies, innovative farming and efficient and sustainable use of land and forests.

The Council is expected to formally adopt its position by mid-September. It will serve as a mandate for the Slovak presidency to negotiate the 2017 EU budget with the European Parliament. The European Parliament is expected to examine the draft budget for 2017 on 31 August.

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