- On 2 May the Commission proposed an EU budget for 2021–2027 of €1.135 trillion at 2018 prices, 1.11% of gross national income.
- It cuts the agricultural and cohesion funds by about 5%, to cover the Brexit gap and fund new priorities.
- It starts a negotiation that requires unanimity in the Council: figures and allocations may change a lot.
On 2 May 2018 the European Commission presented its proposal for the Union’s multiannual financial framework for 2021–2027, the first after the UK’s departure. It provides for spending commitments of €1.135 trillion at 2018 prices, around 1.11% of the gross national income of the twenty-seven, equivalent to €1.279 trillion in current prices.
To cover the gap left by Brexit, the Commission combines spending cuts with new revenue. It reduces by about 5% the funds for the common agricultural policy and cohesion policy, which remain the largest items, and strengthens new priorities such as research, security, defence and border and migration management.
What it contains
Besides the overall figures, the proposal includes several structural novelties. The European Development Fund, which until now was outside the budget, is brought into it. It proposes eliminating all the rebates enjoyed by some member states and reducing from 20% to 10% the share of customs duties that countries keep as a collection cost.
On the revenue side, the budget would continue to rely mainly on national contributions, but new own resources are proposed to replace part of them. Each novelty will require political agreement, and several member states hold very different positions on how much the Union should spend and on what. It is usual for these negotiations to drag on and end with figures different from those first proposed, because each member state defends its interests and agreement requires unanimity.
Impact on companies and regions
Agricultural and cohesion policies finance farms, infrastructure, training and regional development projects. A cut, even a moderate one, can affect those who depend on that aid: farmers, town councils, universities and companies taking part in co-financed projects. For an economy like Spain’s, a net recipient of funds, the debate is especially sensitive. There is an additional dimension that deserves attention: the Commission proposed linking part of the funds to respect for certain principles, such as the rule of law, a debate that may condition access to financing.
At the same time, the reinforcement of research, innovation and the digital economy opens opportunities for companies able to take part in European programmes. As in earlier editions, much of the funding is allocated through competitive calls, where the quality of the project and its presentation make the difference. For regions and municipalities, the distribution of cohesion funds between territories is a highly political matter: the criteria chosen will decide who receives more or less.
What to review
If the company’s activity depends on European aid, it is worth distinguishing between what is already committed under the current period, which does not change, and what could vary from 2021. Long-term investment plans should not rest on figures from a proposal that has yet to be negotiated.
It is also useful to follow calls under research and innovation programmes and assess whether it is possible to join consortia. The negotiation will probably take more than a year, and requires unanimous approval by the Council and the consent of the European Parliament. This information is general. Anyone already preparing projects for 2021 can start identifying the most relevant funding lines and co-financing requirements, which usually demand a significant own contribution.
A European budget is a proposal until the twenty-seven approve it.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
