Europaudvalget 2023
KOM (2023) 0336
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EUROPEAN
COMMISSION
Brussels, 20.6.2023
SWD(2023) 336 final
COMMISSION STAFF WORKING DOCUMENT
Accompanying the document
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN
PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN
ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE
REGIONS
Mid-term revision of the multiannual financial framework 2021-2027
{COM(2023) 336 final}
EN
EN
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Contents
EXECUTIVE SUMMARY ....................................................................................................................................................................................................... 5
1.
2.
INTRODUCTION ......................................................................................................................................................................................................... 6
IMPLEMENTATION: SPENDING PRIORITIES AND CHALLENGES ....................................................................................................... 7
2.1.
2.2.
2.3.
2.4.
2.5.
2.6.
2.7.
A transformative budget ............................................................................................................................... 7
The Union budget response to the COVID-19 pandemic and energy crisis .................................. 10
Digital transition............................................................................................................................................ 14
Cohesion policy and the green and digital transition ......................................................................... 16
Common Agricultural Policy ....................................................................................................................... 18
Protecting EU citizens: responding to emergencies ............................................................................. 19
The fallout of Russia’s war against Ukraine ......................................................................................... 21
Support to Ukraine and Ukrainians
................................................................................ 21
The fallout of the war in the EU and third countries
..................................................... 24
2.7.1.
2.7.2.
2.8.
2.9.
An EU budget for long-term competitiveness ....................................................................................... 28
Security and defence .................................................................................................................................... 30
2.10. Migration and border management .......................................................................................................... 33
2.11. The economic context: inflation and interest rates ............................................................................ 34
2.11.1.
2.11.2.
3.
3.1.
3.2.
3.3.
Inflation
......................................................................................................................... 34
Interest rates
................................................................................................................ 35
IMPLEMENTATION: HORIZONTAL ELEMENTS ......................................................................................................................................... 37
,MFF state of play: current availabilities and past usages ............................................................... 37
Borrowing and lending ................................................................................................................................. 40
Rule of Law ...................................................................................................................................................... 42
3.4. Performance and Mainstreaming .............................................................................................................. 43
4. CONCLUSIONS ....................................................................................................................................................................................................... 49
5.
ANNEXES ................................................................................................................................................................................................................... 50
5.1.
Overview of MFF 2021 – 2027 .................................................................................................................. 50
Table 5.1.1
– Comparison between the adopted and the current multiannual financial framework ceilings
for commitments and payment appropriations
..................................................................................... 50
Table 5.1.2
Redeployments and flexibilities implemented since 2020
................................................... 53
Figure 5.1.1
– Expenditure ceiling for commitment appropriations 2021-2027 as a proportion, by heading
and sub-heading
............................................................................................................................... 55
Figure 5.1.2
– Expenditure ceilings for commitment appropriations and MFF top-ups
............................. 56
Table 5.1.3
– Sustainability of the ceilings for commitment appropriations (EUR million, current prices)
.... 57
Table 5.1.4
– Adopted MFF ceilings and other elements of the December 2020 MFF agreement
.............. 58
Table 5.1.5
– Evolution of the payment ceilings
.................................................................................. 60
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5.2.
Overview of availabilities and flexibilities ............................................................................................ 61
Table 5.2.1
– Adopted availabilities and flexibilities in the MFF 2021-2027
........................................... 61
Table 5.2.2
– Remaining availabilities and flexibilities in the MFF 2021-2027
........................................ 63
Table 5.2.3
– Availabilities and flexibilities mobilised, used or planned in the MFF 2021-2027
................ 65
Table 5.2.4
– Summary presentation of adopted, current, and mobilised or used availabilities
................. 67
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EXECUTIVE SUMMARY
Since the adoption of the Multiannual Financial Framework (MFF) 2021-2027, the Union has
faced a series of unexpected challenges.
Barely out of the pandemic, the Union was faced with
Russia’s brutal invasion of Ukraine with huge humanitarian, economic, social, budgetary and political
consequences. The ensuing energy crisis was a yet another call to accelerate the clean-energy transition,
and a red-alert to reduce the energy dependency from Russia. More broadly, geopolitical instability has
brought further pressures to migration and to the Union’s external action activities. The macro-economic
environment has changed dramatically. Because of the energy crisis and supply chains bottlenecks from
the post-COVID-19 pandemic, inflation increased sharply, and in turn pushed up interest rates, which
made borrowing costs rise for all bond issuers, including the EU. As a consequence, NGEU borrowing
costs will be substantially higher than foreseen at the time of adoption of the MFF.
The Commission has acted swiftly to address these challenges, by using all means at its
disposal, including redeployments, reprogramming and budgetary flexibilities.
The EU and its
Member States have shown unwavering solidarity with people fleeing the war in Ukraine and
immediately mobilised support to the Ukrainian people and the Ukrainian government. Cohesion policy
funding provided support to refugees from Ukraine through the CARE and Fast-CARE initiatives, and
addressed the energy crisis through the package of SAFE (Supporting Affordable Energy) measures.
Remaining RRF loans (EUR 225 billion), additional grants (EUR 20 billion) and Brexit Adjustment Reserve
transfers are mobilised under REPowerEU plan, to accelerate the energy transition and to diversify
energy supply, reducing the energy dependency from Russia. Among other measures, substantial
reprogramming of existing MFF funds took place under the Chips Act to secure the supply chain of semi-
conductors. The proposed Act in Support of Ammunition Production (ASAP) to facilitate the ramp-up of
ammunition production capacity within the EU is financed with redeployments from the European
Defence Fund for 2024 and from resources initially foreseen for the European Defence Industry
Reinforcement through common Procurement Act (EDIRPA) in 2023 – 2024.
As a result, the existing budgetary flexibility under the MFF is largely depleted.
With the Draft
Budget 2024, the annual allocation of the Flexibility Instrument is fully used to cover the sharp increase
in NGEU borrowing costs. The annual amounts of the Solidarity and Emergency Reserve in 2021 and
2022 were fully used as well to tackle needs from the war in Ukraine, as well as natural disasters, and
could not cover all the requests. Almost three quarters of the 2021-27 budgetary margins have been
either used or planned, and the NDICI Cushion for emerging challenges and priorities by around 80%,
notably to support Ukraine, but also for vaccines and the Syrian refugees package,
inter alia.
The loss of
flexibility poses constraints for the remainder of the MFF horizon.
The Union’s budget needs to provide sustainable support to its key priorities.
The European
Union is committed to firmly and fully stand with Ukraine and to continue to provide strong political,
economic, military, financial and humanitarian support to Ukraine and its people. Financing is required
for Ukraine’s immediate needs, short-term recovery and for long-term reconstruction. The Macro-
Financial Assistance Plus instrument only covers 2023 and can only finance the most urgent immediate
budgetary needs. It can neither cover all the areas that the Union committed to support, nor provide
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long-term support for fast recovery. Migration has picked up after the pandemic, putting strains on
Member States’ reception and integration capacities. Addressing the root causes of migration, improving
border management, and maintaining effective migration partnerships with third countries – whether
countries of origin and transit, or those hosting large numbers of refugees – will need additional
financial support. Targeted investment in strategic technologies is needed to foster long-term
competitiveness. Leveraging on existing instruments and governance frameworks will speed-up the
implementation and allow to mobilise quicker higher amounts of financial support Finally, in the current
context of high volatility in financial markets the EU budget should have the necessary flexibility to cater
for higher borrowing costs, which is a legal obligation.
New emergencies and increasing priorities have put a strain on the resources of the EU
administration
Many additional tasks have been given to the Union since 2020 without a
corresponding increase in staff. Severe measures of reprioritisation and cost savings operations have
been applied. However, the situation has reached a critical point where these additional tasks cannot be
delivered without additional resources. In addition, the high inflation affects the Union’s legal obligations
related to indexed contracts.
A targeted MFF revision is therefore necessary to address urgent needs.
The revision shall equip
the MFF with the means to ensure that the Union can meet its legal obligations and address the most
urgent priorities.
This Staff Working Document builds on the information available at the time of the presentation of the
Draft Budget 2024, the Annual Budget and Performance Report for 2022, and the 2023 Long-Term
Forecast of Inflows and outflows of the EU budget.
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1. INTRODUCTION
The multiannual financial framework (MFF) 2021-2027 and NextGenerationEU, adopted in
December 2020 during the COVID-19 crisis, marked a watershed moment in the history of the
EU budget.
It came with an unprecedented size of EUR 2 trillion,
2
a new instrument to support recovery
and resilience funded by EU borrowing on financial markets and, after more than three decades, a new
own resource and a roadmap to propose additional new own resources. Moreover, it was adopted with a
new genral regime of conditionality, as respect for the rule of law is key for the sound financial
management of the Union budget and the effective use of the Union funding.
The MFF and NextGenerationEU provide a well-designed support to the EU economy for its
recovery from COVID-19, while minimizing the risks of lasting socio-economic divergences or
Statement of estimates of the European Commission for the financial year 2024, SEC(2023) 250 – June 2023;
COM(2023)406 Annual Management and Performance Report for the EU Budget – Financial Year 2022; COM(2023)390
Report from the European Commission to the European Parliament and the Council – Long-Term Forecast of future Inflows
and Outflows of the EU budget (2024-2028)
2
All figures in this document are in current prices, except when indicated otherwise.
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scarring effects of the pandemic.
In addition, they aim at fostering the EU’s recovery and resilience
by accelerating the green and digital transitions. Thanks to strong and coordinated EU action, the EU
reached its pre- crisis GDP in less than 2 years, while it took 7 years for the EU to go back to its pre-
crisis GDP after the global financial crisis.
However, the economic and geopolitical context has dramatically changed since the adoption
of the MFF and NextGenerationEU.
Russia’s unprovoked and unjustified war of aggression against
Ukraine and its fallout brought new challenges to the EU. The war is causing enormous suffering and
destruction in Ukraine and has had significant economic reverberations in the rest of the world and the
EU, with lower growth and record-high inflation that is only now starting to recede. The modest growth in
the EU registered in the first quarter of 2023 dispelled fears of a winter recession, but inflation remains
high, which might call on monetary authorities to act more forcefully to stem inflationary pressures.
3
The
high inflation also has a negative impact on the real value of all budgets, including the EU budget.
The EU budget has been one of the main tools of response to these unforeseen challenges, requiring –
as discussed in this Staff Working Document – significant reprogramming and use of flexibilities.
However, the EU budget’s overall flexibility, availabilities and possibilities for reprogramming are now
reaching their limits, undermining the MFF’s ability to address current and future challenges.
At the time of adoption of the MFF, the Commission committed to present a mid-term review
by 1 January 2024.
As per the Commission’s declaration, the review ‘may, as appropriate, be
accompanied by relevant proposals for the revision of the MFF Regulation’.
This Staff Working Document, together with the Communication COM (2023)336, presents
the main elements and outcomes of the review and sets the ground for a necessary and
targeted revision of the MFF.
This analysis builds on the information available at the time of the
presentation of the Draft Budget 2024, as well as the Annual Budget and Performance Report for 2022
and the 2023 Long-Term Forecast of Inflows and outflows of the EU budget
4
to assess the
implementation of the MFF and evaluate the challenges for the remainder of the MFF in light of the
evolving economic and geopolitical context.
2. IMPLEMENTATION: SPENDING PRIORITIES AND CHALLENGES
2.1. A transformative budget
The MFF and NextGenerationEU were adopted at a time when the Union was confronted with
several challenges that required common action.
Not only Europe was facing the largest shock in
modern history with the COVID-19 pandemic, but additional structural changes driven by technological,
European Commission (2023) “European Economic Forecast – Spring 2023“,
European Economy – Institutional Paper
200
Statement of estimates of the European Commission for the financial year 2024, SEC(2023) 250 – June 2023;
COM(2023)406 Annual Management and Performance Report for the EU Budget – Financial Year 2022; COM(2023)390
Report from the European Commission to the European Parliament and the Council – Long-Term Forecast of future Inflows
and Outflows of the EU budget (2024-2028)
3
4
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demographic and the climate crisis, and scarce resources posed significant challenges. New security
threats as well as war in Europe's neighbourhood, and global geopolitical instability characterized
already the external environment.
The composition of the current long-term budget responded to this wide array of challenges.
The EU budget expenditure has been traditionally dominated by agriculture and cohesion policy, with
other instruments and policies gradually gaining ground. For the period 2021-2027 about one third of
the MFF is allocated to new and reinforced priorities. Research, defence, healthcare, migration, among
others, represent 31.9% of the current multiannual framework, up from 23.2% in the MFF 2014-2020
(Graph 1). When NextGenerationEU - a temporary and exceptional instrument - is included, the share of
these new policies and priorities is above 50%.
Graph 1.
Share of the main policy areas in the multiannual financial frameworks excluding (upper chart)
and including NextGenerationEU (lower chart)
60%
50%
40%
30%
20%
10%
New and reinforced
priorities
Common Agricultural
Policy
Economic, Social and
Territorial Cohesion
31,9%
30,9%
30,5%
Administration
6,7%
0%
1988-1992 1993-1999 1995-1999* 2000-2006 2007-2013 2014-2020 2021-2027
60%
56,1%
50%
40%
30%
20%
10%
New and reinforced priorities
20,8%
19,0%
Economic, Social and
Territorial Cohesion
Common Agricultural Policy
Administration
4,1%
0%
1988-1992 1993-1999 1995-1999* 2000-2006 2007-2013 2014-2020 2021-2027
Source:
European Commission.
NextGenerationEU is the most innovative element both from the point of view of its
composition and its financing.
Over the period 2021-2026, the recovery instrument will inject up to
around EUR 807 billion to the EU economy to repair the economic and social damage caused by the
COVID-19 pandemic and to support a greener, more digital, and more resilient EU, better fit for the
current and forthcoming challenges. NextGenerationEU is financed via common Union borrowing on
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financial markets. Whereas the EU was already a well-established issuer on financial markets, with
NextGenerationEU it becomes a major issuer and for the first time it is borrowing to finance spending
programmes (Section 4.2).
The EU budget provides a substantial impulse to investment in Europe.
The EU budget’s impact
on investment is compounded by Member States’ co-financing and in many cases by the leverage effect
of financial instruments crowding in funds from partnering institutions and private investors. Net
investment had declined dramatically after the global financial crisis and struggled to recover in the run-
up to the current MFF. The InvestEU programme,
5
building on the success of its predecessor, leverages
on the budget and brings together different prior financial instruments, generating economies of scale,
thus making a more efficient use of guarantees to crowd-in private investors (Box 1).
By providing financial support to key European policies and priorities, the long-term budget
aims at accelerating Europe’s economic structural transformation.
The EU budget is not only
supporting growth and investment on a durable manner, it also boosts the implementation of structural
reforms that improve the functioning of the economy, bringing further EU added value. The focus is on
the green and digital transitions and ensuring that these occur in an inclusive way.
Box 1. InvestEU two years on
The promotion of investment for recovery, green growth, employment, and well-being across
Europe is one of the EU’s top priorities.
The InvestEU programme is endowed with an EU budgetary
guarantee of EUR 26.2 billion. This is expected to mobilise more than EUR 372 billion over the period
2021-2027 to support investments in key EU policy priority areas, including the green and digital
transitions, research and innovation, the European health sector, strategic technologies, and projects of
common European interest.
InvestEU implementation is on track.
As of June 2023, the Commission has signed guarantee
agreements with 11 implementing partners, already allocating EUR 22.3 billion out of the total available
guarantee. This alone should mobilise more than EUR 290 billion in private investment. The investment
committee has approved 94 operations worth EUR 11.51 billion of the EU guarantee.
Member States can transfer additional resources to InvestEU,
up to 5% of their shared
management funds and up to 4% of the Recovery and Resilience Plan’s total financial allocation under
the Recovery and Resilience Facility. This additional EU guarantee will be implemented in accordance
with InvestEU rules and will be used exclusively for the benefit of the Member State concerned (‘Member
State compartment’). This may bring benefits in terms of policy implementation and higher leverage.
Member States can benefit from ready-made or tailor-made products, a single set of rules including in
specific cases simplified state-aid rules. Up to date, there are EUR 1.7 billion additional guarantees
mobilised through contributions by six Member States under their compartments.
EU support under InvestEU has been reinforced by EUR 1.4 billion additional EU guarantee
through blending operations from nine sectoral programmes.
This either increases the amount of
5
Regulation (EU) 2021/523 of the European Parliament and of the Council of 24 March 2021 establishing the
InvestEU Programme and amending Regulation (EU) 2015/1017.
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the EU guarantee granted, provides a self-standing financial product or may provide a certain amount of
grants to de-risk the investments. The most recent example is the Green Premium Agreement that
provides to the EIB an indicative contribution from the EU Innovation Fund (EUR 220 million), and
Horizon Europe (EUR 200 million) of up to EUR 420 million to be used to co-invest in projects selected by
Breakthrough Energy Catalyst up to EUR 820 million between 2022-2026 to accelerate the deployment
and rapidly commercialise innovative technologies that will help deliver European Green Deal ambitions
and the EU's 2030 climate targets.
2.2. The Union budget response to the COVID-19 pandemic and energy crisis
In early 2020, the COVID-19 pandemic swept across the globe leading to loss of lives, a
sudden exceptional economic contraction and a steep increase in uncertainty, prompting
Member States and the EU to intervene at large scale.
Lockdown measures to contain the virus
severely affected economic activity. All Member States were impacted by this major shock although in a
different way depending,
inter alia,
on the spread of the virus among the population, the type and
severity of the containment measures and the sectoral composition of the economy. To counter these
negative effects and underlying risks, the ECB provided large-scale liquidity, European state-aid rules
were relaxed, and the general escape clause of the Stability and Growth Pact was activated for the first
time to enable Member States to provide immediate budgetary support to their economies.
The EU budget also contributed to the immediate response, through substantial
reprioritization and redeployments (Table 5.1.2).
The Coronavirus Response Initiative (CRII) and the
Coronavirus Response Investment Initiative Plus (CRII+) provided immediate liquidity to Member States'
budgets and made possible the frontloading of cohesion policy funding within the 2014-2020 cohesion
policy programmes. The CRII introduced a range of simplifications, liquidity measures and flexibilities
designed to help Member States respond to urgent needs for the healthcare sector, small and medium-
sized enterprises (SMEs) and labour markets. CRII+ provided the possibility to apply 100% EU co-
financing to operations for one year
6
and facilitated the redirection of available funds from the 2020
allocation. As a result of these measures, Member States spent over 10% more of their cohesion policy
funding in 2020 than they had planned before the pandemic and most of the available funds were
mobilised by the end of 2021 (Graph 2).
The EU budget also backed loans to fund short-time work schemes and similar measures to
effectively safeguard employment and avoid scarring in the labour markets.
The temporary
Support to mitigate Unemployment Risks in an Emergency (SURE) instrument introduced in 2020
provided close to EUR 100 billion in loans to 19 Member States
7
, financed by the issuance of social
bonds. As a result of the measures taken at Member State and EU level, unemployment in the EU-27
went up by substantially less than what could have been expected given the fall in domestic production.
6
7
The CARE package extended the 100% EU co-financing for relevant operations by one additional year.
Belgium, Bulgaria, Cyprus, Estonia, Greece, Spain, Croatia, Hungary, Ireland, Italy, Lithuania, Latvia, Malta, Poland, Portugal,
Romania, Slovenia, Slovakia, Czechia.
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Member States are estimated to have saved EUR 9 billion in interest payments thanks to EU borrowing
to finance SURE, which had lower rates than most of the EU Member States.
8
Graph 2.
The EU Budget’s immediate response to COVID-19 through CRII and CRII+ (EUR billion)
Source:
European Commission.
In May 2020, the Commission put forward a recovery plan that included a revised proposal
for the 2021-2027 MFF and the recovery instrument NextGenerationEU.
Despite the decisive
actions to contain the immediate impact of the crisis, concerns remained that the crisis might trigger a
situation of prolonged sluggish growth, high unemployment and a permanently weakened business
sector. For the EU as a whole, the crisis entailed fundamental risks that the single market level-playing
field could become permanently uneven and widen a gap in living standards. The process of economic
integration and convergence could also be jeopardised.
At the centre of NextGenerationEU is the Recovery and Resilience Facility (RRF), which
provides up to EUR 723.8 billion in grants and loans for reforms and investments.
The RRF
provides financial support to Member States for reforms and investments establishing for the first time
a very strong link between Europe’s must-do’s for economic prosperity as defined in Member States’
Country Specific Recommendations and EU financial support for investments. Payments are subject to
the delivery of agreed milestones and targets. This set-up incentivises the implementation of major
economic, social and environmental reforms, which, in turn, increase the effectiveness of the
investments (Box 2). Member States have flexibility in designing and implementing the measures in a
way that suits their national conditions, which increases their ownership of plans. Technical support for
reforms is available to Member States under the Technical Support Instrument.
NextGenerationEU also reinforces several EU programmes and policies with EUR 83.1 billion.
These include cohesion policy, under the recovery assistance for cohesion and the territories of Europe
(REACT-EU), the Just Transition Fund, the European Agricultural Fund for Rural Development (EAFRD),
InvestEU, rescEU, and Horizon Europe. These can be used until end 2023, as was already the case for the
original allocations. To provide the maximum possible assistance to the Member States, the
Report on the European instrument for Temporary Support to mitigate Unemployment Risks in an Emergency (SURE)
following the COVID-19 outbreak pursuant to Article 14 of Council Regulation (EU) 2020/672,‘SURE after its sunset: final bi-
annual report’ (June 2023).
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implementing conditions are very generous and flexible, including no national co-financing and a high-
level of prefinancing. As of end-2022 almost the full amount was programmed and committed
(99.95%), with 36% paid-out to Member States.
The macroeconomic impact of NextGenerationEU is expected to be sizeable.
European
Commission simulations
9
suggest an impact of 1.2% of GDP by 2026. In particular, the synchronised
fiscal stimulus leads to important positive spillovers across countries: on average, GDP effects are
around one-third larger compared to a counterfactual of a fiscal impulse in one individual country. ECB
analysis points to a somewhat larger growth impact (+1.5% of GDP by 2026)
10
. In particular, in Italy and
Spain, two of the main beneficiaries, the public debt-to-GDP ratio may be substantially lower in a decade
compared to what it would have been without NextGenerationEU.
Box 2. The Recovery and Resilience Facility two years on
All Member States have adopted national Recovery and Resilience Plans (RRPs).
22 RRPs were
adopted in 2021 and 5 in 2022. The RRPs present a comprehensive set of measures with milestones and
targets whose fulfilment is a condition to disbursements. The positive assessment by the Commission of
the RRPs and endorsement by the Council depends on several criteria including their consistency with
Country Specific Recommendations, the impact on growth and job creation and policy costing, in addition
to quantitative requirements for their contribution to climate and digital objectives.
[1]
A key innovative feature of the RRF is that it provides financial support to productivity-
enhancing structural reforms in addition to investments.
The RRF supports Member States in
addressing relevant country-specific recommendations adopted by the Council as part of the European
Semester. As such, the RRF provides political momentum and financial incentives for Member States to
deliver on long-standing and newly emerging reform needs. Meeting such needs is essential to enhance
the resilience and competitiveness of the European economy and to contribute to upward social and
economic convergence. A breakdown by policy area shows that challenges in the areas of research and
innovation, education, skills and life-long learning, energy and climate change as well as transport and
the business environment are well covered in the plans. Member States’ plans are, in general, less
ambitious in policy areas related to taxation or to the long-term sustainability of public finances.
The RRF helps Member States to deliver on jointly identified policy priorities, including the
green and digital transitions and the European Pillar of Social Rights.
About 40% of the total
allocation of the RRPs (EUR 230 billion) contributes to measures aimed at reducing net greenhouse gas
emissions by at least 55% by 2030, and 26% (EUR 131 billion) to measures of digital transformation of
the European society and economy. The RRF’s contribution to the green transition is further reflected in
the mandatory respect of the “do no significant harm” principle, which is essential to ensure the
compatibility of the Facility with the EU’s environmental objectives. Moreover, the Facility also supports
measures that are contributing to the implementation of the European Pillar of Social Rights, the Union
Pfeiffer, P., Varga, J. & in’ t Veld J. (2022). Quantifying spillovers of coordinated investment stimulus in the EU.
Macroeconomic Dynamics,
1-23.
10
Bańkowski (et al), “The economic impact of Next Generation EU: a euro area perspective”,
ECB Occasional Paper Series,
No
291, April 2022 (link).
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of Equality, and the achievement of the 2030 targets in terms of employment, skills and poverty
reduction - with almost 30% (EUR 138 billion) of the RRPs’ allocation dedicated to social expenditure.
As of May 2023, EUR 153.4 billion have been disbursed (EUR 106.3 billion in grants and EUR
47.1 billion in loans) out of around EUR 500 billion committed.
This includes EUR 56 billion in pre-
financing, which was quickly disbursed to provide liquidity in response to the crisis. The level of
disbursements is commensurate to the progress in the achievement of milestones and targets.
There are still some EUR 225 billion of loan support available for Member States for
commitment in 2023.
Ten Member States have expressed an interest in (additional) RRF loans for a
total of around EUR 145 billion for REPowerEU objectives or other
[2]
. Member States have until 31
August 2023 to request loan support.
[1]
Recovery
[2]
Overview
and Resilience Scoreboard (europa.eu)
of Member States' intentions to request RRF loan support.pdf (europa.eu)
The EU economy has largely recovered from the COVID-19 induced shock halfway through
NextGenerationEU implementation.
In almost all Member States, GDP levels and unemployment
rates have returned to pre-pandemic levels by the end of 2022. This strong recovery contrasts with the
experience after the global financial crisis. This can be explained by both the nature of the shock as well
as the coordinated policy response.
However, Russia’s war of aggression against Ukraine massively disrupted the global energy
system and halted the recovery.
The war is causing enormous suffering in Ukraine (section 2.7) and
Russia’s weaponization of energy supply caused economic hardship on EU households and firms as it
pushed energy prices at historical highs and heightened energy security concerns. It also brought to the
fore the EU’s over-dependence on fossil fuel imports from Russia (gas, oil and coal). As a result, in March
2022, EU leaders agreed in the European Council to phase out Europe’s dependency on Russian energy
imports as soon as possible and the Commission presented the REPowerEU plan in May 2022.
REPowerEU, as a new chapter in RRF plans, strengthens the joint effort to end Europe’s
dependence on Russian fossil fuels and to accelerating the green transition and is mainly
financed through redeployments.
REPowerEU entered into force in March 2023. In addition to the
remaining RRF loans, the financial envelope is increased by EUR 20 billion in grants from the sale of EU
Emission Trading System allowances. It allows for voluntary transfers from the Brexit Adjustment
Reserve and higher pre-financing for a faster impact. Member States are to prepare dedicated
REPowerEU chapters complementing their existing RRPs with a massive scaling-up and speeding-up of
renewable energy in power generation, industry, buildings, and transport accelerating energy
independence and the green transition. It is a further step forward under the European Green Deal - the
EU's long-term growth plan to make Europe climate neutral by 2050.
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For more on the European Green Deal and Fit for 55:
https://commission.europa.eu/strategy-and-policy/priorities-2019-
2024/european-green-deal/delivering-european-green-deal_en
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2.3. Digital transition
The digital transformation has been affecting the economy, security and society, further
accelerated by the COVID-19 pandemic.
One of the side effects of the pandemic has been a boost
to internet-based ways of doing things, in particular e-commerce and teleworking but also e-government
and e-health services, the development of new business models, home-work arrangements, and
teleworking at a larger scale. This underscores the critical importance of digital infrastructure and
connectivity. As a result, it has led to a greater recognition of the need to invest in digital technologies
and skills to ensure Europe's competitiveness and resilience in the digital age.
Several investment
programmes in the MFF are supporting digitisation efforts.
A stock-taking exercise conducted in
2023 shows that in 2021-2022, the EU budget contributed to the digital transition by EUR 28.6 billion
12
(EUR 131.9 billion including the RRF) (Graph 3). The EU budget is supporting all key dimensions of the
Digital Compass for the EU’s Digital Decade
13
(Graph 4).
Digital transformation is one of the key investment areas of the 2021-2027 MFF and
NextGenerationEU.
The Digital Europe programme’s (DEP) has financed the deployment of common
data spaces built on innovative, secure and energy efficient cloud-to-edge capabilities. It also promoted
the testing and adoption of trustful artificial intelligence technologies and invested in cybersecurity,
including by deploying a secure quantum communication infrastructure (EuroQCI). 31% of Horizon
Europe's budget is dedicated to the digital transformation, under the ‘Digital, industry and space’ cluster.
The digital strand of the Connecting Europe Facility (CEF Digital), in its first programme call, is supporting
38 selected projects to receive EU funding to support safe, secure and sustainable high-performance
infrastructure, totalling EUR 150 million. CEF Digital also contributes to the increased capacity and
resilience of digital backbone infrastructures in all EU territories. The second round of CEF-Digital calls,
worth EUR 240 million, attracted 69 proposals that are currently being evaluated. The Transport strand
of the CEF is also making a key contribution by supporting the digitisation of transport in particular the
European Rail Traffic Management System (ERTMS). As a result of the first Transport calls for proposals
for ‘Actions related to smart and interoperable mobility’, 31 actions with programme co-funding of more
than EUR 500 million have been awarded.
Graph 3.
Estimated contributions to the digital transition of the MFF and NextGenerationEU in 2021 and
2022 in EUR million (left scale) and in percentages of their total implementation (right scale)
The exercise aggregates the contributions of the EU budget programmes using different tracking methodologies. A fully-
fledged digital tracking methodology will be put in place in the coming years. The contributions are based on the annual voted
budget, contributions from partners and third countries and NextGenerationEU. The overall amount may be larger as due to
methodological limitations some programmes’ contributions are underestimated (i.e. InvestEU, CAP).
13
https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/europes-digital-decade-
digital-targets-2030_en
12
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Source:
European Commission based on the first stock-taking exercise.
The execution rate of the programmes supporting the digital transformation has been high,
which reflects their strong demand.
The execution rate is currently nearly 99% of the voted
commitment appropriations, and implementation in these programmes is expected to gain cruising speed
in 2023. This is despite the late adoption of the relevant legal bases, which required postponing by
several months actions initially planned to start in late 2021 and in 2022.
Graph 4.
Estimated contributions of the MFF and NextGenerationEU to the digital transition in 2021 and
2022 by key digital dimensions (EUR billion)
Source:
European Commission based on the first stock-taking exercise.
The Commission has proposed several initiatives to develop secure and resilient supply
chains in strategic sectors as a response to the evolving geopolitical landscape, including in
the digital area with the European Chips Act.
The Chips Act will mobilise over EUR 43 billion of
public and private investments to ensure that the EU has the tools, skills and technological capabilities to
become a global leader in semiconductor technologies and applications, to secure its supply of
semiconductors and to reduce its dependencies. Given the very limited financial availabilities within the
MFF, achieving a budget of EUR 3.3 billion has been extremely complex and necessitated a combination
of multiple funding sources: the original Commission proposal’s redeployments from Horizon Europe and
13
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the Digital Europe Programme for EUR 2.9 billion
14
; EUR 100 million from the 2023 margin of Heading 1;
EUR 125 million through redeployment of the pre-existing strands of the Digital Europe Programme to
the new Semiconductor objective; EUR 50 million through redeployment from ITER in 2024; EUR 50
million of future margins to be allocated to Digital Europe during the annual budgetary procedure and
EUR 75 million from decommitments.
To address the emerging challenges in the digital sector, there have been significant
redeployments and extensive utilisation of margins, which are by now depleted.
For the
remainder of the MFF, margins under heading 1 stand at EUR 215 million in total over 2024-2027
(ranging from EUR 10 million in 2026 to EUR 167 million in 2024), i.e. one fifth of the amounts in the
adopted MFF
15
(Table 5.2.2 and section 3.1). In combination with the momentum gained in programme
implementation, these limited margins render it unfeasible to rely on further redeployments or margins
to finance new future requirements.
2.4. Cohesion policy and the green and digital transition
EU cohesion policy aims at strengthening social, economic and territorial cohesion across EU
regions, mostly through investments and creating employment opportunities.
For the 2021-
2027 MFF, the total funding under Cohesion policy amounts to EUR 392 billion
16
, roughly a third of the
EU budget. Cohesion policy programmes are delivered through the European Regional Development Fund
(ERDF), the European Social Fund Plus (ESF+), the Cohesion Fund (CF) and the Just Transition Fund (JTF).
In addition, REACT-EU aims to foster crisis repair capacities in the context of the COVID-19 pandemic, by
completing resources available under the 2014-2022 programmes as discussed in Section 2.2. Due to
their size, cohesion policy funds have played a key role in addressing the fallout of COVID-19 and the
war in Ukraine, through increased flexibility and unprecedented reprogramming of 2021-2020
programmes,
17
and are supporting the Green Deal Industrial Plan.
18
The new Cohesion funds are tuned
towards a record contribution on climate objectives, increasing their climate contribution from 20% in
2014-2020 to 31% in 2021-2027 (see section 3.4).
Cohesion policy funds present flexibilities that allow to adjust the programming to specific
needs, while reflecting EU key priorities.
Member States can transfer up to 25% of the respective
initial allocations between the three funds (ERDF, CF and ESF+). In the Partnership Agreements adopted
before the end of 2022, only a limited number of Member States opted for transfers to funds and
instruments outside of cohesion policy (Bulgaria, Czechia, Germany, Greece, Finland, Malta and Portugal)
for a total of EUR 918 million (i.e. 0.25% of the total cohesion envelope), while almost all used the
possibility of transfers between the three Cohesion policy funds. Moreover, Member States can transfer
Excluding the EUR 400 million of redeployment from Horizon Europe to Digital Europe to be compensated by re-
commitments.
15
The margin in Heading 1 for 2021-2027 at the beginning of the MFF was equal to EUR 1.06 billion (see Table 5.2.1).
16
Includes the full allocation for the ERDF, ESF+, Cohesion fund (includng CEF) and the Just Transition Fund. The amounts
presented in table 5.1.1 are net of the transfers to other funds as presented in the Draft Budget 2024.
17
As discussed in Section 2.2 concerning COVID-19 and 2.7 on the war in Ukraine.
18
Communication from the Commission to the European Parliament, the European Council, the Council, the Economic and
Social Committee and the Committee of the Regions
ʺA
Green Deal Industrial Plan for the Net-Zero Ageʺ, COM(2023)62 final.
14
14
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up to 5% to other funds implemented in shared management, and to several funds and instruments
implemented in direct management.
19
In addition, to respond quickly to future exceptional or unusual
circumstances, a flexibility mechanism has been inbuilt into the Cohesion policy funds regulations to
allow temporary measures as an emergency response.
The framework governing the 2021-27 Cohesion Funds has been simplified compared to
previous programming period.
In addition to the above-mentioned flexibilities, the number of
objectives has been reduced from eleven in 2014-2020 to five (Graph 5). Other simplifications aim at a
faster and better implementation, and higher legal certainty for managing authorities and beneficiaries.
Member States are encouraged to use Simplified Cost Options in the form of unit costs, lump sums and
flat rates, as well as financing not linked to the costs based on the achievement objectives.
Furthermore, the number of verifications follow a proportionate risk-based approach, instead of covering
100% of operations, reducing control burden and total administrative costs by 2-3% . Enabling
conditions, ensuring that Member States put in place strategies and mechanisms for the efficient and
effective implementation of the specific objectives, have also been streamlined and reduced compared
to
the
previous
programming
period.
Graph 5.
Cohesion policy budget (EU amount, EUR billion)
By Policy Objective, 2021-2027 period
Source:
European Commission, cohesion open data platform.
The late adoption of the MFF and the sectoral legal bases is weighing on implementation.
None of the 2021-2027 programmes under the Common Provisions Regulation were adopted in the first
year and most of them were adopted only towards the end of 2022, with 9 programmes adopted in
carry-over at the beginning of 2023. As a result, in line with Article 7 of the MFF Regulation, the
Commission adopted an adjustment of the MFF, reprogramming commitment appropriations of EUR 49
Regulation (EU) 2021/1060 of the European Parliament and of the Council laying down common provisions on the
European Regional Development Fund, the European Social Fund Plus, the Cohesion Fund, the Just Transition Fund and the
European Maritime, Fisheries and Aquaculture Fund and financial rules for those and for the Asylum, Migration and
Integration Fund, the Internal Security Fund and the Instrument for Financial Support for Border Management and Visa Policy.
19
15
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billion from 2021 from shared management funds
20
, that could not be used in 2021 nor carried over to
2022.
Furthermore, the implementation of the new generation of cohesion policy lags behind
compared to the previous MFF .
The implementation of the 2021-2027 cohesion programmes started
in 2022 with the disbursement of part of the pre-financing. In 2023 and 2024, additional pre-financing
and first interim payments will be disbursed, though at slower pace than in the previous programming
period. Several factors explain such delayed implementation. First, the late adoption of the legal bases
mentioned above. Second, the prioritisation of re-programming under the 2014-20 framework , crises
related measures under CRII, CRII+, REACT-EU, the Recovery and Resilience Facility, with shorter
timeframes for programming and implementation. Given these delays, cohesion programmes for the
period 2021-2027 are forecast to face important risks of de-commitments from 2025 unless Member
States undertake additional efforts to catch up with the one-year implementation gap.
21
Delivering on the green transition should leave no-one behind.
The implementation of the Just
Transition Fund, a brand-new instrument financed by both MFF and NGEU resources to support climate
transition in those regions mostly affected by the transition towards climate neutrality, is delayed. A
total of EUR 10.9 billion (55% of the total allocation of the Just Transition Fund) will need to be paid
within the next three years given the 2026 deadline for payments under NextGenerationEU. Furthermore,
almost no payments under the MFF ceilings are planned in the budget 2023 and in the draft budget
2024, which increases the risk of decommitments unless Member States substantially accelerate the
implementation in years 2025 and 2026.
22
The Social Climate Fund (SCF) will provide EUR 65 billion to
Member States over the period 2026-2032 to support policies to address the social effects for the
introduction of the emissions trading system for buildings and road transport on vulnerable households,
vulnerable micro-enterprises and vulnerable transport users. The fund will exceptionally and temporarily
be financed from the revenues generated from the new ETS for buildings and road transport.
2.5. Common Agricultural Policy
The total allocation for the Common Agricultural Policy (CAP) under the 2021-2027 MFF
including NextGenerationEU amounts to EUR 386.6 billion, about one third of the MFF.
Its first
pillar, the European agricultural guarantee fund (EAGF) has an allocation of EUR 291 billion. Up to EUR
270 billion will be provided for income support schemes, with the remainder dedicated to other
measures supporting agricultural markets. The total allocation for the ‘second pillar’, the European
agricultural fund for rural development (EAFRD), amounts to EUR 95.5 billion. This includes EUR 8.1
billion from NextGenerationEU.
European Regional Development Fund, the European Social Fund, the Cohesion Fund, the Just Transition Fund, the European
Agricultural Fund for Rural Development, the European Maritime and Fisheries Fund, the Asylum and Migration Fund, the
Internal Security Fund and the Border Management and Visa Instrument under the Integrated Border Management Fund.
21
COM(2023)390 Report from the European Commission to the European Parliament and the Council – Long-Term Forecast
of future Inflows and Outflows of the EU budget (2024-2028)
22
COM(2023)390 Report from the European Commission to the European Parliament and the Council – Long-Term Forecast
of future Inflows and Outflows of the EU budget (2024-2028)
20
16
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The CAP 2023-2027 increased flexibilities for the Member States under their national CAP
Strategic Plans.
Member States have used possibility to transfer a maximum of 25% of their national
envelopes between the two CAP pillars: the transfers between pillars of the CAP communicated by
Member States will result in a net transfer of EUR 4.8 billion from pillar I (EAGF) to pillar II (EAFRD) for
the years 2024-2027.
23
Member States can also apply additional flexibilities for certain purposes, such
as supporting environment and climate objectives, supporting young farmers and where countries have
below-average direct payments. Moreover, the CAP includes a reserve amounting to at least
EUR 450 million a year that has been already mobilised to provide exceptional market support for eggs
and poultry as well as emergency support for cereal and oilseeds (see also Section 2.7.2).
Member States have more ambitious environment and climate actions than in the previous
programming period in their strategic plans.
They had to take into account European legislation on
climate change, energy, water, air, biodiversity and pesticides including the European Green Deal targets.
Three out of ten of the CAP’s specific objectives directly concern the environment and climate – covering
climate change, management of natural resources, and biodiversity. CAP’s contribution to the climate
objective is on track, but a more substantive contribution to biodiversity would be necessary to meet the
MFF biodiversity targets (see section 3.4).
By the end of 2022, all the strategic plans for the CAP 2023-2027 were approved and
implementation started in January 2023.
The transitional provisions extending the 2014-2020
programmes allowed the continuation of the implementation in 2021 and 2022.
24
As for the EAFRD,
implementation accelerated on NextGenerationEU financing, while the implementation of the EAFRD-
supported projects presented some under-execution in 2021 and 2022. The 100% co-financing rate of
the NextGenerationEU part may explain that. With the 2014-2022 EAFRD programmes continuing their
course and the implementation of the new CAP plans starting, the payments are projected to run steadily
in the coming years.
2.6. Protecting EU citizens: responding to emergencies
From the onset of the COVID-19 pandemic, the EU took measures to protect its citizens and
tackle the health crisis.
As soon as April 2020, all availabilities remaining in the 2014-2020 MFF
were mobilised to provide EU emergency support for the coronavirus health response, e.g. medicines,
vaccines and protective equipment, as discussed in Section 2.2. The updated proposal for the 2021-
2027 MFF presented by the Commission in May 2020, together with NextGenerationEU, included a new
programme, “EU4Health, significant reinforcements of the Union Civil Protection Mechanism
(UCPM)/rescEU and a scale-up of the Union’s budgetary capacity to address future health crises or major
disasters, which clearly represent cross-border challenges.
In the 2014-2022 period, the net transfer from the EAGF to the EAFRD amounted to EUR 5.9 billion, on average EUR 0.65
billion per year.
24
As set out in the
transitional regulation
adopted on 23 December 2020.
23
17
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EU4Health significantly strengthens EU financial support in the health area, with a budget of
more than EUR 5.5 billion in 2021-2027.
In comparison, budget related to health had a budget of
around EUR 450 million in the previous MFF. The COVID-19 pandemic spotlighted the fragility of the
national and local health systems and the need for a coordinated strong action at Union level: EU4Health
thus contributes to building strong foundations for a European Health Union. In addition, the
Commission’s Health Emergency Preparedness and Response Authority (HERA) started operating in
October 2021 aiming at anticipating threats and potential health crises, through intelligence gathering
and building the necessary response capacities.
The Union Civil Protection Mechanism/rescEU has an overall budget of EUR 3.3 billion from
the MFF and NextGenerationEU, five times larger than in the previous MFF.
The reinforcements
under NextGenerationEU contribute exclusively to build EU preparedness and response capacity to health
and chemical, biological, radiological and nuclear (CBRN) threats. As the number and intensity of forest
fires increased in recent years, EUR 195 million of the UCPM envelope was frontloaded to 2021-2023
from to 2024-2027 to accelerate the procurement of Canadairs and helicopters and to accelerate the
availability of forest fire-fighting ground assets. The UCPM has been under strong pressure to respond
rapidly to major emergencies like the consequences of the war in Ukraine. For instance, the transport of
in-kind assistance from Member States and third countries to Ukraine, the medical evacuations of
patients, as well as the establishment and operability of 3 UCPM hubs in Poland, Romania and Slovakia
required a budgetary reinforcement of EUR 124.5 million.
EU response to emergencies has been reinforced with the Solidarity and Emergency Aid
Reserve (SEAR).
This thematic special instrument with a maximum annual financial envelope of EUR
1.2 billion (in 2018 prices) mobilises financial resources over and above the ceilings of the MFF 2021-
2027 to act for emergency situations provoked by major natural disasters or public health crises in
Member States and accession countries. Moreover, it can also support non-EU countries suffering from
conflicts, refugee crisis or natural disasters.
The MFF Regulation establishes three periods of the year for the utilisation of the SEAR:
During the first period, from 1
st
January to 31
st
August, 75% of the annual SEAR allocation can be
mobilised, which is equally split between the Union Solidarity Fund (EUSF) and the Emergency Aid
Reserve (EAR). The remaining 25% is held in reserve until 1
st
October. During the second period, from 1
st
September to 30
th
September, any unspent amounts from the first period for any of the SEAR
components can be used. The third period, from 1
st
October to 31
st
December, enables the utilisation by
any of the SEAR components of the unspent amounts from the first and second periods and the reserved
25%. All these rules resulted in complicated decision-making, increased the ompetition between the
different strands and challenged the planning.
The SEAR amounts are rapidly used and seem insufficient to cover all needs.
The requests from
major emergencies under the EUSF (COVID-19, earthquakes, floods in Germany, Belgium, the
Netherlands, Luxembourg, Austria and Italy, and recently the earthquake in Türkyie)
25
and for emergency
response (e.g. Humanitarian Aid in Ukraine and Moldova and impact of the food crisis worldwide, support
to Member States in the reception of refugees and civil protection following the Russian war of
25
Candidate Countries are eligible for support of the EUSF.
18
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aggression against Ukraine) have been much higher than available resources. The aid granted to the 20
applications by Member States and candidate countries for COVID-19 represented 53% of the potential
aid amounts. The aid granted to Germany, Belgium, Luxembourg, the Netherlands, and Austria following
the 2021 summer floods, to Greece for the earthquake in Crete and to Spain for the volcanic eruption in
La Palma had to be reduced by 63% compared to the potential aid amounts.
2.7. The fallout of Russia’s war against Ukraine
2.7.1.
Support to Ukraine and Ukrainians
The unprovoked and unjustified Russian war of aggression against Ukraine has caused
terrible human suffering and massive destruction of towns and communities.
Lives and
livelihoods are being lost, with millions of people forced from their home countries in search of safety.
Such dramatic events have also changed the level and type of approach initially planned from the EU
budget to Ukraine before the invasion. Before the start of the invasion in February 2022, the estimated
EU budget support to Ukraine was around EUR 160 million per year (or EUR 1.1 billion for 2021-2027).
The EU and its Member States have shown unwavering solidarity with people fleeing the war
in Ukraine and immediately mobilised support to the Ukrainian government to maintain its
basic functions.
The planned programmes for Ukraine have been redesigned and adapted to respond
to the needs generated by the war, through budgetary top-ups, frontloading, redeployments and using
available flexibilities. For example, of the EUR 1 billion originally programmed for provisioning of MFA
loans under the Neighbourhood, Development and International Cooperation Instrument – Global Europe
(NDICI – Global Europe) for 2021-2027, EUR 648 million have been used for Ukraine (EUR 7.2 billion in
loans) and EUR 20 million for Moldova (EUR 220 million in loans). EUR 2.6 billion from NDICI cushion
over 2021-2027 have been planned to finance support to Ukraine, including the provisioning of the EIB
repurposed loans and the interest rate subsidy on the MFA1 and MFA2 loans in 2022.
All in all, since the beginning of the Russian invasion, the EU, its Member States and the
European Financial Institutions have mobilised EUR 38.3 billion in financial assistance to
Ukraine, under a Team Europe approach (Graph 6).
This includes EU budget support of EUR 30.5
billion and bilateral support from EU Member States of EUR 7.8 billion. The military assistance to
Ukrainian Armed Forces from EU Member States amounts to around EUR 15 billion, including the support
from the European Peace Facility and a military training mission for Ukrainian soldiers. The total Team
Europe support to Ukraine therefore amounts to EUR 53 billion. Together with EUR 17 billion mobilised
by the EU and its Member States to support people fleeing Ukraine, this brings the total support to
Ukraine and its people to EUR 70 billion.
For 2023, the backbone of the EU support to Ukraine is the EUR 18 billion Macro Financial
Assistance Plus (MFA+) Instrument that will help the functioning of the Ukrainian State and
its vital services.
EUR 7.5 billion were already disbursed as of May 2023. This highly concessional
instrument offers flexibility and very favourable terms for Ukraine, catering to the country’s current
situation and ensuring swift action to support the Ukrainian people. To secure the funds for the loans,
the Commission borrows on capital markets through its unified funding approach. The borrowing for
19
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Ukraine for MFA+ is guaranteed by the headroom of the EU budget, which provides the most robust
financial safeguard. This is a change as the headroom was previously used only to guarantee the
borrowing for financial assistance programmes to Member States.
Graph 6.
Team Europe’s financial assistance to Ukraine since 2022
The EU budget gave decisive support to the millions of people that have fled the war, seeking
refuge in EU countries and in the Republic of Moldova.
The Temporary Protection Directive
26
, which
had been adopted following the conflicts in former Yugoslavia, was triggered for the first time by the
Council on 24 February 2022 to offer quick and effective assistance to people fleeing the war in Ukraine.
4 million refugees from Ukraine registered for temporary protection or similar schemes in the EU. EU
Home Affairs Funds were granted more flexibility to facilitate the use of unspent 2014-2020 funds.
EUR 400 million were made available through Emergency Assistance under the Asylum Management and
Integration Fund (AMIF) and Border Management and Visa Instrument (BMVI) Thematic Facilities for
frontline Member States, to assist with the first reception and early integration of Ukrainians entering
the EU. The AMIF Regulation was also amended to provide additional flexibility and funding from
contributions made by Member States and by other public or private donors.
27
Humanitarian needs increased dramatically during the past years, because of a multitude of
crises and natural disasters worldwide.
According to the 2022 Global Humanitarian Overview
(published before the start of the war in Ukraine), the number of people in need of humanitarian
assistance and protection globally has reached 274 million, a significant increase compared to 235
million in 2021 and 168 in 2020. This has been further aggravated by the Russian invasion of Ukraine,
which triggered the fastest-growing refugee crisis in the world. Over 8 million people have left Ukraine
according to OHCHR and about 5 million moved within the country according to the International
Organization for Migration (IOM), most of them women and children. Meanwhile, many others are still
stranded in affected areas, either unwilling or unable to leave as a consequence of military action.
Council Directive 2001/55/EC of 20 July 2001 on minimum standards for giving temporary protection in the event of a
mass influx of displaced persons and on measures promoting a balance of efforts between Member States in receiving such
persons and bearing the consequences thereof.
27
OJ L 112, 11.4.2022, p. 1–5
26
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Humanitarian aid remains one of the most pressured instruments under the EU external
action spending policy.
It continuously relies on ad-hoc budgetary reinforcements from other funding
sources, i.e. margins, redeployments, Solidarity and Emergency Aid Reserve (SEAR), recommitments from
European Development Fund, to provide support given several emergencies such as Syrian refugees,
COVAX, famine, fighting hunger in Afghanistan, crises in West and Central Africa, etc. This trend is
unlikely to slow down, also due to the impact of the war in Ukraine on worldwide food security and the
recent Türkiye and Syria earthquakes. Since February 2022 the European Commission has allocated EUR
733 million for humanitarian aid programmes to help civilians affected by the war in Ukraine. For
Ukraine, the EU has mobilised EUR 485 million for 2022 (EUR 685 million including the first half of
2023), that is 2.5 times higher than in the previous years (2014-2021).
Cohesion policy funds have been mobilised extensively to support Ukrainian refugees and
hosting Member States.
Amendments concerning 2014-2020 and 2021-2027 programmes were
adopted, in the Cohesion's Action for Refugees in Europe Packages (CARE and FAST CARE), with a view of
alleviating the budgetary pressure on Member States and allowing faster and more flexible use of
available funding to provide emergency support to people fleeing Ukraine and arriving to their territory.
This includes investments in education, employment, housing, health, and childcare services, including
basic material assistance like food and clothing. Moreover, cohesion policy funds have also been
provided flexibility through the Supporting Affordable Energy (SAFE) initiative – enabling support for
SMEs most exposed to the negative effects of the energy crisis as well as for vulnerable households.
In total, Member States received EUR 7 billion of additional pre-financing, equally split in
2022 and 2023 between REACT-EU and 2021-2027 programmes, and EUR 6.7 billion of
payments were frontloaded due to the 100% co-financing ending on 30 June 2022.
Easier re-
programming and cross eligibility between ERDF, ESF and CF for the 2014-20 programmes were also
available. Under the 2014-2020 programmes, Member States can also declare expenditure based on
unit cost at a rate of EUR 100 per week per registered refugee for a maximum of 26 weeks. Based on
the information from Member States, the uptake of this simplification amounts to around EUR 489
million as of 30 April 2023. Furthermore, Member States can also programme resources under a
dedicated priority benefitting from the possibility of 100% co-financing to support the socioeconomic
integration of refugees. As of end-April 2023, such measures dedicated EUR 1 095 million and EUR 721
million for the programmes under the 2014-2020 and 2021-2027 periods.
To provide emergency assistance to Ukrainians, the European Commission is coordinating the
largest ever operation under the Union Civil Protection Mechanism (UCPM).
Also, thanks to the
EU budget, all 27 EU countries, plus Norway, Türkiye, North Macedonia, Iceland, and Serbia, have offered
in-kind assistance ranging from medical supplies and shelter items to vehicles and energy equipment.
The EU has established logistical hubs in Poland, Romania, and Slovakia to channel suppliest to Ukraine
more efficiently. To date, more than 88,0500 tonnes of aid have been delivered. Given the immense
need for emergency equipment in Ukraine, the EU has deployed assistance from its rescEU medical
stockpiles, including power generators, medical equipment, temporary shelter units, specialised
equipment for public health risks such as chemical, biological, radiological and nuclear threats.
Furthermore, the EU is coordinating medical evacuations of Ukrainian patients in urgent need of
treatment, transferring them to hospitals across Europe to receive specialised care.
21
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The Erasmus+ programme is also supporting the education of the many children and young
people fleeing Ukraine following the Russian invasion.
As set out in the Commission
Communication on ‘Welcoming those fleeing war in Ukraine: readying Europe to meet the needs’
5
,
Erasmus+ will play a key role to help the education and training systems by supporting learners and
teachers, schools, vocational education and training institutes, higher education institutions, as well as
youth organisations and NGOs. In 2023, the programme has been reinforced by EUR 100 million to
pursue these objectives.
2.7.2.
The fallout of the war in the EU and third countries
The war provoked a massive shock to the global and EU economy, especially to energy and
food markets, affecting vulnerable economies and pushing up prices.
This has especially
affected the grain and oilseeds markets for which both Russia and Ukraine are major exporters. Support
under NDICI and Humanitarian Aid has been provided to deal with the global repercussions on the food
markets, often thanks to the mobilisation of special instruments. In addition, EUR 600 million were made
available again by the EDF to promote food security in Africa, Caribbean and Pacific (ACP).
Increased input costs and food inflation resulting from the war continue weighing on
agricultural markets and consumers’ purchasing decisions in the EU.
Farm income increased on
average, though with significant sectoral and regional disparities, as high commodity prices counter for
the rising input costs
28

As part of its Communication “Safeguarding food security and reinforcing the
.
resilience of food systems” of 23 March 2022, the Commission adopted exceptional EU budget support
measures of EUR 500 million to farmers that could be topped up with national resources up to EUR 1.5
billion. This measure has been taken up well by Member States with an implementation of EUR 492,2
million (98,4%). Private storage aid for pig meat was also activated for a total amount of EUR 17 million
over 2022 and 2023. In addition, the Commission has granted an exceptional and temporary derogation
to allow the production of crops on land set aside within the EU, while maintaining full greening
payments for farmers.
Market access granted to Ukraine and the EU Solidarity Lanes are crucial for Ukraine’s
resilience and to ensure that exports reach markets around the world. However, the
unexpected surge in imports in neighbouring countries risks disrupting the markets for some
agricultural goods.
As of April 2023, the Commission has proposed two support packages to the
affected countries using the resources of the crisis reserve under the CAP. The first package providing
emergency support for cereal and oilseed sectors in Bulgaria, Romania and Poland amounted to EUR
56.3 million from the agricultural reserve, with the possibility for Member States to top it up with
national contributions of up to 100%. The second package amounts to EUR 100 million in support also
from this reserve to Bulgaria, Romania, Poland, Hungary, and Slovakia. Member States can complement
it with national contributions of up to 200%.
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Short-term outlook report: war in Ukraine continues to impact EU farmers (europa.eu)
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Exceptional temporary aid under the EAFRD was introduced in May 2022 to support farmers
and SMEs affected by the consequences of Russia’s invasion of Ukraine.
This measure allows
Member States to amend their rural development programmes up to 5% of their 2021-2022 EAFRD
allocation to provide liquidity support in the form of one-off lump sums to farmers and agri-food
businesses affected by significant increases in input costs. The measure has been activated in 26 rural
development programmes in 10 Member States for a total planned amount of some EUR 409 million,
representing an uptake of 30% of the maximum possible allocation.
The EU also provides substantial support to Moldova, an EU candidate country since June
2022.
EUR 782 million of financial assistance have already been pledged, including EUR 250 million to
help Moldova to overcome the energy crisis. Russia’s war of aggression against Ukraine has particularly
affected Moldova with over 600,000 refugees entering the country and around 80,000 still on Moldovan
territory. Relative to its population of just over 2.5 million, Moldova is the country hosting most refugees
per inhabitant. During these times of heightened vulnerability, the EU has been standing firmly with
Moldova, an associated country with the EU and key partner in the Eastern Partnership.
Since May 2022, the European Commission has implemented, hand in hand with Ukraine,
Moldova and bordering EU Member States, several actions under the 'Solidarity Lanes'
initiative to help Ukraine export its agricultural production.
This helps counter the threat to
global food security following Russia's invasion and its blockade of Ukrainian ports. The Solidarity Lanes
initiative benefits from substantial EU budget support. The European Commission, EU Member States
and International Financial Institutions have pledged to mobilise EUR 1 billion for Solidarity Lanes to
increase global food security and provide a lifeline for Ukraine's economy. By end 2023, the Commission
together with Member States will dedicate EUR 250 million in grants through the EU budget and
EUR 50 million to support the infrastructure developments needed to increase further the capacity of the
Solidarity Lanes, financed by NDICI-Global Europe and Connecting Europe Facility. In addition, the
European Investment Bank and the European Bank for Reconstruction and Development intend to invest
up to EUR 300 million each on projects that respond to the Solidarity Lanes objectives and
USD 100 billion from World Bank Group.
The urgency for the EU budget to respond to Russia's invasion of Ukraine has significantly
depleted the availabilities, margins and flexibilities of the EU budget for external policy.
This
reduces the capacity of the Union to support react on other fronts requiring external action funding.
Whereas Heading 6 is larger in the MFF 2021-2027 compared to the previous period (+17% in current
prices), most of this reinforcement is the result of the budgetisation of the European Development Fund
(EDF). Moreover, NDICI has a decreasing profile over the period, which implies that the geographic lines
(especially for Neighbourhood) will be reduced.
The most evident example of the depleting flexibilities is represented by the use and planning
of the NDICI-Global Europe cushion.
The emerging challenges and priorities cushion caters for
unforeseen needs and priorities. It can be used to top-up the three pillars of the instrument (geographic,
thematic and rapid response pillars). The cushion, which built on the previous experience under the
European Development Fund, has increased the Union’s ability to respond to unforeseen needs. However,
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this ability has now been greatly diminished early in the multiannual cycle. The overall financial envelope
of the cushion was EUR 9.5 billion. In 2021-2023, the cushion has been fully used, and 61% is already
planned in 2024-27. Hence, at mid-term, almost 80% has been used or planned (Table 5.2.4 in the
annex). One third of the cushion expenditure was used or programmed for Ukraine, EUR 2.6 billion. A
high amount has also been used or programmed for global support for vaccines (EUR 1.3 billion) and the
Syrian refugees package (EUR 1.2 billion).
Besides the global humanitarian needs described above, the other main (non-exhaustive) challenges and
sources of pressure on Heading 6 of the MFF can be summarised below.
Syrian refugees:
the needs regarding refugees in Türkiye on the ground are not decreasing. It is
unlikely that Turkish authorities will be able take over the costs for the refugees any time soon, also
given the expected reconstruction needs related to the recent earthquakes affecting Türkiye and
Syria. The needs of Syrian refugees might increase even further considering the massive number of
displaced people following such natural disaster and will not only affect refugees in Türkiye itself
but also Syria, Jordan, Lebanon, Iraq. The needs for 2024-2027 are largely uncovered. Given the
significant pressure on all headings of the budget and the depleted flexibilities, including in the
NDICI cushion, it would be very difficult to cover these needs with the current availabilities.
The financial impact of Moldova and Georgia as EU accession countries, which is still
under assessment.
The European Council in its conclusions of 23 March 2023 stressed that ‘[…]
The European Union will continue to provide all relevant support to the Republic of Moldova,
including to strengthen the country’s resilience, security, stability, economy and energy supply in the
face of destabilising activities by external actors, as well as support on its accession path to the
European Union. The European Council invites the Commission to present a support package ahead
of its next meeting.
External aspects of migration:
indicatively 10% of NDICI will support management and
governance of migration and forced displacement, as well as address the root causes of
irregular migration and forced displacement when they directly target specific migration challenges.
However, following the closure of the Trust fund for Africa, there is growing expectations on
preserving at least the same levels of funding for the Southern Mediterranean route (EUR 208
million per year), to which the Commission had also committed. This creates a gap of around
EUR 100 million/year (including for 2024) in the Neighbourhood South line of NDICI. This is a point
of further attention following the EUCO of 9 February 2023, which put an accent on the need to
increase returns by intensifying cooperation with countries of origin and transit covering all
migratory routes, ‘also with adequate resources’, including under NDICI.
Provisioning for guarantees:
the geographic lines of NDICI and IPA cover the additional needs for
provisioning of the former External Lending Mandate, Euratom legacy and Macro-Financial
Assistance legacy loans, which come on top of the provisioning of the External Action Guarantee
under the current MFF. Since NDICI has a decreasing financial profile in the MFF, this means that the
geographic lines (especially for Neighbourhood) will be affected by these increased needs. More
generally, MFA has proved an effective tool for supporting neighbouring countries experiencing
balance of payments difficulties. However, limited remaining availabilities in the Common
Provisioning Fund to provision for additional Macro-Financial Assistance loans imply that there will
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be little to no room for more measures of this type under the current MFF, in particular given the
proposal of a EUR 900 million MFA loan to Tunisia.
Box 3. Future EU support to Ukraine
The Ukrainian economy contracted in 2022 by around 35%, according to the World Bank.
Over one year since the start of the Russian invasion, no sector in Ukraine has remained
untouched by the war.
If the war continues through 2024, Ukraine will still need budgetary support for
its functioning and immediate needs. The IMF estimates Ukraine’s financing gap at USD 81.6 billion in
2024-2027 (assuming the war winds down in the first half of 2024). Fully fledged reconstruction will be
possible only when the war is over, but some early reconstruction and fast recovery operations are
already starting. The overall needs for the reconstruction of Ukraine are not yet known and the
distinction between immediate and long-term needs is increasingly blurred. Nevertheless, it is important
to design the main building blocks of this international effort already at this stage.
A major global financial effort will be required to rebuild Ukraine once the war is over.
A
second joint assessment, Rapid Damage and Needs Assessment (RDNA2
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), released in March 2023 by
the Government of Ukraine, the World Bank Group, the European Commission, and the United Nations,
estimates that the cost of reconstruction and recovery in Ukraine has grown to USD 411 billion
(equivalent of EUR 383 billion). The estimate covers the one-year period since the start of Russia’s
invasion of Ukraine on 24 February 2022. The cost of reconstruction and recovery is expected to stretch
over 10 years and combines needs for both public and private funds. The EU is already contributing
substantially to boost the country’s ongoing resilience, but more support will be needed in the medium to
long-term: to re-establish the foundations of a free and prosperous country, anchored in European
values and well-integrated into the European and global economy, and to support it on its European
path. Given the scale of the challenge, the recovery efforts need to be an inclusive multi-stakeholder
process, involving both public and private sectors, as well as international organisations and international
financial institutions (IFI).
In this regard, the Multi-agency Donor Coordination Platform to support Ukraine's repair,
recovery and reconstruction process, launched on 26 January 2023, is a key forum.
The
Platform allows for close coordination among international donors and financial organisations and
ensures coherent, transparent, and accountable support. It aims to ensure enhanced coordination
amongst all key players providing short-term financial support but also longer-term assistance for the
reconstruction phase. In this way, it builds on the results of the Conferences in Lugano, Berlin and Paris,
to help bridge the gap between needs and resources as well as on the May 2022 Commission’s
communication on ‘Ukraine relief and reconstruction’
30
.
A structural solution is needed to support Ukraine for the remainder of the current MFF. The
World Bank; Government of Ukraine; European Union; United Nations. Ukraine - Rapid Damage and Needs Assessment:
February 2022 – 2023 (English). Washington, D.C. : World Bank Group.
http://documents.worldbank.org/curated/en/099184503212328877/P1801740d1177f03c0ab180057556615497
30
COM/2022/233 final
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solution will need to strike the right balance between the flexibility to adapt to the evolving
situation on the ground and predictability of financing.
As a candidate country Ukraine needs to
pursue further significant reforms on its EU path. This will likely work as an essential leverage for
Ukraine to attract support and investments for its reconstruction. It will also ensure that investments do
not create stranded assets but are converging towards climate, environmental and digital EU policies
and standards, which will help Ukraine emerge stronger and more resilient from the devastation of the
Russian invasion. Therefore, the reconstruction of Ukraine is to be guided and framed by the EU
enlargement process. This means investments need to go hand in hand with the reforms supporting
Ukraine in pursuing its European path. They should also be implemented in line with the EU acquis
framework, including continuing on rule of law reforms and fight against corruption as well as core
standards and principles, based on the European Green Deal and supporting the digital transformation.
2.8. An EU budget for long-term competitiveness
Strengthening the competitiveness and resilience of the European economy through the green
and digital transformations has been the EU compass over the last years.
With
NextGenerationEU, the EU has closed the gap with pre-pandemic output levels already in the summer of
2021. The funds directed to the twin green and digital transformation are making the economy more
competitive and sustainable. The unprecedented efforts by the Member States to implement crucial
reforms are making the EU more resilient.
Together with a strong European Single Market, further efforts in this direction can enable
the EU to be at the frontier on key technologies.
The European Green Deal has set the EU green
transition ambitions, including the climate targets towards net-zero by 2050. The Fit for 55 package
provides a concrete plan to put the European economy firmly on track. This requires massive
investments both from the private and public sectors and a strong industrial base to support this
transition. The EU industry has also proven its inbuilt resilience but is being challenged from high
inflation, labour shortages, post-COVID supply chains disruptions, rising interest rates, and spikes in
energy costs and input prices. This is paired with strong competition on the fragmented global market.
The Green Deal Industrial Plan seeks to enhance the competitiveness of Europe's net-zero
industry, support the fast transition to climate neutrality and create quality jobs.
To do so, it
aims to provide a more supportive environment for the scaling up of the EU's manufacturing capacity.
The plan is based on four pillars: a predictable and simplified regulatory environment, speeding up
access to finance, enhancing skills, and open trade for resilient supply chains. In March 2023, the
Commission adopted a new Temporary State aid Crisis and Transition Framework. Member States have
more flexibility to design and directly implement support measures in sectors that are key for the
transition to climate neutrality. Member States are also currently amending their RRPs to include
REPowerEU chapters to finance companies and boost their competitiveness.
New initiatives such as the Chips Act, the Critical Raw Materials Act and the European
Hydrogen Bank, aim at making our economies more digital and greener without creating new
dependencies.
The EU Chips Act builds on Europe's strengths – world-leading research and technology
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organisations and networks as well as host of pioneering equipment manufacturers – and address
outstanding weaknesses (section 2.3). The Critical Raw Materials Act aims to ensure the EU's access to a
secure, diversified, affordable and sustainable supply of critical raw materials. Raw materials are vital
for manufacturing key technologies for our twin transition – like wind power generation, hydrogen
storage or batteries. The objective is to strengthen cooperation with reliable trading partners globally
and reduce the EU's current dependencies on just one or a few countries.
A quicker deployment of financial support is needed. This could be achieved via a leveraging
and reinforcement of existing EU instruments under a new Strategic Technologies for Europe
(STEP) platform.
The EU has several funds and programmes on- and off-budget to provide support to
deep and digital technologies, clean technologies, and biotechnologies. The European Council
recommended to “ensure full mobilisation of available funding and existing financial instruments and
deploy them in a more flexible manner, so as to provide timely and targeted support in strategic
sectors”.
31
Leveraging on existing instruments and governance frameworks would speed-up the
implementation and allow to mobilise quicker higher amounts of financial support. The goal should be to
preserve a European edge on critical and emerging technologies relevant to the green and digital
transitions, from computing-related technologies, including microelectronics, quantum computing, and
artificial intelligence; to biotechnology and biomanufacturing, and net-zero technologies.
Box 4. Boosting technological competitiveness: the Strategic Technologies for Europe (STEP)
platform
STEP would cover critical and emerging technologies (deep and digital technologies, clean technologies,
and biotechnologies) to advance the green and digital transitions, supporting both the manufacturing
side and the relevant value chains, including the skills shortages in these areas.
Deep and digital technologies
- Innovation, and in particular its new wave of deep-tech innovation, is the
European reply to bring down greenhouse gas emissions, to make our economies more digital and to
guarantee Europe’s food, energy and raw materials security. The New European Innovation Agenda,
adopted on 5 July 2022, aims to position Europe at the forefront of the new wave of deep tech
innovation and start-ups.
Clean technologies
- EU’s competitiveness in the clean energy sector entails the capacity to produce and
use affordable, reliable and accessible clean energy and compete in the global clean energy markets,
with the overall aim of bringing benefits to the EU economy and people. The EU is currently facing
technological and non-technological challenges, such as high energy prices, critical raw materials supply
chain disruptions and skills shortages. According to the 2022 Competitiveness Progress Report – which
the Commission published in the context of the Governance of the Energy Union framework - “The rapid
development and deployment of home-grown clean energy technologies in the EU is key to a cost-
effective, climate friendly and socially fair response to the current energy crisis.” Considering that half of
the greenhouse gas emissions reductions expected by 2050 require technologies that are not yet ready
for the market, research and innovation activities are crucial. More public and private investments in
clean energy research and innovation, scale-up and affordable deployment are of pivotal importance.
The EU’s regulatory and financial frameworks have a crucial role to play here. Together with the
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European Council conclusions, 23 March 2023.
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implementation of the New European Innovation Agenda, EU funding programmes, enhanced
cooperation between Member States, and a continuous monitoring of national R&I activities, are crucial
to design an impactful EU R&I ecosystem, and to bridge the gap between research and innovation and
market uptake, thus reinforcing EU competitiveness.
Biotechnologies
- Biotechnology and life sciences are key for the modernisation of the European industry.
They are used in a variety of industrial sectors such as healthcare and pharmaceuticals, agriculture,
materials, and bioeconomy. Reaping the full benefits of biotechnology can help the EU economy grow
and provide new jobs, while also supporting sustainable development, public health, and environmental
protection. Vaccine manufacturers have played a key role in reversing the course of the COVID-19
pandemic. And while Europe continues to be a leader in life science innovation, its biotech industry
remains approximately a quarter of the size of the US in terms of both the number of companies and
the value of venture financing. In addition, financing – both at the earliest stages and later on – is more
limited in Europe than in the US. This constrains companies’ ability to invest in larger diversified pipelines
and leaves them reliant on their initial investors.
2.9. Security and defence
Financing from the EU budget focuses on the defence industry’s competitiveness, given
limitations in the Treaties to finance defence more broadly
32
.
There is significant added value of
EU action in defence industry investments, as persistent underinvestment over the years has had a
negative impact on the European defence industry. Furthermore, defence spending in the EU suffers
from inefficiencies due to duplications, lack of interoperability and technological gaps between the EU
and other global spenders, though the aggregated spending is among the highest in the world. With the
MFF 2021-2027, the importance of defence and security in the EU budget has been strengthened. The
European Defence Fund started operating in 2021 with a budget of EUR 7.95 billion, allocated in two
windows: a research window (EUR 2.7 billion) and a capability window (EUR 5.3 billion). The MFF also
allocated EUR 1.69 billion to dual (civilian and military)-use transport infrastructure to enable military
mobility within the EU.
Heading 5, dedicated to Security and Defence, is the smallest of all MFF headings.
This heading
was a novelty of the 2021-2027 MFF, and Russia’s war of aggression against Ukraine has clearly
demonstrated the added value of increased EU efforts in this policy area. The initial margin of EUR 680
million has been mostly depleted for the new needs that were also covered a with redeployments, as
discussed in this section.
In response to Russia’s aggression, Member States have announced increases in their
national defence budgets, which can be more effectively used with EU coordination and
cooperation.
In its absence, these additional investments could deepen the existing fragmentation of
Article 41.2 of the Treaty on European Union (TEU) states that ‘Operating expenditure [on Common Foreign and Security
Policy] shall (…) be charged to the Union budget, except for such expenditure arising from operations having military or
defence implications and cases where the Council acting unanimously decides otherwise. (…) As for expenditure arising from
operations having military or defence implications, Member States whose representatives in the Council have made a formal
declaration [of abstention] shall not be obliged to contribute to the financing thereof.’
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the European defence sector. As a result, the European Commission and the High Representative of the
Union for Foreign Affairs and Security Policy put forward several options for improving defence
capability supply.
33
This is consistent with the call for stronger EU action in defence at the Conference on
the Future of Europe.
The conflict in Ukraine has also presented a new set of challenges for the European Union's
cybersecurity efforts.
The proliferation of cyber-attacks targeting both military and civilian have
caused widespread disruption and, in some cases, have even endangered lives.. With its new cyber
defence policy, the EU will enhance cooperation and investments in cyber defence to better protect,
detect, deter, and defend against the increasing risks of cyber-attacks. The conflict has also exacerbated
the challenge of the spread of disinformation campaigns and propaganda to influence public opinion and
destabilize the EU. The Union tackles to the issue through legislation like the Digital services act, that will
foster a co-regulatory framework for online harms, or through support to media and information
awareness programmes, that will help to counter the disinformation spread through a long-term
structured approach.
The EU has put forward an ambitious plan to develop the new space-based Secure
Connectivity System IRIS
2
.
A large part of the IRIS² budget comes from redeployments from other
programmes under Headings 1, 5 and 6: the Space Programme, CEF-Digital, Digital Europe Programme,
European Defence Fund and NDICI-Global Europe for a total of EUR 1.2 billion. Margins of Heading 1 and
Heading 5 are used on top to complete the IRIS² budget.
The Commission proposed a Regulation establishing the European defence industry
reinforcement through common procurement act (EDIRPA).
EDIRPA would set up a dedicated
short-term instrument through the EU budget to incentivise common procurement in the field of defence.
This would support the reinforcement of Member States’ defence capacities in the emergency situation
caused by Russia’s war of aggression against Ukraine. The Commission tabled its proposal on EDIRPA on
19 July 2022, with the objective to establish the legal act swiftly. Taking into account the implications of
the Act in Support of Ammunition Production (ASAP) proposal, EDIRPA will be financed fully through the
flexibility instrument in 2024.
On 3 May 2023, the Commission proposed a Regulation on establishing the Act in Support of
Ammunition Production (ASAP) to facilitate the ramp-up of ammunition production capacity
in the EU.
The financial envelope for ASAP amounts to EUR 500 million in current prices for the period
from 2023 to 30 June 2025, financed from redeployments of EUR 260 million from the European
Defence Fund programming for 2024 and of EUR 240 million initially foreseen for the European Defence
Industry Reinforcement through common Procurement Act (EDIRPA) in 2023-2024. The proposed ASAP
initiative has been designed to complement the already planned EDIRPA and the EDF programme and to
create synergies with defence-related initiatives, such as Permanent Structured Cooperation (PESCO).
Joint Communication to the European Parliament, the European Council, the Council, the European Economic and Social
Committee and the Committee of the Regions on the Defence Investment Gaps Analysis and Way Forward, JOIN(2022) 24
final.
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The Union contribution would provide an appropriate incentive for economic operators, leveraging
additional funding that is expected to bring the total investment to EUR 1 billion.
Implementation of the defence programmes is proceeding fast.
In 2021, the budget execution
was 100%, with 23 calls launched for 15 out of 17 European Defence Fund categories such as air,
ground and naval combat, energy resilience and environmental transition, cyber, space. Grant
agreements were signed in 2022. The European Defence Fund work programme 2022 funded 8 calls for
proposals among 33 R&D topics with an envelope of EUR 924 million.
The envelope for Military Mobility under CEF (EUR 1.69 billion at the beginning of the MFF)
was frontloaded and supported recent crises-related packages.
The calls launched for military
mobility in 2021-2022 for a total of EUR 955 million were fully subscribed. Calls address dual-use
infrastructure projects, mostly on the railway and roads infrastructures across Europe (e.g. infrastructure
for 740m trains on the North Sea – Baltic and Orient/East-Med corridors, design and reconstruction of
road A5 Kaunas – Marijampolė – Suwalki). The second call was advanced from September 2022 to May
2022 due to the war in Ukraine. As a result of the accelerated procedures used to respond to the crises,
56% of the funds (EUR 949 million) have already been allocated during the first two calls in 2021 and
2022. The next third call of 2023 is expected to exhaust the available budget .
In the future, it will be challenging to finance any additional initiative under Heading 5.
The
main reasons are that (i) the IRIS² budget will be almost fully mobilised upfront; (ii) CEF-Military Mobility
expenditure is frontloaded; and (iii) the potential for redeployments between programmes in Heading 5 is
almost non-existent. The increasing number of emergency requests for projects and the inflationary
pressure also contribute to this challenging context. Furthermore, no reserves are available, and the
margins are exhausted: as of 2023, the remaining margin is just EUR 81 million for 2025-2027, and a
negative margin of EUR 311 million in 2024 had to be covered via special instruments.
2.10. Migration and border management
Migration and border management remain a challenge for the Union and require a European
response supported by adequate European funding.
Unforeseen crises have put additional
significant pressure on the European funding for migration and border management. This was the case
with the events in Afghanistan and Belarus and then with the war in Ukraine, which led to an
unprecedented triggering of the temporary protection directive and to the need to take immediate action
for the millions of Ukrainians fleeing the conflict.
The Pact on Migration and Asylum, currently in the interinstitutional phase, will provide a new and
durable EU framework for migration management. Based on the current state of the discussions on the
Pact and of the emerging balance between responsibility and solidarity, its successful implementation
will require substantial additional funding.
In February 2023, the European Council underscored its aim to develop a comprehensive
approach to migration
and, in that context, called on the Commission to mobilise substantial funds for
the control of external borders.
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Therefore, pressure on EU funding for migration, asylum and border management continues
to be high.
Although expenditure available to Member States under Heading 4 for the EU-27 is higher
compared to the programming period 2014-2020, the Commission has already had to reinforce the
Asylum Management and Integration Fund (AMIF) and the Border Management and Visa Instrument
(BMVI) programmes of several Member States to allow them to address the challenges linked to the
events in Afghanistan, Belarus and Ukraine as well as to meet more structural needs reflecting the
increase in migrant flows.
Around 70% of the budget for AMIF and BMVI is implemented through national programmes
under shared management.
The national programmes of the EU Member States for 2021-2027 have
been adopted in the second half of 2022. Pursuant to Article 7 of the MFF Regulation, the total amounts
corresponding to the allocations not used in 2021 (EUR 676 million)
34
were transferred in equal
proportions to each of the years 2022 to 2025, and the corresponding MFF ceilings were adjusted
accordingly. A new and comprehensive performance framework allows for a stronger monitoring of
achieved results and outcomes.
The AMIF and BMVI will undergo their own respective mid-term reviews in 2024, which will
adjust automatically Member States allocations for 2025-2027.
The MFF 2021-2027 foresees
that 15% of the budget under AMIF (EUR 1 billion) and 13% under BMVI (EUR 0.6 billion) will be
allocated to Member States as an in-built reserve for the mid-term review. The amounts will be allocated
to all Member States based on updated statistics for pre-determined criteria concerning
inter alia
asylum
seekers, persons under temporary protection, legal migrants, returns, border crossings, consular offices.
As a novelty in the 2021-2027 MFF, 30% of the funds is implemented under the Thematic
Facilities.
The Thematic Facility under each fund increases the flexibility to respond to evolving needs in
this area and can be implemented by the Commission directly, indirectly or granted as a top-up to
national programmes of Member States in need. The AMIF Thematic Facility also finances top-ups to
national programmes in case of resettlement of refugees from third countries and relocation of
migrants between Member States.
The flexibility within the AMIF and BMVI Thematic Facilities has been extensively used in the
first part of the MFF programming period.
Almost three quarters of the funds available under the
AMIF and BMVI Thematic Facilities for 2021-2025 are either spent or allocated to actions which are in
an advanced stage of preparation. Significant redeployment was done to the meet the challenges of the
unforeseen crises, and the in-built flexibility was used
inter alia
to support Member States with reception,
asylum and return systems under pressure. Emergency assistance was also provided to the Member
States most affected by the arrival of people from Ukraine.
For 2026-2027, EUR 2.1 billion under AMIF and EUR 1.7 billion under BMVI remain to be
programmed
and will be used to deal with the continued and increasing pressure on migration and
border management, to actions linked to the Pact implementation, while a substantial buffer will need to
be kept to deal with unforeseeable crises.
Respectively EUR 397 million of the AMIF (8% of total 2021-2027 allocation to the Member States) and EUR 279 million of
the BMVI (9% of total 2021-2027 allocation to the Member States)
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The Home Affairs Agencies will also be called to increasingly contribute
to support Member
States and the Commission in dealing with such increased migration pressure and in enhancing border
protection. In particular, the European Union Agency for Asylum (EUAA) will be required to have an
increasingly key role in supporting Member States’ asylum and reception systems, particularly at the
border.
2.11. The economic context: inflation and interest rates
2.11.1. Inflation
In the course of 2022, inflation in Europe has reached levels unseen in the last 40 years.
These developments result from spiralling energy prices, due to the war in Ukraine, coupled with strong
demand as the global economy recovered from the COVID-19 crisis and supply bottlenecks. With energy
being a key input to much of economic activity, energy price increases gradually passed through to other
inflation components. Headline inflation started declining in the first quarter of 2023 amid sharp
deceleration of energy prices; however, core inflation (i.e. headline inflation excluding energy and food)
continued to rise in early 2023, reaching 6.6% in March, and only slightly declined to 6.5% in April.
The high inflation might reduce the purchasing power of the MFF by EUR 74 billion for the
seven-year period.
The ceilings of the Multiannual Financial Framework (MFF) for 2021-2027 are
expressed in 2018 prices. As stipulated in article 4(2) of the MFF Regulation
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, the adjustment to current
prices is done on the basis of a fixed annual deflator of 2%. This long-standing adjustment mechanism
in use since 2007 has the advantage of providing predictability for the Union programme resources over
the duration of the MFF. This is important for regional authorities, partners and beneficiaries for mid- to
long-term investments supported by the Union programmes and policies. For Member States, this also
gives predictability for the planning of their national budget contributions. For the EU budget, the fixed
deflator gives predictability to future margins, which can then be used in the event of additional needs
related to existing or new initiatives. However, because of the unprecedented gap between actual and
forecast inflation up to 2027
36
and the fixed 2% deflator, the real value of the MFF for the whole 7-year
period would be substantially lower based on the current forecasts.
37
This is an important difference
between the EU budget and Member States’ budgets: in the case of the EU, only the own resources
ceiling adjusts to inflation. The revenues called from Member States instead depend on the actual
expenditures, and these are limited by the MFF expenditure ceilings which adjust based on the fixed
Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for
the years 2021 to 2027, OJ L 433I , 22.12.2020, p. 11
36
As measured by EU GDP deflator
37
When actual inflation is below 2% (which has been the case until 2020), the MFF ceilings as adjusted can potentially result
in a stronger purchasing power of the EU budget, but it is ultimately up to the budgetary authority (European Parliament and
Council) to act upon it.
35
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deflator.
38
In the case of national budgets, inflation affects the nominal value of both revenues and
expenditures.
The high inflation leads to higher implementing costs for EU budget programmes, an erosion
of the purchasing power of the operational budgets as their real value is reduced, and higher
administrative expenditures in all EU bodies.
For programmes distributing grants,
39
the high
inflation means that less activities can be financed, thus reducing the ambition of EU activities. Similarly,
programmes with pre-allocated envelopes per Member State the national and regional authorities will be
able to finance less projects and to provide less direct support. For the few programmes that procure a
given infrastructure or service (e.g. Space programme, ITER, civil protection), the costs sought by the
developers and operators are likely to increase, such that the Commission may not be able to procure
the full infrastructure or service. For the European Public Administration, it is particularly problematic due
to the already very tight ceilings and contractual obligation and the inflation indexation of most
expenditure in host countries. This is creating a strong pressure on Heading 7 of the MFF, despite the
exceptional efforts made for savings (see Box 5).
Box 5. Pressures on Heading 7 – European Public Administration
The fixed deflator of 2% for adjusting MFF expenditure ceilings is currently far below the
actual EU inflation rate, which reached 9.2% in 2022 and is forecasted to be 6.7% in 2023.
[1]
This divergence affects the EU budget as a whole, but is particularly difficult for inflation-indexed areas,
notably administrative expenditure.
Most non-salary expenditures are indexed to inflation.
This includes
inter alia
rents, legally
indexed to inflation. When contracts, for example for IT services, security, cleaning personnel are
indexed there is a legal and financial obligation to pay the increases, and when new contracts are
launched the costs reflect the indexation of wages and other costs encountered by the service provider.
Efficiency gains are constantly sought, for instance through pooling resources, an example being the
CERT-EU, an interinstitutional body dealing with cybersecurity, as well as through constantly identifying
opportunities for synergies and efficiencies across services and functions, but there is a minimum which
must be maintained for the proper functioning of the Institutions.
As per legal requirement, the remuneration of European staff, as well as the pensions of
retired employees, is automatically linked to that of Member States.
As defined in the Staff
Regulations
[2]
, it takes account of inflation in Belgium and Luxembourg and the purchasing power
development of government officials in 10 Member States
[3]
. When the purchasing power of the salaries
of Member States officials increases or decreases, this has a corresponding impact on the salaries of the
EU staff and pension beneficiaries. The exceptional inflationary situation in 2022, and the subsequent
salary increases applied in several Member States, has reduced the margins under the annual ceiling and
sub-ceiling for the institutions’ expenditure to the point that the expenses can no longer be covered.
The Own Resources Decision instead determines gross reductions to the GNI-based EU-budget contributions of Denmark,
Germany, the Netherlands, Austria, and Sweden in 2020 prices, which are converted every year into current prices based on
the most recent Union GDP deflator.
39
For instance, Horizon Europe, European Defence Fund, Erasmus, Creative Europe, EU4Health, CEF, LIFE, external action
programmes.
38
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Staffing Issues
Increasing priorities and demands put an enormous strain on the resources of the EU
administration, in a context of stable staffing.
The agreement between the co-legislators on new
initiatives with responsibilities mainly for the Commission result in significant additional staff needs.
They are related to the Green Deal, Single Market, Cross Border Adjustment Mechanism, Health, Digital
Agenda, Inter-operability, Cybersecurity, Secure Connectivity, Schengen evaluation and monitoring
mechanism, European Peace Facility among others. These new initiatives, as shown in the Legislative
Financial Statements accompanying the agreed legal proposals, should translate into 600 establishment
posts until 2027. In the absence of staff reinforcements until now, some very severe measures of
reprioritisation have been applied. For instance, more than 900 posts have already been redeployed to
support the new emerging priorities, such as Fitfor55 package, Digital Services Act and the Digital
Markets Act, the war in Ukraine, the COVID-19 pandemic, leaving no space to further adjustments. This
situation has reached a critical point where
these additional tasks
on top of the MFF (for which the
stable staffing principle was agreed),
cannot be taken on board without additional resources.
The Commission is not the only institution facing the challenge of addressing new tasks with stable
staffing. This is clearly illustrated by the requests of the other Institutions expressed in the context of the
annual budgetary procedures. Taking a proportional approach, based on the 600 posts agreed in the
context of the Legislative Financial Statements for the Commission, the other institutions would need
some 411 additional posts. However, unlike the Commission, most of the other institutions have received
some staff reinforcement in the course of the annual budget procedures 2021-2023. When these
allocated posts are taken into account, some 113 would remain as outstanding needs.
Furthermore, as per the preliminary outcome of the assessment of the cybersecurity-related needs
conducted by the Commission as part of the follow-up of the Draft Budget 2023 negotiations, the
institutions’ total needs until the end of MFF 2021-2027 are at the level of 172 additional posts.
Taken all these elements together, the overall deficit in the number of posts in all the EU institutions
covered by Heading 7, necessary to enable them to effectively fulfil the new tasks, equals 885 posts.
Further Savings Efforts
The Commission has made exceptional efforts for savings and intends to continue applying
structural changes.
Drastic cuts have also been introduced in case of missions, meetings and
representation costs, cumulatively above 30% compared to 2019. Moreover, for all other administrative
expenditures, a new building policy, covering the 2022-2030 period, has been developed to optimise
surface used which aims at reducing office space from 788.000 m² in 2021 to 722.000 m² by 2024
and to 575.000 m² by 2030. For the period between August 2022 and March 2023, the total energy
consumption was reduced by 17% compared with the average for the same period in the last 5 years
(113.000 MWh).
These examples illustrate the Commission’s determination to keep the annual increase of the non-salary
expenditures within the limit of 2% - despite the soaring inflation. Other institutions are exposed to the
same constraints. While preparing the Draft Budget 2024 the Commission has applied a rigorous
approach and not accepted any request going beyond the 2% limit, which led to the total of
EUR 164,4 million cuts applied to all the EU institutions altogether. In addition, with a view to ensure
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stable staffing at the 2023 level, the Commission reduced the requests of the other Institutions by 260
FTE with a related reduction in budget of EUR 16,3 million.
Future developments
Despite the above efforts, in the long-term scenario built on the macroeconomic assumptions
used for Draft Budget 2024 and the Commission’s long-term projections for the period 2025-
2027, the total underbudgeting of Heading 7 would amount to over EUR 1,9 billion.
(EUR million)
Sub-ceiling margin
Ceiling margin
2024
- 123
- 148
2025
- 327
- 382
2026
- 544
- 652
2027
- 564
- 718
2024-2027
- 1,558
- 1,900
This simulation is based on the following assumptions:
For non-salary expenditures, the financial programming provided for DB 2024 is included.
Salary updates rates of 3,7% in 2023 (average of DB 2024 assumption for 2023 (+4,4%) and
ECFIN Spring 2023 forecast (+3,0%)), +3,4% in 2024 (DB 2024 assumption), +3,8% in 2025
and 3% in both 2026 and 2027 (derived from ECFIN Spring 2023 forecast).
the number of staff in the institutions is increased in total by 885 posts (phased-in: 25% in
every year from 2024 to 2027); the related cost is estimated at EUR 346 million.
While simulating any potential long-term scenario, it is crucial to underline the volatility of the
macroeconomic data and an objective difficulty in their appropriate predictions. This, coupled with the
lasting impact of any variation over subsequent years, effectively hampers the precision in any long-
term planning for Heading 7. For instance, if the annual inflation rate taken into account for the salary
update, or the salary evolution of the Member States’ government officials for the period 2025-2027,
led to a salary update rate higher of 0,5% compared to the assumptions taken in the table above, the
total gap in Heading 7 would increase further up by EUR 233 million.
In conclusion, even according to the most conservative available forecasts, it is evident that the level of
appropriations as agreed in MFF 2021-27, which was based on 2% annual deflator, will turn out not
sufficient and will require reinforcement.
European Commission (2023) European Economic Forecast – Spring 2023. European Economy - Institutional Paper 200,
May 2023.
[2]
Regulation No 31 (EEC), 11 (EAEC), laying down the Staff Regulations of Officials and the Conditions of Employment of
Other Servants of the European Economic Community and the European Atomic Energy Community.
[3]
Belgium, Germany, Spain, France, Italy, Luxembourg, Netherlands, Austria, Poland, Sweden.
[1]
2.11.2. Interest rates
After the launch of the NextGenerationEU bond issuances in 2021, the EU enjoyed favourable
financing conditions, thanks to low global bond market rates, its high credit rating and the
markets’ demand for euro-denominated “safe” assets.
EU transactions have attracted very high
investor demand, anchored by the EU’s strong credit rating. Since June 2021, syndicated transactions
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have been between 3 to 16 times oversubscribed. High investor demand has helped the Commission
achieve a competitive interest cost for the Member States seeking support under the programme.
However, since the beginning of 2022, due to increasing uncertainty in financial markets and
monetary policy tightening to respond to high inflation, bond market rates in the EU and
beyond have increased substantially.
As inflation increased in 2022, market interest rates increased
across the board also as a result of successive monetary policy rate increases. Changing interest rates
have important budgetary implications: interest rates in 2021 (and related budgetary costs) were
substantially lower than what had been foreseen at the time of the adoption of the MFF, but the
situation quickly reversed in 2022. The interest rate risk is felt most acutely under the current MFF since
all new net issuances will take place before the end of 2026, and the cost of issuance is determined by
the path and conditions of issuance which is unknown in advance.
The pace of the increase in interest rates for all issuers including the EU has been one of the
steepest witnessed in financial markets in the past decades.
Interest and debt management costs
have increased substantially alongside generally worsening market conditions since the start of
NextGenerationEU. Average cost of funding increased from 0.14% in the period from June to December
2021 to 2.6% for the period July to December 2022. Interest rates on 10-year EU-Bonds have increased
from 0.09% at the time of the inaugural 10-year NextGenerationEU bond in June 2021 to 1.53% in May
2022, and to 3.09% in the most recent issuance in April 2023. Comparable increases have been
observed for highly rated euro area sovereign issuers. For example, interest rates on 10-year German
government bonds increased from around -0.20% in June 2021 to close to 1.0% in May 2022, were over
2.50% in the first quarter of 2023 and stood around 2.30% in early May (Graph 7).
Graph 7.
Yields on 10-year bonds of EU and selected Member States, 2021-2023
Source:
Bloomberg, European Commission
The increase in interest rates has substantial budgetary implications.
For the MFF 2021-2027,
an amount of EUR 14.9 billion (in current prices) under Heading 2b is planned for covering the interest
payments for NextGenerationEU non-repayable support. This amount was defined based on an historical
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mean reversal assumption. The envelope for interest payments was therefore based on the assumption
that average yields would gradually increase from 0.55% in 2021 to 1.15% in 2027.
At current market conditions, the initially planned amount for 2024 will not be sufficient for
the annual payments of NextGenerationEU related interests.
The final amount necessary in 2024
will depend on the interest rates of the borrowings undertaken until the end of 2023 and the volume of
the operations.
3. IMPLEMENTATION: HORIZONTAL ELEMENTS
3.1. MFF state of play: current availabilities and past usages
Chapter 2 has shown that the EU budget has been at the forefront of the EU’s recovery
efforts from the COVID-19 crisis and of the response to the fallout of Russia’s war of
aggression against Ukraine as well as other unforeseen events.
The need to provide urgent
financing to face unexpected events and crises has resulted in increased re-programming and
redeployments within programmes, in particular for cohesion policy, given its ability to deploy substantial
means at regional and local level. Redeployments also played an important role in addressing other
unforeseen events, in particular the energy crisis: for instance, due to the scale of the challenge and the
comparatively very limited free space in the EU budget, the financing support for REPowerEU came
mostly from redeployment and repurposing of other funds within and outside the EU budget.
To respond to unexpected challenges, the flexibilities included in this MFF are being used to
the fullest, but they are small overall.
Total flexibility at the time of adoption of the MFF ranges
from 0.45% to 3.5% of the commitment ceiling, depending on the definition of flexibility used. If we
consider only ‘pure’ MFF-relevant budgetary flexibility, i.e. the flexibility instrument and the unallocated
margins, then this amounts to only 1.05% of the commitments ceiling, i.e. on average EUR 1.82 billion
per year (Table 3.1.1).
40
In particular, unallocated margins, which provide flexibility within each heading
of the MFF, were equal to only EUR 5.5 billion or 0.45% of the expenditure ceilings at the beginning of
the MFF. The amount is far lower than the Commission proposal of May 2020 (EUR 28.2 billion) (Table
5.1.4 in the Annex).
Thematic special instruments can only top up only specific expenditures and programmes, and the other flexibilities (i.e. the
emerging challenges and priorities cushion under NDICI-GE and the thematic facilities under AMIF, ISF, and BMVI) are bound
to their respective instruments.
40
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Table 3.1.1
– Comparison of different types of flexibilities and availabilities and the ceilings for
commitments in the adopted MFF
41
Commitment appropriations, in EUR million, in current prices, rounded to the nearest whole number
Name
42
Total Ceilings
Unallocated margins
Flexibility Instrument
Thematic special instruments
Other flexibilities
43
Total for:
Unallocated margins and Flexibility Instrument
Unallocated margins and special instruments (thematic and non-thematic)
Unallocated margins, special instruments (thematic and non-thematic), and other
flexibilities
Amount
1 210 894
5 489
7 219
16 453
15 074
As % of ceilings
0.45%
0.60%
1.36%
1.24%
12 707
29 160
44 234
1.05%
2.41%
3.65%
The sustainability of most headings of the MFF is challenged by the need to address
unforeseen events and the evolving geopolitical context.
Almost 78% of margins initially
available in the MFF for 2023-2027 have already been allocated or pre-empted to date. The quick
depletion of margins is especially relevant for Heading 1 (Single Market, Innovation and Digital), Heading
6 (Neighbourhood and the world) and Heading 5 (Security and Defence). In the case of Heading 1, this is
due to in particular to the Secure Connectivity Programme and the Chips Act (Sections 2.9 and 2.3),
which have almost completely used the margins between 2024 and 2027. In the case of Heading 6, the
mobilisation of available flexibility was necessary to address the humanitarian fallout of Russia’s war on
Ukraine, both in Ukraine itself and in developing countries. A similar situation concerns Heading 5
(Security and Defence), where margins for the remainder of the MFF have already been almost
completely pre-empted (by 84% on average between 2023 and 2027). The sub-ceiling of Heading 2b is
under very strong pressure due to the increase in the financing costs of NextGenerationEU, where the
margin has been fully depleted up to and including 2024. The margin under Heading 7 is expected to be
negative until the end of the MFF (see tables in Box 5).
The resulting negative margins have been covered by mobilising special instruments over and
above the ceilings of the MFF.
Budgetary data from the first two years of the MFF (2021-2022) and
the adopted budget for 2023 show that special instruments are being used at high pace in the current
MFF (Table 5.2.2 in the Annex). The Flexibility Instrument is fully mobilised in 2021-2024. Over 90% of
maximum amounts for special instruments
44
in 2021 have been committed, and almost 80% of the
Sections 5.1 and 5.2 provide additional information about the adopted, current, and mobilised/used availabilities,
flexibilities, and ceilings.
42
Special instruments and other flexibilities have either annual envelopes or otherwise specific, legal condition of application.
43
The other flexibilities considered are the emerging challenges and priorities cushion under NDICI-GE and the thematic
facility under AMIF, ISF, and BMVI.
44
Thematic and non-thematic special instruments, excluding the Single Margin Instrument.
41
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amounts for 2022. Concerning 2023, the adopted annual budget has already allocated almost 78% of
the maximum resources for special instruments. The only instrument that is showing lower mobilisation
is the EGF, which however is also the smallest. Quick depletion of the availabilities for special
instruments can be a constraint for the remainder of the MFF, given that there would be limited carry-
over amounts.
The depletion of budgetary margins in the early years of the MFF poses a serious constraint
for the remainder of the MFF.
The Single Margin Instrument, which allows entering new commitments
and/or payments over and above the ceilings by using commitment and payment appropriations that are
left unused below the expenditure ceilings from previous years as from 2021 and, as a last resort,
commitment and payment appropriations from the current or future financial years, is also being used at
a high pace, which will imply that availabilities in later years of the MFF will be very limited.
An additional constraint for the remainder of the MFF is given by the payments ceiling, given
the forecast pattern of payments.
The long-term forecast on future inflows and outflows describes
in detail the forecast evolution of payments, its determinants as well as implications for decomitments
and outstanding payments (reste-à liquider).
45
Payments from the EU budget are not uniformly
distributed across the years, and unspent amounts in a year then increase the annual ceilings in future
years.
46
In the current programming period, the forecast payments for cohesion programmes are
expected to accelerate towards the end of the MFF, and the EAFRD will peak in 2026. This pattern was
observed in previous MFFs, but it is more accentuated in this MFF given more important delays at the
start of implementation (as described also in Section 2.3).
The MFF payments ceiling appears sufficient to cover the projected payments, except in 2026
where the forecast points to an overrun even considering all the flexibilities due to the
“capping” mechanism.
The total payment margin for 2024-2027
47
is estimated at EUR 11 billion.
However, this is not uniformly distributed: in 2024 and 2025, the annual margin is projected at EUR 31
billion and EUR 9 billion respectively, while the forecast margins for 2026 and 2027 are negative, with
the payments exceeding the ceiling by an estimated amount of EUR 16 billion and EUR 12 billion. The
positive margin in 2024 and 2025 will allow transferring unused amounts within certain limits towards
the end of the period. However, under the current assumptions, the estimated payment needs will exceed
the MFF payment ceiling in 2026 by EUR 0.8 billion even taking the maximum cap of EUR 13 billion
under the Single Margin Instrument. In fact, due to the capping mechanism, it would not be possible to
fully use in the second half of the MFF the estimated margin under the payment ceiling for 2024 and
2025 and part of the margin might remain unused. An acceleration in payments of cohesion
programmes beyond the projected central forecast scenario could lead to a larger breach of the
maximum payment ceiling in that year.
COM(2023)390 Report from the European Commission to the European Parliament and the Council – Long-Term Forecast
of future Inflows and Outflows of the EU budget (2024-2028).
46
Article 11(1)(b) of the MFF Regulation.
47
The payments margin is the difference between the forecast payments under the MFF ceiling and the payment ceiling set
in the annual technical adjustment (TAJU 2024)
45
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3.2. Borrowing and lending
One of the main novelties of the 2021-2027 long-term budget is the credit financing of
NextGenerationEU.
The Own Resources Decision
48
empowered the Commission to act on behalf of the
Union and borrow up to EUR 806.9 billion on financial markets until 2026. In addition, to ensure
sufficient headroom for the NextGenerationEU borrowing, the permanent 1.4% Own Resources Ceiling of
the EU budget was increased by 0.6 percentage points of the EU's Gross National Income (GNI). This
increase provides a sufficiently high ceiling to allow the Union to cover all of its financial obligations and
contingent liabilities falling due under this programme in a given year.
The Commission is an established actor in debt securities markets, with a track record of
bond issuances over the past 40 years.
However, before the start of NextGenerationEU the
Commission was a relatively small issuer. Moreover, for all programmes prior to NextGenerationEU, the
Commission issued bonds and transferred the proceeds directly to beneficiary countries on the same
terms (i.e. interest rate and maturity) that it received, known as a ‘back-to-back’ funding approach. This
method was sufficient in addressing small funding needs, but it reached its limits with the SURE
programme, under which 19 Member States had to be served by a single funding programme of up to
EUR 100 billion.
To address the scale of funding needs under NextGenerationEU the Commission put in place a
pooled funding approach similar to that employed by sovereign issuers.
This funding approach –
named “diversified funding strategy” – enabled the Commission to cope with multiple disbursements of
loans and grants to Member States at high speed and frequency and with uncertain timing given their
dependence on the implementation of related plans.
In December 2022, the European Parliament and the Council adopted an amendment of the
Financial Regulation
49
to allow the Commission to broaden the diversified funding strategy to
other EU borrowing programmes.
Under this ‘unified funding approach’, the Commission is now
issuing single-branded ‘EU-Bonds’, rather than separately denominated bonds for individual programmes
such as NextGenerationEU, SURE, and MFA. This single EU-Bond label allows the Commission to plan,
execute and communicate all its issuances in an agile and coherent way. The funding plan and annual
borrowing decision covers all programmes financed through the unified funding approach, giving the
European Parliament, the Council and investors a comprehensive overview of the EU’s upcoming
borrowing.
The unified funding approach enables the Commission to use the full range of its funding
instruments (EU-Bonds and EU-Bills) and funding techniques (syndications and auctions)
developed for NextGenerationEU to cover its funding needs for other lending programmes.
In
this way, the Commission can obtain more attractive conditions, which will be passed on to the
Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own resources of the European Union
and repealing Decision 2014/335/EU, Euratom.
49
Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018
48
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beneficiaries of its funding programmes, while also having greater flexibility on the timing of
disbursements to better address beneficiaries’ needs. The Commission collects all proceeds of EU-Bonds
in a central funding pool and internally allocates them to various policy programmes.
50
The
appropriateness of EU’s funding method in meeting the NextGenerationEU needs was confirmed by
ECA’s special report on NextGenerationEU debt management (published on 12 June 2023) which noted
that the Commission’s debt management procedures enabled borrowing of the required funds on time, in
compliance with regulatory limits and at costs corresponding to its market position.
51
As a result of these developments, the EU has become one of the largest issuers in euro right
after France, Germany, Italy and Spain.
The EU has issued EUR 132.6 billion in 2021 and EUR 118.3
billion in 2022, up from an annual average of EUR 6.1 billion in 2010-2019. As of end May 2023, the EU
has EUR 394 billion of bonds outstanding, with the majority of bond proceeds allocated to
NextGenerationEU. The steep increase in annual issuance volume has been met by strong demand from
the markets for EU Bonds, with EU’s investor base including more than 100 different investors from 70
different countries.
Beyond providing funds to support the EU’s policy priorities, EU issuances can also have a
broader impact on the European capital market.
First, they boost the supply of highly rated euro-
denominated assets, thus potentially strengthening the international role of the euro. Second, they
enable the establishment of new EU securities, such as the EU Social Bonds linked to SURE and the
NextGenerationEU Green Bonds, based on dedicated frameworks that ensure coherence with the
Commission’s overall ESG strategy.
Graph 8.
EU outstanding debt as of end 2022
Source:
European Commission.
Financing EU programmes through joint EU issuances requires continuous expansion of the
Commission’s debt management architecture.
To further boost secondary market liquidity of EU
For financial assistance programmes for which the basic acts enter into force on or after 9 November 2022, back-to-back
funding will remain an option on an exceptional basis when warranted by specific transaction needs.
51
ECA (2023), “NGEU debt management at the Commission - An encouraging start, but further alignment with best practice
needed„ ,
Special Report
n. 16.
50
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debt and improve the efficiency of EU issuances, the Commission is putting in place mechanisms to
facilitate trading of EU-Bonds in the secondary market, and price discovery through appropriate
platforms. Both enhancements will help markets to adapt to the strong credit and large-scale
characteristics of the EU’s issuance programme. In addition, the Commission will continue to further
increase the share of issuances via auctions to favour the liquidity of EU Bonds and support the
performance of EU bonds.
3.3. Rule of Law
Since 2021, with the entry into force of the regulation on a general regime of conditionality
(‘conditionality regulation’), the EU budget has an additional layer of protection in cases
when breaches of the rule of law principles affect or risk affecting the EU financial interests.
The new conditionality regime allows the EU to take measures to protect the EU budget, such as
suspension of payments or financial corrections. The instrument complements other tools and
procedures to protect the EU budget, for example checks and audits or financial corrections, or
investigations by the EU's anti-fraud office OLAF. The Commission can only recur to the regulation if the
other Union budget protection tools cannot be used more effectively.
The general regime of conditionality applies to all EU funds and Member States.
The
conditionality includes a set of clear and objective criteria for assessing whether the Union budget is
affected or at risk of being affected due to breaches of the principles of the rule of law in a Member
State. These criteria link to situations that may be indicative of breaches, such as endangering the
independence of the judiciary, failing to prevent, correct, or sanction arbitrary or unlawful decisions by
public authorities ensuring the absence of conflict of interests and limiting prosecution.
52
If the conditions provided to initiate the general regime of conditionality are fulfilled, the
European Commission proposes to the Council the adoption of measures to protect the EU
budget.
The final decision is taken by the Council of the EU. Following a proposal by the Commission,
measures adopted by the Council can be adapted or lifted if the Member State concerned submits
further remedial measures that effectively address the relevant concerns.
In 2022, the Commission continued to implement the regulation on the general regime of
conditionality.
It opened the procedure to protect the EU budget against rule of law breaches in
Hungary, concerning public procurement related to the use of Union funds by public interest trusts, the
effectiveness of prosecutorial action and the fight against corruption. On 15 December 2022, based on a
proposal from the Commission, the Council adopted measures to protect the Union budget from
breaches of the principles of the rule of law in Hungary. The Council decided to suspend 55% of the
commitments for three operational programmes in Cohesion Policy, which corresponds to an amount of
approximately EUR 6.3 billion in total for the period 2021-2027. The Council also prohibited entering
Communication from the Commission - Guidelines on the application of the Regulation (EU, EURATOM) 2020/2092 on a
general regime of conditionality for the protection of the Union budget, COM(2022)1382 final.
52
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new legal commitments with public interest trusts or entities maintained by them (many of which are
universities), under any Union programme directly or indirectly managed by the Commission. Pursuant to
the Conditionality Regulation, Hungary can submit further remedial measures to demonstrate that the
conditions for budgetary measures are no longer fulfilled. The Commission will continue to lead the
implementation and enforcement of the Regulation, to identify possible breaches of the rule of law that
affect or seriously risk affecting the EU budget in a sufficiently direct way and assess whether the
conditions to launch the procedure set out in the Regulation are fulfilled.
3.4. Performance and Mainstreaming
The EU budget requires a modern, transparent, accountable, and solid performance
framework, linking expenditure to objectives, and allowing for the measurement of both
expenditure and achieved results.
The Commission communication of June 2021 ‘The performance
framework for the EU budget under the 2021-2027 multiannual financial framework.’
53
described the
features and functions of the performance framework for the current MFF, based on better defined
objectives, more focused and meaningful indicators, and high-quality data. The principles of
“mainstreaming" which allow to dedicate funds to a specific priority from a multiangle perspective,
mobilizing the synergies and leveraging the entire EU budget are also described in the Communication.
Despite being in the early stages of implementation, there are already some performance results
available for the current MFF (Table 3.4.1).
54
Table 3.4.1.
Results achieved exclusively with appropriations from 2021-2027
5.8 million
farmers benefited from
direct payments of the
Common
Agricultural
Policy
in the 2021
calendar year.
142
countries participated in
Horizon Europe
in 2021-
2022,
with
44 832
applications
evaluated
from 14 182 organisations.
2 million
of Palestine refugees were
supported
by
the
Neighbourhood
Development
and
Cooperation Instrument
(Global
Europe)
contribution in 2022
17
electoral processes and
democratic cycles were
supported, observed and
monitored by means of
electoral missions in 2022
thanks to
Neighbourhood
Development
and
Cooperation Instrument
(Global Europe)
SWD(2021) 133 final.
More detailed information on the performance of each programme and their alignment with political priorities for both the
2014-2020 and 2021-2027 MFF can be found on
https://commission.europa.eu/strategy-and-policy/eu-budget/performance-
and-reporting_en.
53
54
43
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2726330_0045.png
60
EU humanitarian air
bridge flights were
organised in 2022,
delivering 842
tonnes of
humanitarian
materials thanks to
Humanitarian Aid.
125 million
Is the population
that the European
Union Solidarity Fund
helped to support in
2022
30%
Is the share of
recipients of the
European Defence
Programme that did
not carry out
research activities
with defence
applications before
the entry into force
of the fund
1.5 million
Was the number of
participants in 2021
and 2022 in learning
mobility activities
(learners and staff)
thanks to Erasmus+
Source: Programme Performance Statements Draft Budget 2024 and Annual Management and Performance Report
2022:
https://commission.europa.eu/strategy-and-policy/eu-budget/performance-and-reporting/programme-
performance-statements_en
With the inter-institutional agreement (IIA) accompanying the 2021-2027 MFF, the European
Parliament, the Council and the Commission committed towards the integration of
crosscutting objectives into the EU budget.
A key commitment is to spend at least 30% of all
resources available under the 2021-2027 MFF and NextGenerationEU for addressing climate objectives.
Furthermore, the IIA supports biodiversity objectives with 7.5% of annual spending in 2024 and 10% in
2026 and 2027. It also commits to the development of a new gender equality expenditure tracking
methodology and the pilot mainstreaming of those objectives as of 2023. In addition to these
mainstreaming and tracking commitments, the IIA provides for an annual reporting on the
implementation of the United Nations Sustainable Development Goals in all relevant programmes.
The projections for climate spending over the period 2021-2027 are above the 30% target,
with the estimated figures for the Draft Budget 2024 at 32.6% for the overall period.
In
absolute terms, the amounts devoted to climate objectives for the total of the 2021-2027 MFF and
NextGenerationEU of EUR 578 billion will more than double the climate expenditures in the 2014-2020
period (EUR 220.8 billion--which represented 20.6 % of the 2014-2020 MFF envelope) (Graph 9).
Graph 9.
Climate contribution comparison in relative terms in selected funds
44
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2726330_0046.png
Source:
European Commission.
The climate architecture also supports the achievement of the EU climate ambitions.
Starting
from the experience of MFF 2014-2020, the Commission set targets at programme level to underpin the
horizontal 30% target, with the “climate adjustment mechanism” proposing corrective actions if targets
were not achieved. Furthermore, elements of the Taxonomy for Sustainable Finance have been put in
place to track nominal expenditure together with the application of the “do no (significant) harm”
principle. In the period 2021-2027 almost all the programmes have increased their contribution to
climate compared to the previous period (Graph 9).
Several programmes contribute to the achievement of the climate target (Graph 10).
Cohesion
programmes and CAP together with NextGenerationEU, in particular the Recovery and Resilience Facility,
as well as the additional financing for the Just Transition Fund, will contribute to achieving the climate
transition. Furthermore, the new REPowerEU chapters in the RRF could raise the ambition of this climate
financing.
Graph 10.
Selected programmes contributing to the achievement of the climate target in 2021-2027 in
EUR million (left scale) and in percentages of their total implementation (right scale)
45
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2726330_0047.png
Source:
European Commission.
Data available for the 2021-2027 period suggest that the financing for biodiversity has
increased and is on track to devote 7.5% of the budget in 2024, but the targets for the end
tail of the MFF might be missed.
The methodology put forward by the Commission provides a solid
base to measure biodiversity financing in all the EU budget programmes for mainstreaming biodiversity
objectives into the EU budget, including the steering to dedicate more resources, going beyond the
simple tracking of relevant expenditure.
55
In line with the mainstreaming principles, the EU budget has
increased the relative and absolute amounts dedicated to biodiversity (graph 11). While the budget is on
track to achieve 7.5% of its resources to biodiversity in 2024, it is forecast to allocate some 8.6% and
8.4% respectively in 2026 and in 2027, against the target of 10% in both years. Supported by other
stakeholders, the Commission is seeking for ways to ensure that Member States will dedicate sufficient
funding to biodiversity in the context of cohesion policy funds and the CAP. More detailed information on
the implementation of the biodiversity ambition in the 2021-2027 MFF, in compliance with article 16 of
the IIA, is provided in the Programme Performance Statement.
56
Graph 11.
Biodiversity contribution comparison in relative terms in selected funds
55
Biodiversity
56
Financing and Tracking,
May 2022 study and
biodiversity methodology
as published by the Commission.
More info available
at
https://commission.europa.eu/strategy-and-policy/eu-budget/performance-and-
reporting/horizontal-priorities/green-budgeting_en
46
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2726330_0048.png
Source:
European Commission.
In March 2020, the Commission presented its gender equality strategy 2020-2025.
57
The
implementation of the strategy is based on the dual approach of (1) key actions to achieve gender
equality combined with (2) strengthening the integration of a gender perspective in all EU policies and
major initiatives. In this context, the Commission committed to analyse the impact of its activities on
gender equality, and at how to measure expenditures related to gender equality at the programme level
in the MFF 2021-2027. To that effect the Commission is developing a methodology and has
implemented it on a pilot basis. As shown in the Draft Budget for 2024 performance statements, the
total of the EU budget’s 2022 interventions that are relevant for the promotion of gender equality or
that have the potential to contribute to it represent 83% of the budget.
4. CONCLUSIONS
This Staff Working Document provided a thorough mid-term review of the 2021-2027 MFF.
It
has shown the progress with implementation and the challenges that the EU budget has been facing
since its adoption.
The 2021-2027 MFF and NextGenerationEU adopted in December 2020 aimed at fostering
the recovery of the EU from the COVID-19 pandemic and ensuring its resilience, supporting
the green and digital transition. They were not designed to respond to a succession of crises.
Nevertheless, the EU budget has been successfully and extensively mobilised to address the fallout of
Russia’s war of aggression against Ukraine, the energy crisis, as well as other unexpected events and
natural disasters, on top of its predefined priorities. Significant pressures on the EU budget is also
Communication from the Commission to the European Parliament, the Council, the European Economic and Social
Committee and the Committee of the Regions - A Union of Equality: Gender Equality Strategy 2020-2025, COM(2020) 152.
57
47
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coming from the increase in interest rates. The limited flexibilities that were available at the beginning of
the MFF have been used to the maximum. Redeployments have been used to an unprecedented extent
and extremely little room for manoeuvre is left for the reminder of the MFF.
A targeted revision of the MFF is therefore necessary.
The revision shall equip the MFF with the
means to ensure that the Union can meet its legal obligations and address the most urgent priorities.
The elements of this targeted revision are outlined in the Communication COM(2023)336.
48
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5. ANNEXES
5.1.
Overview of MFF 2021 – 2027
In EUR million, in current prices, rounded to the nearest whole number
Name
Description
adopted
current
1. Single Market, Innovation and Digital
difference, of
which:
Article 5 MFFR
Table 5.1.1
– Comparison between the adopted and the current multiannual financial framework ceilings for commitments and payment appropriations
58
2021
20 919
20 919
0
0
2022
21 288
21 878
590
590
2023
21 125
21 727
602
602
2024
20 984
21 598
614
614
2025
21 272
21 272
0
0
2026
21 847
21 847
0
0
2027
22 077
22 077
0
0
Total
149 512
151 318
1 806
1 806
adopted
current
2. Cohesion and Values
difference, of
which:
Article 5 MFFR
Article 7 MFFR
52 786
6 364
- 46 422
0
- 46 422
55 314
67 806
12 492
886
11 606
57 627
70 137
12 510
904
11 606
60 761
73 289
12 528
922
11 606
63 387
74 993
11 606
0
11 606
66 536
66 536
0
0
0
70 283
70 283
0
0
0
426 694
429 408
2 714
2 712
2
adopted
2a. Economic, social and territorial
cohesion
current
difference, of
which:
Article 7 MFFR
48 191
1 769
- 46 422
- 46 422
49 739
61 345
11 606
11 606
51 333
62 939
11 606
11 606
53 077
64 683
11 606
11 606
54 873
66 479
11 606
11 606
56 725
56 725
0
0
58 639
58 639
0
0
372 577
372 579
2
2
2b. Resilience and values
adopted
current
4 595
4 595
5 575
6 461
6 294
7 198
7 684
8 606
8 514
8 514
9 811
9 811
11 644
11 644
54 117
56 829
The main ceiling differences for commitments are accounted for by the annual programme-specific adjustments under Article 5 MFFR and the re-programming of shared management
programmes carried out in January 2022 under Article 7 MFFR. In the case of the sub-ceiling for market related expenditure and direct payments, the differences comes from transfers between
EAGF and EAFRD, reflected in the annual technical adjustments in accordance with article 2(1) of the MFF Regulation.
58
49
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2726330_0051.png
Name
Description
difference, of
which:
Article 5 MFFR
2021
0
0
2022
886
886
2023
904
904
2024
922
922
2025
0
0
2026
0
0
2027
0
0
Total
2 712
2 712
adopted
current
3. Natural Resources and Environment
difference, of
which:
Article 7 MFFR
58 624
56 841
- 1 783
- 1 783
56 519
56 965
446
446
56 849
57 295
446
446
57 003
57 449
446
446
57 112
57 558
446
446
57 332
57 332
0
0
57 557
57 557
0
0
400 996
400 997
1
1
adopted
Of which: Market related expenditure
and direct payments
current
difference, of
which:
Transfers
40 925
40 368
557
557
41 257
40 639
618
618
41 518
40 693
825
825
41 649
40 603
1 046
1 046
41 782
40 665
1 117
1 117
41 913
40 691
1 222
1 222
42 047
40 651
1 396
1 396
291 091
284 310
6 781
6 781
adopted
current
4. Migration and Border Management
difference, of
which:
Article 5 MFFR
Article 7 MFFR
2 467
1 791
- 676
0
- 676
3 043
3 360
317
148
169
3 494
3 814
320
151
169
3 697
4 020
323
154
169
4 218
4 387
169
0
169
4 315
4 315
0
0
0
4 465
4 465
0
0
0
25 699
26 152
453
453
0
adopted
current
5. Security and Defence
difference, of
which:
Article 7 MFFR
1 805
1 696
- 109
- 109
1 868
1 896
28
28
1 918
1 946
28
28
1 976
2 004
28
28
2 215
2 243
28
28
2 435
2 435
0
0
2 705
2 705
0
0
14 922
14 925
3
3
adopted
6. Neighbourhood and the World
current
difference
7. European Public Administration
adopted
16 247
16 247
0
10 635
16 802
16 802
0
11 058
16 329
16 329
0
11 419
15 830
15 830
0
11 773
15 304
15 304
0
12 124
14 754
14 754
0
12 506
15 331
15 331
0
12 959
110 597
110 597
0
82 474
50
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2726330_0052.png
Name
Description
current
difference
adopted
2021
10 635
0
8 216
8 216
0
163 483
114 493
- 48 990
0
- 48 990
2022
11 058
0
8 528
8 528
0
165 892
179 765
13 873
1 624
12 249
2023
11 419
0
8 772
8 772
0
168 761
182 667
13 906
1 657
12 249
2024
11 773
0
9 006
9 006
0
172 024
185 963
13 939
1 690
12 249
2025
12 124
0
9 219
9 219
0
175 632
187 881
12 249
0
12 249
2026
12 506
0
9 464
9 464
0
179 725
179 725
0
0
0
2027
12 959
0
9 786
9 786
0
185 377
185 377
0
0
0
Total
82 474
0
62 991
62 991
0
1 210 894
1 215 871
4 977
4 971
6
Of which: Administrative expenditure of
the institutions
current
difference
adopted
current
Total commitments
difference, of
which:
Article 5 MFFR
Article 7 MFFR
adopted
Total payments
current
difference
166 140
163 496
- 2 644
167 585
166 534
- 1 051
165 542
168 575
3 033
168 853
170 543
1 690
172 230
173 654
1 424
175 674
177 126
1 452
179 187
180 668
1 481
1 195 211
1 200 596
- 5 385
51
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2726330_0053.png
Table 5.1.2
Redeployments and flexibilities implemented since 2020
Proposal
CRII - EU 2020/460
CRII Plus - EU 2020/558
CARE - EU 2022/562
CARE 2 - EU 2022/613
FAST-CARE - EU 2022/2039
Flexibility-redeployment
Non-recovery of unspent pre-financing
100% co-financing - accounting year 2020-2021
100% co-financing - accounting year 2021-2022
Amounts re-programmed to address the migration challenges stemming from
Russia's military aggression
REACT-EU increased pre-financing
Cohesion programmes increased pre-financing
Amounts programmed to address the migration challenges stemming from
Russia's military aggression
Amounts that can re-programmed to address the energy crisis
Redeployments from EDIRPA
Redeployments from European Defence Fund
Redeployments and reallocations from Horizon Europe and Digital Europe
Redeployments from ITER
Margin
De-commitments
Redeployments, earmarking and reallocations from Space Programme, Horizon
Europe, CEF-Digital, Digital Europe Programme, NDICI-Global Europe and
European Defence Fund
Loans
Grants
52
Period- Financed
2014-2020
2014-2020
2014-2020
2014-2020
NextGenerationEU
2021-2027
2021-2027
2014-2020
2021-2027
2021-2027
2021-2027
2021-2027
2021-2027
2021-2027
2021-2027
NextGenerationEU
2022-2026
Total Commission proposal
8.0
14.6
10.0
1.1*
3.5
3.5
15.7
40.0
0.2
0.3
2.9
0.05
0.35
0.08
1.93
225**
20.0***
SAFE 2023/435
ASAP COM(2023) 237 final
Chips Act COM(2022) 46 final.
Political agreement reached on
18/04/2023
Union Secure Connectivity
COM(2023)588
REPowerEU
 kom (2023) 0336 - Ingen titel
2726330_0054.png
BAR
CPR transfers - existing transfer possibility from cohesion policy funds
Decentralised agencies
Redeployments from programmes for additional tasks in decentralised agencies
2021-2027
2021-2027
2021-2027
5.4
17.9
1.1
* Actual re-programming
** from remaining loans
*** ETS resources (12bn from Innovation Fund and 8 bn from Member States allowances)
53
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2726330_0055.png
Figure 5.1.1
– Expenditure ceiling for commitment appropriations 2021-2027 as a proportion, by heading and sub-heading
In EUR billion, in current prices, rounded to the nearest billion
1. Single Market, Innovation and Digital
2a. Economic, social and territorial cohesion
2b. Resilience and values
3. Natural Resources and Environment
4. Migration and Border Management
5. Security and Defence
6. Neighbourhood and the World
7. European Public Administration
54
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2726330_0056.png
Figure 5.1.2
– Expenditure ceilings for commitment appropriations and MFF top-ups
The MFF top-ups considered are commitments made available again under Article 15(3) FR, Article 5 MFFR, and NextGenerationEU. On Article 5 – legend: Article 5 MFFR 2025-
2027 not yet included in technical adjustments.
55
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2726330_0057.png
Table 5.1.3
– Sustainability of the ceilings for commitment appropriations (EUR million, current prices)
In EUR million, current prices, rounded to one decimal place
Name
1. Single Market, Innovation and Digital
2a. Economic, social and territorial cohesion
2b. Resilience and values
3. Natural Resources and Environment
4. Migration and Border Management
5. Security and Defence
6. Neighbourhood and the World
7. European Public Administration
Total
2021
101.7
- 1.6
- 432.3
49.9
164.0
97.7
- 784.0
192.2
- 612.4
2022
32.9
30.8
- 30.0
283.9
- 52.2
83.0
- 907.4
274.8
- 284.2
2023
147.6
12.5
- 517.2
35.7
86.7
- 170.6
- 1 230.7
107.7
- 1 528.3
2024
166.6
17.8
- 1 708.2
60.1
123.3
- 300.2
0.0
- 176.6
- 1 817.1
2025
13.9
1.0
55.9
47.4
37.4
30.0
108.7
- 299.7
- 5.5
2026
10.0
0.3
90.1
49.4
51.5
26.7
108.5
- 392.8
- 56.3
2027
24.1
0.6
183.2
54.0
46.5
24.1
113.1
- 306.3
139.4
If the figures are negative, it means that the authorised appropriations exceed the ceilings. For the years up to 2024, it means that the mobilisation of special instruments was required.
If the figures are positive, it means that the authorised appropriations are below the ceilings.
Years 2021 and 2022 correspond to the final approved budget, year 2023 corresponds to the latest draft amending budget, and years 2024-2027 correspond to the draft budget proposal for 2024.
56
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Table 5.1.4
– Adopted MFF ceilings and other elements of the December 2020 MFF agreement
In EUR million, in current prices, rounded to the nearest whole number
Name
Description
Article 5 MFFR
Article 15.3 FR
1. Single Market, Innovation and Digital
NGEU
Ceiling, of which:
Re-allocated from
the margin
Article 5 MFFR
NGEU grant
allocation
2. Cohesion and Values
NGEU loan allocation
Ceiling, of which:
Re-allocated from
the margin
2a. Economic, social and territorial cohesion
NGEU
Ceiling, of which:
Article 5 MFFR
NGEU
2b. Resilience and values
Ceiling, of which:
Re-allocated from
the margin
3. Natural Resources and Environment
NGEU
Ceiling
Article 5 MFFR
4. Migration and Border Management
Ceiling, of which:
Re-allocated from
the margin
5. Security and Defence
Ceiling
2021
0
76
3 587
20 919
0
0
156 551
191 017
52 786
249
39 795
48 191
0
116 756
4 595
249
4 510
58 624
0
2 467
0
1 805
2022
723
77
3 604
21 288
0
1 083
129 894
194 838
55 314
138
10 824
49 739
1 083
119 070
5 575
138
10 012
56 519
181
3 043
90
1 868
57 627
141
0
51 333
1 105
104 200
6 294
141
4 416
56 849
185
3 494
92
1 918
60 761
144
0
53 077
1 126
0
7 684
144
0
57 003
189
3 697
94
1 976
63 387
146
0
54 873
1 149
0
8 514
146
0
57 112
192
4 218
96
2 215
66 536
149
0
56 725
1 172
0
9 811
149
0
57 332
196
4 315
98
2 435
70 283
152
0
58 639
1 203
0
11 644
152
0
57 557
198
4 465
100
2 705
2023
738
79
4 295
21 125
0
1 105
104 200
2024
753
80
0
20 984
141
1 126
0
2025
767
82
0
21 272
144
1 149
0
2026
782
84
0
21 847
146
1 172
0
2027
796
86
0
22 077
149
1 203
0
Total
4 559
564
11 486
149 512
580
6 838
390 645
385 855
426 694
1 120
50 620
372 577
6 838
340 025
54 117
1 120
18 939
400 996
1 141
25 699
569
14 922
57
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2726330_0059.png
Name
Description
Ceiling
2021
16 247
0
0
76
164 648
191 017
163 483
249
2022
16 802
90
1 987
77
143 511
194 838
165 892
318
2023
16 329
92
2 028
79
112 912
0
168 761
325
2024
15 830
94
2 068
80
0
0
172 024
472
2025
15 304
96
2 108
82
0
0
175 632
481
2026
14 754
98
2 150
84
0
0
179 725
491
2027
15 331
100
2 197
86
0
0
185 377
501
Total
110 597
569
12 538
564
421 070
385 855
1 210 894
2 838
6. Neighbourhood and the World
Re-allocated from
the margin
Article 5 MFFR
Article 15.3 FR
NGEU grant
allocation
NGEU loan allocation
Ceiling, of which:
Re-allocated from
the margin
Total commitments
58
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Table 5.1.5
– Evolution of the payment ceilings
Payment appropriations, in EUR million, in current prices (unless otherwise specified), rounded to the nearest whole number
Name
2021
2022
2023
2024
2025
2026
2027
Total
59
Ceiling in the adopted MFF and technical adjustments
Adopted MFF ceiling (in 2018 prices)
60
MFF technical adjustment 2021
61
MFF technical adjustment 2022
62
, of which:
Article 5 MFFR top-up
156 557
166 140
166 140
154 822
167 585
169 209
1 624
149 936
165 542
165 542
149 936
168 853
168 853
149 936
172 230
172 230
149 936
175 674
175 674
149 936
179 187
179 187
1 061 058
1 195 211
1 196 835
1 624
MFF technical adjustment 2023
63
, of which:
Article 5 MFFR top-up
Adjustment
163 496
170 558
168 575
1 657
168 853
172 230
175 674
179 187
1 198 573
1 657
81
- 2 644
1 349
1 376
MFF technical adjustment 2024
64
Article 5 MFFR top-up
Adjustment
163 496
166 534
168 575
170 543
1 690
173 654
177 126
180 668
1 200 596
1 690
- 4 024
1 424
1 452
1 481
333
Remaining under cap
65
(current prices)
Remaining under cap (in 2018 prices)
7 766
6 761
13 779
11 760
16 445
13 760
37 990
32 281
Totals may not tally due to rounding.
Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 2027 (OJ L 433I, 22 December 2020, p. 11-22)
61
Communication from the Commission to the European Parliament and the Council, Technical adjustment of the multiannual financial framework for 2021 in accordance with Article 4 of Council
Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 2027 (COM(2020) 848 final, 18 December 2020)
62
Communication from the Commission to the European Parliament and the Council, Technical adjustment of the multiannual financial framework for 2022 in accordance with Article 4 of Council
Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 2027 (COM(2021) 365 final, 7 June 2021)
63
Communication from the Commission to the European Parliament and the Council, Technical adjustment of the multiannual financial framework for 2023 in accordance with Article 4 of Council
Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 2027 (COM(2022) 266 final, 7 June 2022)
64
Communication from the Commission to the European Parliament and the Council, Technical adjustment of the multiannual financial framework for 2024 in accordance with Article 4 of Council
Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 2027 (COM(2023) 320 final, 6 June 2023)
65
The cap is enshrined in 11(3) MFFR and updated annually, if applicable, in the technical adjustment of the MFFR.
59
60
59
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5.2.
Overview of availabilities and flexibilities
Table 5.2.1
– Adopted availabilities and flexibilities in the MFF 2021-2027
Adopted availabilities focus on a specific set of flexibilities, namely unallocated margins, special instruments, and the emerging challenges and priorities cushion
under NDICI-GE. Other programmes or instruments may have elements of flexibility that are not included in this table.
Commitment appropriations, in EUR million, in current prices, rounded to the nearest whole number
Name
66
2021
2022
2023
2024
2025
2026
2027
Total
Unallocated margins
1. Single Market, Innovation and Digital
2. Cohesion and Values
2a. Economic, social and territorial cohesion
2b. Resilience and values
3. Natural Resources and Environment
4. Migration and Border Management
5. Security and Defence
6. Neighbourhood and the World
7. European Public Administration
67
Total commitment margin
- 57
101
106
93
168
257
890
57
102
17
94
81
256
834
59
105
19
96
84
256
848
60
107
21
99
85
255
719
61
109
21
100
86
254
727
62
111
22
102
88
252
735
63
114
19
97
91
256
736
305
748
226
681
684
1 786
5 489
221
- 57
226
57
229
59
94
60
96
61
97
62
96
63
1 059
305
Non-thematic special instruments
68
Flexibility instrument
971
990
1 010
1 030
1 051
1 072
1 094
7 219
Thematic special instruments
The degree of flexibility varies depending on the instrument, and depends on the provisions of the applicable legislation.
The margin for heading 7 has been calibrated based on the adopted MFF and the technical update of the financial programming of February 2021.
68
The Single Margin Instrument (parts 11(1)(a) and 11(1)(c)) has specific provisions that depend on the margins available during the programming period, hence no initial programming can be
provided.
66
67
60
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Name
66
European Globalisation Adjustment Fund (EGF)
Solidarity and Emergency Aid Reserve (SEAR)
69
Carry-over from the past
Internal strand
EUSF
External strand
End-of-Year Cushion
Brexit Adjustment Reserve (BAR)
2021
197
1 321
48
143
478
334
318
1 698
2022
201
1 299
0
146
487
341
325
1 299
2023
205
1 325
0
149
497
348
331
1 325
Other
2024
209
1 351
0
152
507
355
338
0
2025
214
1 378
0
155
517
362
345
1 149
2026
218
1 406
0
158
527
369
351
0
2027
222
1 434
0
161
538
376
359
0
Total
1 467
9 515
48
1 065
3 550
2 485
2 367
5 470
Emerging challenges and priorities cushion under NDICI-GE
1 408
1 538
1 395
1 324
1 249
1 170
1 226
9 310
69
Carry-overs are not included in the adopted availabilities for years 2022-2027.
61
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Table 5.2.2
– Remaining availabilities and flexibilities in the MFF 2021-2027
Current availabilities focus on a specific set of flexibilities, namely unallocated margins, special instruments, and the emerging challenges and priorities cushion under NDICI-GE.
Other programmes or instruments may have elements of flexibility that are not included in this table.
Commitment appropriations, in EUR million, in current prices, rounded to the nearest whole number
Name
70
2021
2022
2023
Unallocated margins
1. Single Market, Innovation and Digital
2. Cohesion and Values
2a. Economic, social and territorial cohesion
2b. Resilience and values
3. Natural Resources and Environment
4. Migration and Border Management
5. Security and Defence
6. Neighbourhood and the World
7. European Public Administration
of which: Administrative expenditure of the institutions
Total commitment margin
72
192
186
627
275
164
705
106
26
369
368
50
186
98
83
284
32
87
60
123
102
33
31
31
132
13
13
167
18
18
14
56
1
56
47
37
30
109
- 300
- 248
-6
90
49
51
27
109
- 393
- 336
- 56
10
90
24
183
1
183
54
47
24
113
- 306
- 243
139
347
361
32
329
243
345
81
330
- 893
- 801
814
2024
2025
2026
2027
Total
71
Non-thematic special instruments
Flexibility instrument
Single Margin Instrument 11(1)(a)
73
1 094
566
1 051
1 072
1 094
3 217
The degree of flexibility varies depending on the instrument, and depends on the provisions of the applicable legislation.
The values for 2021 and 2022 for the remaining unallocated margin are not included in the calculation so as not to overlap with the presentation of the Single Margin Instrument 11(1)(a).
72
The residual margins for 2021 and 2022 are already considered in the EUR 1 094 million available for the Single Margin Instrument 11(1)(a) in 2023.
73
The Single Margin Instrument 11(1)(a) has specific regulatory provisions that prevent showing a reliable forecast. The margins from 2021 and 2022 are as of 2023 included in the Single
Margin Instrument. Hence, only the availabilities for 2023 and 2024 are shown, where the availability in 2024 assumes that no further use of the Single Margin Instrument 11(1)(a) is done in
2023. The value for 2024 does not include the margin for 2023 to avoid double counting.
70
71
62
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Name
70
2021
2022
2023
Thematic special instruments
2024
2025
2026
2027
Total
71
European Globalisation Adjustment Fund (EGF)
74
Solidarity and Emergency Aid Reserve (SEAR)
75
Internal strand
EUSF
External strand
End-of-Year Cushion
Brexit Adjustment Reserve (BAR)
76
Other
Emerging challenges and priorities cushion under NDICI-GE
200
891
63
497
0
331
209
1 351
152
507
355
338
214
1 378
155
517
362
345
1 149
218
1 406
158
527
369
351
222
1 434
161
538
376
359
1 063
6 461
690
2 586
1 462
1 724
1 149
732
452
373
365
1 922
The unused amounts of 2021 (EUR 173.4 million) and 2022 (EUR 173.3 million) have lapsed.
The unused amount of 2023 would be carried over to 2024. For the purpose of an accurate multiannual perspective, this amount is presented only in 2023.
76
Resources under the Brexit Adjustment Reserve can be transferred by Member States to REPowerEU.
74
75
63
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Table 5.2.3
– Availabilities and flexibilities mobilised, used or planned in the MFF 2021-2027
Current availabilities focus on a specific set of flexibilities, namely unallocated margins, special instruments, and the emerging challenges and priorities cushion under NDICI-GE.
Other programmes or instruments may have elements of flexibility that are not included in this table.
Commitment appropriations, in EUR million, in current prices, rounded to the nearest whole number
Name
77
2021
2022
2023
2024
2025
2026
2027
Total
Unallocated margins (current - adopted)
78
1. Single Market, Innovation and Digital
2. Cohesion and Values
2a. Economic, social and territorial cohesion
2b. Resilience and values
3. Natural Resources and Environment
4. Migration and Border Management
5. Security and Defence
6. Neighbourhood and the World
7. European Public Administration
Total commitment margin
- 119
57
0
58
- 51
79
5
- 168
- 65
- 262
- 193
- 27
31
- 57
182
- 17
- 11
- 81
19
- 129
- 97
- 47
13
- 59
- 73
67
- 96
- 84
- 150
- 480
73
- 42
18
- 60
- 47
103
- 99
- 85
- 255
- 351
- 82
-5
1
-5
- 61
17
- 70
22
- 554
- 732
- 87
28
0
28
- 61
29
- 75
20
- 645
- 791
- 72
120
1
120
- 60
27
- 73
22
- 562
- 597
- 578
85
63
24
- 171
306
- 420
- 354
-2 212
-3 342
Non-thematic special instruments
Flexibility instrument
Single Margin Instrument 11(1)(a)
762
368
1 236
280
Thematic special instruments
European Globalisation Adjustment Fund (EGF)
79
Solidarity and Emergency Aid Reserve (SEAR)
Internal strand
EUSF
24
1 281
143
803
28
1 340
152
718
6
434
86
0
58
3 054
382
1 522
1 636
549
4 002
829
The degree of flexibility varies depending on the instrument, and depends on the provisions of the applicable legislation.
The unallocated margin for 2021 and 2022 has become part of the Single Margin Instrument.
79
The unused amounts of 2021 (EUR 173.4 million) and 2022 (EUR 173.3 million) have lapsed.
77
78
64
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Name
77
External strand
Brexit Adjustment Reserve (BAR)
80
2021
334
1 698
2022
469
1 299
Other
2023
348
1 325
2024
2025
2026
2027
Total
1 151
4 322
Emerging challenges and priorities cushion under NDICI-GE
1 408
1 538
1 395
592
797
797
861
7 388
80
The unused allocations for the Brexit Adjustment Reserve are assumed to be fully used.
65
 kom (2023) 0336 - Ingen titel
2726330_0067.png
Table 5.2.4
– Summary presentation of adopted, current, and mobilised or used availabilities
The amounts for the Flexibility Instrument, the EGF, and SEAR are available annually, subject to the specific legal provisions for each instrument. The amount for the Single
Margin Instrument is established each year with the technical adjustment of the MFF. This overview presents an illustrative view.
Evolution and availability of the margin for commitment appropriations
In order to account for the use of the Single Margin Instrument 11(1)(a) in 2023 and 2024, all margin allocations and uses of the Single Margin Instrument 11(1)(a) presented in
previous tables have been converted to 2018 prices for comparison purposes.
In EUR million, in 2018 prices, rounded to the nearest whole number
Name
Margin in the adopted 2021-2027 MFF
Without considering the Single Margin Instrument 11(1)(a)
Available 2021 - 2027 margin
Use 2021-2027 margin
Considering the Single Margin Instrument 11(1)(a)
Margin allocated to the Single Margin Instrument 11(1)(a)
Use of Single Margin Instrument 11(1)(a)
2023
2024
Remaining under Single Margin Instrument 11(1)(a)
Use 2021-2027 margin
Available 2021 - 2027 margin
Under Single Margin Instrument 11(1)(a)
Unallocated margin 2023-2027
1 245
741
254
488
503
3 664
1 228
503
724
75%
1 969
2 922
60%
Amount
4 891
Percentage use or programmed
66
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2726330_0068.png
Adopted, current, and mobilised or used availability other than the unallocated margin for commitments
Commitment appropriations, in EUR million, in current prices, rounded to the nearest whole number
Name
Initial
Non-thematic special instruments
Flexibility instrument
Single Margin Instrument 11(1)(a)
82
Thematic special instruments
European Globalisation Adjustment Fund (EGF)
Solidarity and Emergency Aid Reserve (SEAR)
83
Brexit Adjustment Reserve (BAR)
Other
Emerging challenges and priorities cushion under NDICI-GE
84
9 310
7 388
1 922
79.4%
1 467
9 515
5 470
404
3 054
4 322
1 063
6 461
1 149
27.6%
32.1%
79.0%
7 219
4 002
829
3 217
566
55.4%
Used/Mobilised
81
Available
Percentage difference
Includes the draft budget proposal for 2024, voted budget 2023 including draft amending budget 1/2023, and proposals for transfers for special instruments.
The comparison is not relevant as the Single Margin Instrument 11(1)(a) is linked to the unallocated margins. The amount is inflated to 2024 prices.
83
Fully mobilised in 2021 and 2022.
84
Fully mobilised in 2021, 2022, and 2023.
81
82
67