The state of the negotiations on the long-term EU budget after summit ends with black smoke
After 30 hours of negotiations with the 27 leaders convened for a special EU budget summit in Brussels, Charles Michel, the new President of the European Council, was eventually forced to concede that he would not be able to reach an agreement this time around. The positions of member states were still too far apart and the summit hardly managed to solve the outstanding issues on the next EU long-term budget for the period 2021-2027.
The next long-term EU budget: Between a rock and a hard place
Back in December 2019, the Finnish Presidency proposed the first so-called ‘negotiating box with figures’ to allow for further concrete negotiations in the Council. The proposal was, however, rapidly dismissed by the EU member states, the Commission and the Parliament alike – albeit not for the same reasons. As mandated by the European Council in December 2019, Charles Michel then came up with his own version of the negotiating box on 14 February 2020, a week before the special summit.
His proposal was based on bilateral consultations with all member states to better reflect their priorities and red lines. The President of the European Council genuinely hoped that his proposal and approach would find a different fate than that of the Finnish proposal, but this was not counting on the staunch positions of the EU member states who coalesced into opposing groupings. On one side, the so-called ‘frugal friends’ for whom the EU budget should not exceed 1.00% of EU GNI, and on the other, the ‘friends of cohesion’ (recently renamed ‘friends of an ambitious Europe’) who want to maintain sufficient levels of resources for core areas of EU spending. In an attempt to find a last-minute compromise and to break coalitions, Charles Michel supported by the Commission put forward a new proposal. But it was a bridge too far to satisfy all sides, and at least another summit will therefore be needed.
EU external action is not on the top list of member states’ concerns
Caught in between two fires, EU external action was hardly even mentioned at the summit. The negotiations on the multiannual financial framework (MFF) are fundamentally driven by domestic interests and priorities, which often leads to short-sighted considerations about how much of member states’ individual contributions will eventually make their way back home and serve national interests. It is usually reflected in the traditional yet complex debate around net-beneficiaries versus net-contributors to the EU budget, though things are much more complicated and multidimensional than simple arithmetical calculations.
Unlike traditional policy areas – such as agriculture and cohesion – that have their respective organised constituencies and vocal ‘friends of…”, there is no such champion for EU external action. Yet, the EU and its member states have repeatedly recognised the need for the EU to step up its action as a global player in light of increasingly pressing global challenges. EU leaders have strongly emphasised the importance of doing more in new areas such as climate, migration, security and defence. They underlined in particular the need to enhance EU collective action for promoting EU interests and values in the world. While this calls for better coordination and integration of the full range of EU foreign policy tools and approaches, it also implies that such an ambition cannot be achieved without an adequate level of financing.
EU external action and development cooperation is not an area for which EU leaders have historically fought when things come to the crunch in the MFF negotiations. It is not an EU policy area that benefits from a strong political patronage in EU member states, and financial resources for external action represent less than 10% of the EU budget. Experience shows that it is also the budget line that has suffered the most disproportionate cuts in previous MFF negotiations.
As EU ambitions expand and citizens’ expectations increase, so does the need to ensure sufficient resources and political support for EU international and development cooperation. Higher levels of ambition require higher levels of resources. The credibility of the ‘geopolitical Commission’ and the EU’s global leverage are also at stake.
Heading 6 and NDICI have weathered the storm until now…
Against this background, in 2018 the Commission had made a strong case for increasing the overall budget for external action by 24%, under a new Heading 6 ‘Neighbourhood and the World’. It also proposed a consolidation of its various external financing instruments into a new broad Neighbourhood Development and International Cooperation Instrument (NDICI).
It is noteworthy that, until now, the various iterations of the MFF negotiating box have somewhat preserved Heading 6 and the NDICI within it. The latest figures put forward in President Michel’s negotiating box decreased the overall MFF by 3.5% (from €1,134.5 billion to €1,094.8 billion in constant 2018 prices). Under that scenario, the budget for external action was to be brought down to €101.9 billion (down from the €108.9 billion proposed by the Commission), representing a 6.45% cut, which is higher than the average for the whole MFF.
Yet, the proposed cuts in Heading 6 are proportionally less severe when compared to other spending areas such as Heading 5 Security and Defence (that suffers a -41.25% cut), Heading 4 Migration and Border Management (that saw a -29% cut), or the off-budget European Peace Facility (-13.26% cut). All these areas have a strong connection to EU external action and could eventually also reverberate on Heading 6.
The NDICI was also reduced to €75.4 billion (compared to the €78.9 billion in the Commission proposal), representing a 4.43 % cut. For the NDICI, the figures put forward by Charles Michel were the same as those proposed in the Finnish negotiating box. The cuts to the NDICI are not so bad compared to other instruments within Heading 6, such as the Instrument for Pre-Accession which saw an 11.6% cut. Within the NDICI, the rapid response pillar is where the harshest cuts were proposed, with a reduction of 14.75% compared to the Commission proposal. The other geographic and thematic components of the NDICI were also reduced in lesser proportions, while the emerging challenges and priorities cushion saw a very slight increase.
… but could still get hammered in the last stages of the negotiations
As negotiations will intensify in the next few weeks and with growing pressure to further curtail the proposed EU budget, there are fears that external action will be the target of additional and sharper savings. In the previous MFF process in 2013, this is where the biggest and most disproportionate cuts had been made in order to cut a deal in the last stages of the negotiations. A first worrying signal was observed in the revised figures put forward at the end of the summit, where the proposal was made to further reduce the NDICI to €75 billion.
At the same time, the idea of a consolidated NDICI seems now more secure, at least in the wording of the negotiating box. While the structure of the NDICI is still up for discussion, particularly concerning the inclusion of the European Neighbourhood Instrument (ENI) and of the currently off-budget European Development Fund (EDF) the language regarding the future integration of the EDF into the EU budget has become progressively stronger and less ambiguous. The dynamics within the Council also seem to be shifting towards this. Yet, the NDICI is far from being a done deal, and the EDF will most likely be kept as a bargaining chip until the end, in some sort of political compromise between net contributors and net beneficiaries.
The domino effect of delays hits programming
As MFF negotiations linger on, the risk is that this will considerably delay the trilogues on the NDICI regulation, which are taking place in parallel. A number of key issues in the NDICI regulation are indeed linked to progress made in the MFF negotiations, such as overall geographic and thematic envelopes, spending targets, and governance-related arrangements. The European Parliament, which has a co-decision role on this matter, has announced its intention to freeze negotiations on those issues until further progress is made in the overall MFF process. It has also reiterated its call for a more ambitious EU budget, including for EU external action.
Such delays could negatively affect the start of the programming of EU resources for development and international cooperation. This process will start in earnest in the next few months, with a view to identifying cooperation priorities and country allocations for the next seven years. Programming such a broad instrument without any certainty on the structure of the instrument or on the amounts available will be an unprecedented endeavour for the EU.
What does this mean for the geopolitical Commission?
The outcome of the MFF negotiations will ultimately determine whether the EU and its member states can put the necessary resources behind the new priority areas which they have agreed upon. Without sufficient funding and appropriate instruments, the EU’s capacity to become a leading global player would be severely hampered, and the new ambitions of the geopolitical Commission risk being cut short prematurely. One question is to what extent this geopolitical Commission called for by the President of the Commission is also an ambition equally shared by all the member states.
The views are those of the authors and not necessarily those of ECDPM