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Multiannual Financial Framework (MFF) and the EU budget

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Germany wants to modernise the MFF, © picture alliance / Klaus Ohlenschläger

25.02.2020 - Article

The EU Heads of State and Government are currently negotiating the EU Multiannual Financial Framework (MFF) 2021-2027. On 20 and 21 February, they met for a Special European Council in Brussels. No agreement was reached on the MFF at this Meeting.

Foreign Minister Maas travelled to Brussels as early as 17 February, when during the General Affairs Council (GAC), the member states discussed the MFF. Prior to the GAC and talks with Commission President Ursula von der Leyen, he commented as follows:

We are entering the critical phase of the negotiations

The only debate between member states before the Special European Council takes place today in the General Affairs Council (GAC) in Brussels. Prior to the GAC and talks with Commission President Ursula von der Leyen, Foreign Minister Maas commented as follows:  

Our most important goal is to make the EU budget fit for the future. Europe is facing major challenges – when it comes to climate protection, research, digitalisation, migration and foreign policy. We need a modern budget which provides funds to perform these tasks. The clock is ticking. We need to agree on this by the end of the year – also with the European Parliament. So it is good that the member states want to reach agreement this week. The negotiations are not going to be easy – not least due to the gap left by Brexit. We want to distribute the burden fairly between the member states and secure appropriate financial resources for our Länder.

Germany keen to modernise the MFF

The European budget is on the cusp of radical change. Germany supports proposals submitted by the European Commission to modernise the financial framework and gear it more to EU priorities and new shared challenges. These include migration, climate protection, digital innovation and research. Brexit will result in an increase of contributions for the remaining member states as the United Kingdom was a net contributor to the EU. Based on its good economic performance compared to other EU member states, Germany makes the largest contribution to the EU budget accounting for more than 20%.

What does the MFF actually do?

The European Union currently has almost 155 billion euros per year at its disposal for spending and European funding programmes. The Multiannual Financial Framework (MFF) is used to set priorities in advance and to set a limit on spending.

With the MFF, the EU member states decide the maximum amount of money the EU can spend on its various tasks within a given period (currently seven years). This decision is one the member states need to take unanimously. The aim of this medium-term financial planning is to guarantee the planability of spending and the clear assignment of EU finances to shared political goals. The distribution of financial resources thus reflects the EU’s political priorities.

The MFF lays down the maximum amounts to be spent on various policy fields and funding programmes, and the EU must respect these ceilings in its annual budget planning.

The MFF 2021-2027: Making decisions on the future of the European Union

In May 2018, the European Commission presented its proposal for the MFF 2021-2027 (Commission press statement). The proposal provides for spending to the tune of 1279 billion euros over the seven-year period.

The member states are currently negotiating to find a common position. The negotiations on the future MFF do not just focus on the amount of financial resources assigned to individual fields and programmes, but also on political principles connected to the spending. For example, connecting financial resources to rule of law principles and necessary structural reform or the level of effective climate spending in the MFF.

There are many different interests at play within the EU member states but also between various actors at national level. For Germany, it is the Federal Foreign Office which leads the negotiations on the spending side of the MFF, that is, the Federal Foreign Office coordinates the position of the Federal Government and represents the shared interests in the Council negotiations in Brussels.

In the current negotiations, the Federal Government is working for an MFF which makes the EU fit for the future. The EU needs to increase its innovative capacity, protect its citizens more effectively both from internal and external threats and make its voice better heard in the world – and at the same make a clear commitment to our basic values.

What does the EU spend money on currently?  –
EU Multiannual Financial Framework for 2014-2020

The current MFF took effect in 2014 and runs until the end of 2020. The EU has earmarked 1083 billion euros for this seven-year period. EU funding programmes and spending are geared to the aims of the Europe 2020 Strategy. The Multiannual Financial Framework lays down the maximum amounts for the following fields:

  • Competitiveness (research, education, technology, infrastructure)
  • Structural policy/regional development
  • Natural resources/agricultural policy
  • Home affairs and security policy, Union citizenship
  • Global Europe
  • Administration

All member states, their economies and their citizens benefit either directly or indirectly from EU funding programmes. Thanks to the European education programme Erasmus, more than 10 million people have been able to gain experience in other European countries since the programme was launched, including more than 1.2 million Germans. With a budget of some 80 billion euros, Horizon 2020, the European Framework Programme for Research and Innovation, is supporting joint research by European universities.

In the MFF 2014-2020, more than 70% of the budget is assigned to traditional funding policies – cohesion policy and common agricultural policy.

The EU’s cohesion and structural policy has the aim of promoting economic, social and territorial cohesion between the member states and minimising differences in levels of development between European regions. In Germany, resources from the EU cohesion fund (some 19 billion euros in the current MFF) give the Länder the financial scope to implement a smart, sustainable and inclusive growth strategy (further information from the Federal Ministry for Economic Affairs and Energy).

The common agricultural policy is one of the oldest communitarised policy areas. Its share of the EU budget has dropped steadily in recent years (from 90% originally to its current level of 34%). The most important instrument of agricultural policy remain so-called direct payments. There is also funding available to support rural development. The German agricultural sector is currently receiving more than 6 billion euros of support annually from the EU budget (further information from the Federal Ministry of Food and Agriculture).

EU own resources (income) - How does the EU finance its spending?

The EU is largely financed by contributions from the EU member states, so-called own resources. The respective MFF lays down the maximum level of annual EU own resources. The share shouldered by the individual EU member states depends mainly on each country’s economic performance (Gross National Income, GNI). Furthermore, when calculating the national contributions, customs duties and national VAT revenue are also taken into account.

Based on its good economic performance compared to other EU member states, Germany makes the largest contribution to the EU budget accounting for more than 20%.

Further information on EU own resources and the EU budget is available on the homepage of the European Commission.

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