Development of the budget of European Union Nordic-Baltic meeting of foreign affairs coordinators Association of Estonian Cities (AEC) Tallinn, 4-5 April 2013 UNO SILBERG, Dr (Econ) uno.silberg@gmail.com +372 50 65533
AGENDA 1. Nature and development of the European Union. 2. The development of the European Union Financial System. 3. The Multiannual Financial Framework 2014-2020. 4. Some conclusions. Uno Silberg, Dr (Econ) 05.04.2013 2
The European Union today is not what it was yesterday, and tomorrow's not what it is today.. formation 1951 1958 1967 1993 2009 Eurotam EEC EC EU EU ECSC CAP 1962 Elimination of customs duties 1967 ESF 1971 ERM 1972 ERDF 1974 Common market 1993 Uno Silberg, Dr (Econ) 05.04.2013 3
Snowball integration in the European Union REFORM TREATY 2007 Lissbon Treaty 2009 Rome 2004 TECE 2003/2004 Nice 2000 Amsterdam 1999 Maastricht 1993 EC 1967 Rome 1957 / EEC /Eurotam 1958 ECSC 1952 Citizenship Schengen Anthem Flag 'Europe Day 9. May The single currency - euro Single market Econimic / Customas Union European Union Monetary Union Federation...??? Common foreign and security policymaking Common defense bases Legal personality Uno Silberg, Dr (Econ) 05.04.2013 4
Reform (Lisbon) Treaty, amending the existing Treaties IGC 2004 Constitution for Europe Treaty of Nice 2001 Treaty of Amsterdam 1999 IGC 2004 Treaty on the European Union 1993 Single Act 1986 Treaty on the European Union 2009 Treaty of Lisbon Treaty establishing the European Community 1958 Treaty on the Functioning of the European Union 2009 Uno Silberg, Dr (Econ) 05.04.2013 5
Towards unification of the budgetary instruments The 1951 ECSC Treaty provided for an administrative budget and an operating budget (with validity period limited to 50 years: to 2002). The 1957 Euratom Treaty set up an administrative budget and a research and investment budget. The 1957 EEC Treaty established a single budget. The 1965 Merger Treaty incorporated the ECSC and Euratom administrative budgets into the EEC budget. The 1970 Luxembourg Treaty incorporated the Euratom research and investment budget into the general budget. Between 1970-2002: two budgets co-existed: the general and ECSC operating budget. Uno Silberg, Dr (Econ) 05.04.2013 6 Source: European Union Public Finance 2008: 16
The crisis in the Community's finances (1975-88) The budgets for 1980, 1985, 1986 and 1988 were not adopted until the financial year was well under way, so that the provisional-twelfths arrangements had to be applied for periods of five to six months. There were three reasons for this state of affairs: the climate of conflict in relations between the institutions; the question of budgetary imbalances; the inadequacy of resources to cover the Community's growing needs. Source: European Union Public Finance 2008 Uno Silberg, Dr (Econ) 05.04.2013 7
Reform of the Community's finances: the Delors I package (1988-92) Own resources A new concept: the global own resources ceiling The total amount of available own resources was no longer determined by the yield of traditional own resources combined with the ceiling of the VAT-based resource, but was expressed as a percentage of the Community's total GNP, increasing from 1.15 % for 1988 to 1.20 % for 1992. A further overall ceiling of 1.30 % of total Community GNP was set for 1992 in terms of appropriations for commitments. Source: European Union Public Finance 2008 Uno Silberg, Dr (Econ) 05.04.2013 8
Consolidation of the 1988 reform: the Delors II package (1993-99) Updating the financial framework Major implications: to take account of the financial impact of the reform of the common agricultural policy which started in 1992; to take stock of the reform of the Structural Funds and to adopt a new regulation, since the framework established in 1988 would be expiring at the end of 1993. to guarantee the development of the policies needed for the internal market to run smoothly and to provide the Community with sufficient resources to meet its new international responsibilities. Source: European Union Public Finance 2008 Uno Silberg, Dr (Econ) 05.04.2013 9
Community GDP, public expenditure by Member States and Community expenditure 1960-2001 (million euro) Uno Silberg, Dr (Econ) 05.04.2013 10
Agenda 2000 package (2000-06) Apart from establishing a new financial framework (taking into account the financial impact of the forthcoming enlargement), major decisions had to be taken on the reform of the CAP and structural operations. There was far greater concern about imposing tight budget management, in connection with the establishment of monetary union. A number of Member States were very insistent on the issue of their net contribution to the Union budget, whereas in 1992 such demands had been more moderate. Source: European Union Public Finance 2008 Uno Silberg, Dr (Econ) 05.04.2013 11
Uno Silberg, Dr (Econ) 05.04.2013 12
% of GNP/ GNI 1,40% OR: Ceilings for commitments enlargement enlargements 1,35% 1,30% Ceiling (1.31%) for commitments 1,25% 1,20% 1,15% Budget Shift from GNP to GNI Ceiling fin. framework 1,10% 1,05% Eur. Council December 2005 1,00% 0,95% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Uno Silberg, Dr (Econ) 05.04.2013 13
OR: Ceilings for payments % of GNP/ GNI enlargement enlargements 1,33% 1,28% Shift from GNP to GNI Own Resources ceiling (1.24%) 1,23% 1,18% 1,13% FP ceiling 1,08% 1,03% Budget Eur. Council December 2005 0,98% 0,93% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Uno Silberg, Dr (Econ) 05.04.2013 14
Source: EC SEC (2010) 7000 final (19.10.2010) Uno Silberg, Dr (Econ) 05.04.2013 15
A new own resources system Commission proposal : End statistical VAT own resource as of 2014 Introduce 2 new own resources Financial Transaction Tax EU VAT Radically simplify the system of corrections Developments in the European Union membership fee MEMBER STATE MEMBER STATE Legal Entities Source: European Commission 29.06.2011 MEMBER STATE Legal Entities 2014 2021? Individuals Uno Silberg, Dr (Econ) 05.04.2013 16
Uno Silberg, Dr (Econ) 05.04.2013 17
Allikas: DG ARD 12.10.2011 Uno Silberg, Dr (Econ) 05.04.2013 18
MFF, EU Budget = policy in numbers Challenges Lisbon Treaty : more responsibilities Connect Europe better Social, economic disparities Unstable neighborhood Austerity climate Financial crisis interventions Response to natural disasters Ensure synergies to prove EU Value-added Responses European logic fully geared to Europe 2020 strategy Modernised budget - output oriented, simplification, conditionality, leveraging investment Limited in size, but redesigned - savings in some areas - more to areas that matter - multi-purpose expenditure Budgetary rigour, administrative limits New legitimacy of traditional policies MORE EUROPE FOR THE SAME ONEY! Source: European Commission 2011 19
The 5 targets for the EU in 2020 Source: http://ec.europa.eu/europe2020/index_en.htm Uno Silberg, Dr (Econ) 05.04.2013 20
MFF - timing of negotiations: 2011: Preparatory work under PL presidency June 2012 (DK pres) : European Council level December 2012 (CY pres): Agreement on new MFF regulation between European Parliament and Council 2013: Adoption by co-decision of new legal bases Source: European Commission 29.06.2011 Uno Silberg, Dr (Econ) 05.04.2013 21
Modernised budget Connecting Europe Facility Innovative financial instruments Key changes in research, cohesion, agriculture and external action Administrative rigour Simplification New Own resources Simplified system of corrections Source: European Commission 29.06.2011 Uno Silberg, Dr (Econ) 05.04.2013 22
The European Council has concluded on the MFF for 2014-2020 on 7-8 February 2013. The MFF comprises of primarily six headings, namely; 1. Smart and inclusive Growth, 2. Sustainable growth: Natural resources, 3. Security and Citizenship, 4. Global Europe, 5. Administration, 6. Compensation. The Administrative heading covers administrative expenditure of all Institutions, i.e. even those that the European Parliament and the Committee of the Regions would call "political", such as all budget lines related to members, political groups including all the political activities and actions. Uno Silberg, Dr (Econ) 05.04.2013 23
MULTIANNUAL FINANCIAL FRAMEWORK (EU-28) (EUR million - 2011 prices) COMMITMENT APPROPRIATIONS 2014 2015 2016 2017 2018 2019 2020 Total 2014-2020 1. Smart and Inclusive Growth 60.283 61.725 62.771 64.238 65.528 67.214 69.004 450.763 1a: Competitiveness for growth and jobs 15.605 16.321 16.726 17.693 18.490 19.700 21.079 125.614 1b: Economic, social and territorial cohesion 44.678 45.404 46.045 46.545 47.038 47.514 47.925 325.149 2. Sustainable Growth: Natural Resources 55.883 55.060 54.261 53.448 52.466 51.503 50.558 373.179 of which: Market related expenditure and direct payments 41.585 40.989 40.421 39.837 39.079 38.335 37.605 277.851 3. Security and citizenship 2.053 2.075 2.154 2.232 2.312 2.391 2.469 15.686 4. Global Europe 7.854 8.083 8.281 8.375 8.553 8.764 8.794 58.704 5. Administration 8.218 8.385 8.589 8.807 9.007 9.206 9.417 61.629 of which: Administrative expenditure of the institutions 6.649 6.791 6.955 7.110 7.278 7.425 7.590 49.798 6. Compensations 27 0 0 0 0 0 0 27 TOTAL COMMITMENT APPROPRIATIONS 134.318 135.328 136.056 137.100 137.866 139.078 140.242 959.988 as a percentage of GNI 1,03% 1,02% 1,00% 1,00% 0,99% 0,98% 0,98% 1,00% TOTAL PAYMENT APPROPRIATIONS 128.030 131.095 131.046 126.777 129.778 130.893 130.781 908.400 as a percentage of GNI 0,98% 0,98% 0,97% 0,92% 0,93% 0,93% 0,91% 0,95% OUTSIDE THE MFF 2014 2015 2016 2017 2018 2019 2020 Total 2014-2020 Emergency Aid Reserve 280 280 280 280 280 280 280 1.960 European Globalisation Fund 150 150 150 150 150 150 150 1.050 Solidarity Fund 500 500 500 500 500 500 500 3.500 Flexibility instrument 471 471 471 471 471 471 471 3.300 EDF 2.952 3.868 3.911 3.963 4.024 4.094 4.174 26.984 TOTAL OUTSIDE THE MFF 4.353 5.269 5.312 5.364 5.425 5.495 5.575 36.794 as a percentage of GNI 0,03% 0,04% 0,04% 0,04% 0,04% 0,04% 0,04% 0,04% TOTAL MFF + OUTSIDE MFF 138.671 140.597 141.368 142.464 143.291 144.573 145.817 996.782 as a percentage of GNI 1,06% 1,06% 1,04% 1,04% 1,03% 1,02% 1,02% 1,04% Source: 07-08.02.2013 EUCO 37/13 http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/et/ec/135382.pdf Uno Silberg, Dr (Econ) 05.04.2013 24
MULTIANNUAL FINANCIAL FRAMEWORK 1988-1992 1993-1999 2000-2006 2007-2013 2014-2020 1. EAGGF Guarantee 1. Common agricultural policy 2. Structural operations 3. Policies with multiannual allocations (IMPs, research) 4. Other policies of which: noncompulsory 5. Repayments and administration (including financing of stock disposal) 2. Structural operations *Structural Funds *Cohesion Fund *EEA financial mechanism 1. Agriculture 1a: Common agricultural policy 1b: Rural development 2. Structural actions *Structural Funds *Cohesion Fund Uno Silberg, Dr (Econ) 05.04.2013 1. Sustainable growth 1a: Competitiveness for growth and employment 1b: Cohesion for growth and employment 2. Preservation and management of natural resources *of which market related expenditure and direct payments 3. Internal policies 3. Internal policies 3. Citizenship, freedom, security and justice 1. Smart and Inclusive Growth 1a: Competiveness for growth and jobs 1b: Economic, social and territorial cohesion 2. Sustainable Growth: Natural Resources *of which: market related expenditure and direct payments 3. Security and citizenship 4. External action 4. External action 4. The EU as a global partner 4. Global Europe 5. Administrative expenditure 5. Administration 5. Administration 5. Administration 6. Monetary reserve 6. Reserves 6. Reserves 6. Compensations 6. Compensations 7. Compensation 7. Pre-accession strategy *Agriculture *Pre-accession structural instrument *PHARE (applicant countries) 8. Compensation OUTSIDE THE MFF *Emergency Aid Reserve *European Globalisation Fund *Solidarity Fund *Flexibility instrument *EDF 25
Analysis of the Council Conclusions on the Multiannual Financial Framework (EUR million 2011 prices) MFF 2007-2013 MFF- EUCO 8.2.2013 Difference to the current MFF 2007-13 level 1) Smart and Inclusive Growth 445,491 450,763 5,272 1a) Competitiveness for growth and jobs 90,675 125,614 34,939 1b) Economic, social and territorial cohesion 354,815 325,149-29,666 Cohesion Fond 71,021 66,362-4,659 Less develop Regions 204,366 164,279-40,087 Transition Regions 14,494 31,677 17,183 Outermost Regions 1,387 Developed Regions 56,06 49,492-6,568 European Territorial Cooperation 8,87 8,948 0,078 2) Sustainable growth: natural resources 421,132 373,179-47,953 Market related expenditure and direct payments 336,685 277,851-58,834 Rural Development 84,447 85,086 0,639 3) Security and citizenship 12,366 15,686 3,32 4) Global Europe 56,815 58,704 1,889 5) Administration 56,895 61,629 4,734 Administrative expenditure 49,798 6) Compensations TOTAL 993,619 959,988-33,631 Uno Silberg, Dr (Econ) 05.04.2013 26
Analysis of the Council Conclusions on the Multiannual Financial Framework (EUR million 2011 prices) 440 MFF 2007-2013 340 240 MFF- EUCO 8.2.2013 Difference to the current MFF 2007-13 level 140 40-60 Uno Silberg, Dr (Econ) 05.04.2013 27
Conclusions? Multiannual Financial Framework 2014-2020 = -33 631 (EUR million 2011 prices) 1. At least 20% of the costs of climate-related objectives 2. The biggest losers: 1. Market related expenditure and direct payments -58 834 2. Less develop Regions -40 087 3. Economic, social and territorial cohesion -29 666 3. Winners: 1. Competitiveness for growth and jobs (including the CEF) +34 939 2. Transition Regions (75%-90% DGP) +17 183 4. Conclusions? Uno Silberg, Dr (Econ) 05.04.2013 28
Conclusions The are big losers in the MFF especially poor regions and also agriculture: this will have an effect as the poor areas will not develop as fast as they should and in agriculture this could have an impact on food costs which may have to rise. It is important that we look at ohter measures to be able to cover some of lack of investment wich may now arise in the outlined areas. A budget agreed finally would be better and give more stability to regions than no budget agreed. Uno Silberg, Dr (Econ) 05.04.2013 29
Difference to the current MFF 2007-13 level (EUR million 2011 prices) 40 34,939 30 20 17,183 10 0 5,272-4,659-6,568 0,078 0,639 3,32 1,889 4,734-10 -20-30 -29,666-40 -40,087-50 -47,953-60 -58,834 Uno Silberg, Dr (Econ) 05.04.2013 30
MFF 2014-2020: List of programmes adjusted post European Council conclusions Uno Silberg, Dr (Econ) 05.04.2013 31 Source: 2013-03-25 Indicative breakdown EC conclusions
Source: 2013-03-25 Indicative breakdown EC conclusions Uno Silberg, Dr (Econ) 05.04.2013 32
EUROPEAN PARLIAMENT REACTION: the EP voted a week of the 11 March 2013 on the MFF. The main aspects are: Parliament rejects the 8 February European Council conclusions in their current form. Payment shortfalls: Parliament will not start negotiations on the MFF until the Commission comes forward with an Amending Budget devoted to covering all unpaid payment claims for 2012 and will not conclude these negotiations before the final adoption of this Budget by Council and Parliament. It also wants a political undertaking from the Council that all bills falling due in 2013 will be paid in 2013, so as to avoid "rolling over" a deficit into the new MFF. Flexibility: Parliament insists on maximum overall flexibility between and within headings, as well as between financial years to fully utilise the available margins of each heading. Uno Silberg, Dr (Econ) 05.04.2013 33
Review: Parliament also calls for a review of MFF spending, so as to give the newly-elected Parliament and Commission an opportunity to influence the budgets. Own resources: Parliaments calls for the reduction of the share of GNI-based contributions to the EU budget to a maximum of 40 % and phasing out of all existing rebates and correction mechanisms. Also, revenues from the Financial Transaction Tax should be allocated at least partly to the EU budget as a genuine own resource. Unity: Parliament insists that the principle of the unity of the EU budget be recalled and clearly defined in the Interinstitutional Agreement. All expenditure and revenue resulting from decisions taken by, or in the name of, the EU institutions must be summarised in a document annexed every year to the Draft Budget. Uno Silberg, Dr (Econ) 05.04.2013 34
A few grains General situation in the EU - we are at a crossroads. MFF - do not agree that there is a lot of national interests. Continuous correction the national governments and parliaments mistakes. We have to defend the idea of the European Union. The EU needs economic growth. Lets to survival. Tuesday, 12 March 2013 Meeting of the CoR Conference of Presidents with President Van Rompuy and Commissioner Hahn Uno Silberg, Dr (Econ) 05.04.2013 35
Thank you for your attention! Uno Silberg, Dr (Econ) 05.04.2013 36