Lars Jorgen MAGNUSSON Senior Administrator External Actions DG Budget EU budget and Financial Programming.

Lars Jorgen MAGNUSSONSenior AdministratorExternal ActionsDG Budget

EU budgetandFinancial Programming

EU: 28 Member States with nearly 500 million inhabitants

EU Institutions

European Commission

Council of theEuropean Union

European Parliament

Court of Justice of the European Communities

European Court of Auditors

EU Budget

• Section I – Parliament • Section II – Council • Section III – Commission • Section IV – Court of Justice • Section V – Court of Auditors • Section VI – Economic and Social Committee • Section VII – Committee of the Regions • Section VIII – European Ombudsman • Section IX – European Data Protection Supervisor • Section X – European External Action Service (EEAS) • – 95% of the EU budget – goes to fund concrete activities ("operating

appropriations") is paid out by the Commission (Section III).

EU – relative size of the EU Budget2011 Public expenditure : Member States vs. EU Budget

(as % of GNI / excluding interest charges)

53,0 52,7 52,1

50,049,0 48,6 48,3 47,5

46,8 46,445,2 45,1 44,9

43,942,9 42,5

41,440,3

39,537,737,9 37,3 37,1

54,9

60,7

49,5

45,7

1,0

0

10

20

30

40

50

60

LU DK FR FI IE SI SE AT NL BE HU PT UK CY CZ IT EL PL MT DE ES EE LV SK RO BG LT EUBudget

% of GNI

Legal framework and regulations

• EU Treaties set out basic principles, budget procedure, general goals of policies

• Multiannual financial framework regulation with a duration of at least five years establishes annual upper limits (known as ‘ceilings’) per heading

• Own resource decision determines what and how much to collect - financing mechanisms and revenue limit (‘own resource ceilings’)

• Financial Regulation specifies the rules of spending and financial management

Multiannual Financial Programming

• Multiannual Financial Frameworks (MFF)• 2000-2006, 2007-2013, 2014–2020

• The MFF translates into financial terms the Union’s political priorities for a given period

• Divides the expenditure to categories (headings) and provides the general framework (ceilings) to be respected in annual budgets

• Defines the maximum amounts of money to be spent during the period and in each budgetary year in:

• commitment appropriations: legal pledges to provide finance, provided that certain conditions are fulfilled

• payments: cash or bank transfers to the beneficiaries

Annual budgetary procedure

• In the Treaty of Lisbon, the budgetary procedure has been improved

• The "Multiannual Financial Framework" becomes legally binding

• The European Parliament decides on an equal footing with the Council

EU Budget Expenditure Lifecycle

Who manages the EU budget?

Executive

agencies

CentralisedJoint

International Organisations

SharedMemberStates

Direct Indirect

DecentralisedThird

Countries

Community

agencies

Specialised Community

bodies

EIB & EIF

National

agencies

Who manages the EU budget?

• The bulk of EU expenditure is managed jointly between

• the Commission and the Member States

• under the so called • shared management

Commission SharedManagement

Third Countriesand International

Partners

22% 76% 2%

Accountability and external control

• Transparency in the use of funds: recipients of all EU funds disclosed, e.g. Through Financial Transparency System

• Reporting: Commission publishes annual accounts of the

EU

• External control: European Court of Auditors annual report

• Political accountability: EP gives discharge

The "4 eyes" principle

Authorising Officer

Operationalverification

Operational initiation

Financial initiation

Financial verification

EU Budget 2013

For 500million Europeans

For growthand employment

EU budget 2013 in figures

Budget headings Budget2013*

Change from 2011

Sustainable growth 67.5 4.7 %

a) Competitiveness for growth and employment 14.8 9.1%

b) Cohesion for growth and employment 52.8 3.5 %

Preservation and management of natural resources

60.0 2.2 %

Citizenship, freedom, security and justice** 2.1 10.9%

The EU as a global player*** 9.4 7.4 %

Administration 8.3 1.3 %

Total 147.2 3.5 %

(*)Expenditure estimates for EU policies in commitment appropriations (billion EUR)(**) Excluding the European Union Solidarity Fund.(***) Including the Emergency Aid Reserve.

Reflecting Europe 2020 prioritiesBalancing austerity and growth-boosting measures

The 2013 EU budget looks to the future

Innovation Union EUR 23.0 billion

Youth on the move EUR  1.4 billion

A digital agenda for Europe EUR  2.4 billion

A resource-eficient Europe EUR 22.1 billion

An industrial policy for the globalisation era EUR 1.8 billion

An agenda for new skills and jobs EUR  9.5 billion

European platform against poverty EUR 2.0 billion

Sustainable growth

2nd column: Budget 2013, expenditure estimates for EU policies in commitment appropriations (billion EUR)3rd column: Change from 2011

Natural resources

2nd column: Budget 2013, expenditure estimates for EU policies in commitment appropriations (billion EUR)3rd column: Change from 2011

Citizenship, freedom, security and justice

The EU as a global player

(2) Including the Emergency Aid Reserve

Administration

• 5.6 % of the EU budget is planned to cover the functioning of all the EU institutions, compared to 5.7 % in 2011

• Major reform of administration which saved the EU taxpayers EUR 3 billion.

• The Commission has maintained the policy of 0 % staff growth.

• The rest of the 2013 budget (94.4 %), is directed to Union programmes and operations in favour of Europe’s regions and towns, business, scientists, citizens and the EU’s actions in the world

Where does the money come from?

Sustainable growth: Competitiveness in 2010

0,0 billion EUR

1,0 billion EUR

2,0 billion EUR

3,0 billion EUR

4,0 billion EUR

5,0 billion EUR

6,0 billion EUR

7,0 billion EUR

8,0 billion EUR

PL ES DE PT IT EL CZ HU UK FR SK LT EE RO LV SI BG NL BE SE AT FI IE CY DK MT LU

0,00%

0,50%

1,00%

1,50%

2,00%

2,50%

3,00%

3,50%

4,00%

4,50%

in billion EUR

% GNI

Natural resources in 2010

0,0 billion EUR

2,0 billion EUR

4,0 billion EUR

6,0 billion EUR

8,0 billion EUR

10,0 billion EUR

FR ES DE IT UK PL EL IE RO HU AT PT DK NL CZ SE FI BE SK BG LT LV SI EE CY LU MT

0,00%

0,50%

1,00%

1,50%

2,00%

2,50%

in billion EUR

% GNI

MFF 2014-2020 Challenges

• Exceptional Lisbon Treaty: more responsibilities • Austerity climate• Financial crisis interventions• Ensure synergies to prove EU Value-added• Social, economic and territorial disparities• Connect Europe better to strengthen the internal market• Unstable neighborhood

MORE EUROPE FOR THE SAME MONEY!

Responses• European logic fully geared to Europe 2020 strategy• Modernised budget, output oriented, simplification, conditionality,

leveraging investment:• Connecting Europe Facility and innovative financial instruments• Key changes in research, cohesion, agriculture, external action

• Limited in size, but redesigned • Budgetary rigour, administrative limits • Savings in some areas and more for areas that matter • Multi-purpose expenditure• New legitimacy of traditional policies

• Reformed financing system:• New Own Resources linked to EU policies• Relief on Member States budget (via reduced contributions)• Simplification of existing correction mechanisms

Commission’s proposal*

(EUR million - 2011 prices)

COMMITMENT APPROPRIATIONS 2014 2015 2016 2017 2018 2019 2020Total

2014-20201. Smart and Inclusive Growth 64 706 66 588 68 138 69 957 71 594 73 763 76 163 490 909

of which: Economic, social and territorial cohesion 50 468 51 543 52 542 53 609 54 798 55 955 57 105 376 0202. Sustainable Growth: Natural Resources 57 833 56 759 55 707 54 670 53 660 52 665 51 633 382 927

of which: Market related expenditure and direct payments 42 691 41 854 41 034 40 229 39 440 38 667 37 909 281 8253. Security and citizenship 2 532 2 571 2 609 2 648 2 687 2 726 2 763 18 5354. Global Europe 9 400 9 645 9 845 9 960 10 150 10 380 10 620 70 0005. Administration 8 542 8 679 8 796 8 943 9 073 9 225 9 371 62 629

of which: Administrative expenditure of the institutions 6 967 7 039 7 108 7 191 7 288 7 385 7 485 50 464TOTAL COMMITMENT APPROPRIATIONS 143 013 144 241 145 094 146 179 147 164 148 758 150 551 1 025 000

as a percentage of GNI 1.08% 1.07% 1.06% 1.06% 1.05% 1.04% 1.03% 1.05%

TOTAL PAYMENT APPROPRIATIONS 133 851 141 272 135 506 138 384 142 228 142 894 137 966 972 102as a percentage of GNI 1.01% 1.05% 0.99% 1.00% 1.01% 1.00% 0.94% 1.00%

Margin available 0.22% 0.18% 0.24% 0.23% 0.22% 0.23% 0.29% 0.23%Own Resources Ceiling as a percentage of GNI 1.23% 1.23% 1.23% 1.23% 1.23% 1.23% 1.23% 1.23%

*29/06/2011 - COM(2011)500 final, page 5

Multiannual Financial Framework (EU 27)

What does constant in real terms mean?

14-20 vs. 07-13Statistical overhang

14-20 vs 13

in EUR billion 993,6 146,4 1.024,8 1.025,0 3,2% 3,1% 0,0%

in % of GNI 1,12% 1,12% 1,05%

in EUR billion 942,8 137,8 964,4 972,2 3,1% 2,3% 0,8%

in % of GNI 1,06% 1,05% 1,00%

2007-2013 2013

Payments

2013 * 7 2014-2020

MFF COMPARISON BETWEEN 2007-2013 AND 2014-2020 (in 2011 prices)

Commitments

Change (in %)

2011 prices

What does constant in real terms mean?

125.0

130.0

135.0

140.0

145.0

150.0

155.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EUR billion

2013: EUR 146.4 bn

'07-'13 average EUR 141.9 bn

2014:EUR 142.6 bn(EUR 3.8 bn

less than 2013)

'14-'20 averageEUR146.4 bn

COM proposal '14-'20: EUR 1025 bn

Statistical overhang

+ 3.1%

Committment ceiling ofCOM proposal for MFF 2014-2020

Committment ceiling ofMFF 2007-2013

MFF '07-'13: EUR 993.6 bn

Decreasing payment share

0,85%

0,90%

0,95%

1,00%

1,05%

1,10%

1,15%

1,20%

1,25%

% of EU GNI

'93-'99 average 1.18%

'00-'06 average 1.06% '07-'13 average 1.06%'93-'99 average1.06%

'00-'06 average0.94%

1.27% of GNP ≡ 1.24% of GNI excl. FISIM 1.23% of GNI incl. FISIM

Own Resources ceiling

Payment ceiling of Financial Framework('14-'20 COM proposal)

Payments actuallyexecuted/appropriations

'14-'20 average 1.00%

Commission’s proposal*

Outside the Multiannual Financial Framework (EU 28)

OUTSIDE THE MFF 2014 2015 2016 2017 2018 2019 2020Total

2014-2020

Emergency Aid Reserve 350 350 350 350 350 350 350 2 450

European Globalisation Fund 429 429 429 429 429 429 429 3 000

Solidarity Fund 1 000 1 000 1 000 1 000 1 000 1 000 1 000 7 000

Flexibility instrument 500 500 500 500 500 500 500 3 500

Reserve for crises in the agricultural sector 500 500 500 500 500 500 500 3 500

ITER 886 624 299 291 261 232 114 2 707

GMES 834 834 834 834 834 834 834 5 841

EDF ACP 3 271 4 300 4 348 4 407 4 475 4 554 4 644 29 998

EDF OCT 46 46 46 46 46 46 46 321

Global Climate and Biodiversity Fund p.m. p.m. p.m. p.m. p.m. p.m. p.m. p.m.

TOTAL OUTSIDE THE MFF 7 815 8 583 8 306 8 357 8 395 8 445 8 416 58 316

as a percentage of GNI 0.06% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06% 0.06%

EUR million – 2011 prices

*29/06/2011 - COM(2011)500 final, page 5

Despite restraint – significantre-distribution in key policy areas

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2007-2013 77.8 12.9 12.4 56.8

2014-2020 114.9 40.0 18.5 70.0

Competitiveness InfrastructureSecurity and Citizenship

Global Europe

EUR billion commitment appropriations

Ambitious, but realistic…

EUR billion commitment appropriations

2007-2013 2014-20201. Smart and Inclusive Growth 445,5 490,9 10,2%Of which Competitiveness 77,8 114,9 47,7%Of which infrastructure 12,9 40,0 209,7%Of which cohesion policy 354,8 336,0 -5,3%2. Sustainable Growth: natural resources 421,1 382,9 -9,1%Of which Market related expenditure and direct payments 322,0 281,8 -12,5%3. Security and Citizenship 12,4 18,5 49,9%of which Freedom, Security and Justice 7,6 11,6 53,0%of Citizenship 4,8 6,9 44,9%4. Global Europe 56,8 70,0 23,2%5. Administration (including pensions and European schools) 56,9 62,6 10,1%Of which administrative expenditure of EU institutions 48,4 50,5 4,2%6. Compensations 0,9Total appropriations 993,6 1.025,0 3,2%In % of EU-27 GNI 1,12% 1,05%

COMPARISON MFF 2007-13/2014-20EUR billion in 2011 prices

Difference (in %)

Development of the Common Agricultural Policy and Cohesion policy share in the EU budget

20%

25%

30%

35%

40%

45%

2013 2014 2015 2016 2017 2018 2019 2020

Common agricultural policy Cohesion policy

Cohesion policy

• Common strategic framework for all structural funds

• Investment partnership contracts with Member States

• Stronger conditionality

• Concentration on poorer and weakest regions

• Thematic concentration0%

10%

20%

30%

40%

50%

60%

2007-2013 2014-2020

EU-15

EU-12

Connecting Europe

Connecting Europe Facility 40 EUR billion

• Energy, transport and digital networks

• Cross-border multi-country investments to the benefit of internal market

• Strong co-ordination with cohesion policy

• Proposed use of EU project bonds

Cohesion policy proposalMultiannual Financial Framework 2014-2020

  EUR billion - 2011 prices

Cohesion Fund* 68.7

Less developed regions 162.6

Transition regions 39.0

More developed regions 53.1

Cooperation 11.7

Extra allocation for outermost and northern regions 0.9

Total ** 336.0

*Cohesion Fund will earmark 10 billion EUR for the new Connecting Europe Facility** ESF minimum share: 25%

New architecture of cohesion policy• Three categories of regions

• Less developed regions (GDP per capita < 75% of EU average)

• Transition regions (GDP per capita between 75% and 90%)

• More developed regions (GDP per capita > 90%) • Cohesion Fund for Member States with GNI per

capita <90%• Territorial cooperation (3 strands: Cross-border

Cooperation, transnational, interregional)

Agriculture

• Declining share in the EU budget until 2020

• Greening of CAP - direct aid 30 % linked to environment measures

• Progressive convergence of direct support towards EU average:

• Close 33% of the gap with 90% of EU average• Financed by all Member States above the average

• Market measures: Emergency Mechanism

• European Globalisation Fund to help farmers adapt to globalisation

Administrative expenditure

• Budget under restraint

• Staff reduction up to 5%

• Efficiency gains (increase working hours to 40 a week)

• Reviewing certain benefits in line with similar trends in Member States

• Administrative expenditure discipline for all EU institutions

Own resources past changesEU budget revenue

1958-2011(in % of EU GNI)

Financial contributionsTraditional own resources (custom

duties & sugar levies)

VAT-based own resource

GNI-based own resource

Other revenue & surplus

0,00%

0,20%

0,40%

0,60%

0,80%

1,00%

1,20%

1958 1963 1968 1973 1978 1983 1988 1993 2003 2008 2011

Other revenue & surplus

GNI-based own resource

VAT-based own resource

Traditional own resources (custom duties &sugar levies)Financial contributions

… in other words

• considerable evolutions in EU financing • OR now mainly based on 'statistical aggregates' (GNI and

VAT-based OR = 85%)• contributions seen as “expenditures” to be minimized

by Member States• permanent tension on EU financing• development of corrections and focus on "allocated"

expenditures• own resources disconnected from EU policies

• in times of budgetary consolidation, necessity to find new ways to finance the budget

A new own resources system

• Commission proposal

• End current statistical VAT own resource as of 2014

• Introduce 2 new own resources– Financial Transaction Tax– New VAT resource

• Radically simplify the system of corrections

EU taxation of financial sector

• Commission proposal

• Introduce Financial transaction tax (FTT) from 1/1/2018 at the latest.

• Applicable tax rates to be set at the moment of legislative proposal (Autumn 2011)

• Advantages

• Contributes to budgetary consolidation of Member States by reducing their contributions to the EU budget

• Support in European Parliament, national parliaments, NGOs and public at large (Eurobarometer: 61% in favour and 50% or more in 20 Member States)

• FTT more efficient at EU than at national level

New VAT resource

• Commission proposal• New VAT resource from 1/1/2018 at the latest.• Proposed rate: 1 %

• Advantages• Link EU VAT policy and EU budget• Part of wider revision of VAT systems: fight against VAT

fraud and reinforce harmonisation of VAT systems

Envisaged evolution of own resources structure

Share of Own Resources Types in Total Own Resources Payments

29%

78%

40%

0%

61%

0%

56%

12%

60%

10%

44%

10%

0%

20%

40%

60%

80%

100%

1978 1988 2013 2020

Traditional own resources + new OR

GNI resource (1978 MS Financial Contributions)

VAT resource

Correction mechanisms• Commission proposal

• Replace all corrections mechanisms by a system of fixed annual lump sums for 2014-2020

• Based on Fontainebleau principle:"any member State sustaining a budgetary burden which is

excessive in relation to its relative prosperity may benefit from a correction at the appropriate time."

• Advantages

• Fairness – lump sums based on relative prosperity• Simplicity and transparency• Lump-sum corrections aligned with expenditures (same duration as

MFF)

Corrections

Annual lumpsum

2014-2020

GROSS AMOUNT

DE 2500NL 1050SE 350UK 3600

TOTAL 7500

(in million of euro / in current

prices)

LUMPSUMS ADJUSTED FOR RELATIVE PROSPERITY

The EU Budget is unique, not comparable to any other government or federal budget.

Financed by the Traditional Own Resources (customs duties; Value added tax (VAT) and a MS contribution based on the size of their Gross National Income (GNI).

Revenues are used to finance activities of common interest to all MS, as specified in the Treaties.

The overall amount of the EU Budget is limited by a ceiling, currently 1.23% of the Union's GNI.

The Budget can not run a deficit, i.e. payments must match revenues in any budget year.

Commitments are programmed in advance in the Multi-annual Financial Framework (MFF).

Result - Little room to manoeuvre and a budget relatively well "protected" against fiscal disruptions.

Further information on:

• Financial Programming and Budget website:• http://ec.europa.eu/budget/ • MFF 2014-2020 website:• http://ec.europa.eu/budget/reform/

Thank you !