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Heads of State agree to shrink EU budget by 3.5%

EU Heads of State have – finally – found an agreement on friday 8th february 2013 on the multi-annual financial framework. The total budget for the period 2014-2020 is evaluated (in constant 2011 prices) to 960 billion euros in commitments, 908 billion euros in payments, corresponding to 1% and 0.95% of GNI respectively, 6% less than the initial European Commission proposal which amounted to 1025 billion euros (1.05% of GNI) and 35 billion euros less than the current Financial Framework, which represents a 3.5% decrease. This agreement represents a significant cut in Member States effort at European level.

1% more for smart growth and cohesion, 11% less for sustainable growth

EU Heads of State have – finally – found an agreement on friday 8th february 2013 on the multi-annual financial framework. The total budget for the period 2014-2020 is evaluated (in constant 2011 prices) to 960 billion euros in commitments, 908 billion euros in payments, corresponding to 1% and 0.95% of GNI respectively, 6% less than the initial European Commission proposal which amounted to 1025 billion euros (1.05% of GNI) and 35 billion euros less than the current Financial Framework, which represents a 3.5% decrease. This agreement represents a significant cut in Member States effort at European level.In detail, the two main budget lines in which we are directly interested “smart and inclusive growth” (research and innovation, support to SMEs and cohesion) and “sustainable growth and natural resources” (CAP, fisheries and LIFE) are decreased by 8 and 3% respectively compared to Commission proposal.Compared to the 2007-2013 budget, budget allocated to smart growth represents however 1% more than today while sustainable growth looses 11.3% of its current allocation.

The budget allocated to competitiveness, comprising inter alia the programme Horizon 2020 (research and innovation) increases by 37% compared to the current period, reflecting the clear orientation towards innovation.

Within smart and inclusive growth, the line “economic, social and territorial cohesion” is decreased by 14% compared to Commission’s proposal and by 8% compared to the current period. Allocations regarding paiements to transition regions are significantly impacted while Less developed regions will benefit from a bigger effort. Allocation to outermost regions and northern sparsely populated areas is however raised by 50% compared to Commission’s proposals, showing the activity and support of concerned member states.

The budget allocated to the Connecting Europe Facility is increased compared to the current period but far less than what the Commission had wished.

The budget allocation for direct payments in the framework of the CAP decreases by 1% compared to commission’s proposal, leading to an overall decrease by 17.5% compared to the current period. Rural development allocation, agreed at 85 billion euros, decreases by 6% compared to Commission proposal and by 11.4% compared to the current 96 billion euros budget. Member States will however have the right to reallocate up to 15% of first pillar funds to the second pillar and vice-versa. For Member States which average hectare payment is below 90% of EU average, it will even be possible to raise this reverse modulation rate by 10%. This means that modulation in countries where direct payments are smaller might cut rural development budget by 25%!

The budget agreement also indicates that capping of direct payments will be put in place by Member States on a voluntary basis. The convergence mechanism of payment levels is also specified.

Budget conclusions also establish maximum co-financing rates for rural development at 75% for less developed regions, OMR and Aegean islands and for regions which GPD/capita is between 75% of EU-25 average and 75% of EU-27 average, 63% for transition regions and 53% for other regions. Besides, measures benefiting to environment and climate adaptation and mitigation will benefit from a 75% co-financing rate and amounts transfered from 1st pillar to 2nd pillar will be used without national co-financing. Further flexibility are foreseen in coherence with rural development regulation.

The negociation also led to the attribution of numerous rebates to several Member States, resulting in an obscure final distribution.

The president of the European Parliament has indicated that he would oppose this agreement, which conditions to not allow proper implementation of the European framework. European Commission leaders have however called upon the Parliament to accept the deal, even if it is way below expectations. The negotiation could go on for several months. During these months, the legislative package will have to be finalise.

You can read Council agreement here and its summary here.EU Heads of State have – finally – found an agreement on friday 8th february 2013 on the multi-annual financial framework. The total budget for the period 2014-2020 is evaluated (in constant 2011 prices) to 960 billion euros in commitments, 908 billion euros in payments, corresponding to 1% and 0.95% of GNI respectively, 6% less than the initial European Commission proposal which amounted to 1025 billion euros (1.05% of GNI) and 35 billion euros less than the current Financial Framework, which represents a 3.5% decrease. This agreement represents a significant cut in Member States effort at European level.

In detail, the two main budget lines in which we are directly interested “smart and inclusive growth” (research and innovation, support to SMEs and cohesion) and “sustainable growth and natural resources” (CAP, fisheries and LIFE) are decreased by 8 and 3% respectively compared to Commission proposal.Compared to the 2007-2013 budget, budget allocated to smart growth represents however 1% more than today while sustainable growth looses 11.3% of its current allocation.

The budget allocated to competitiveness, comprising inter alia the programme Horizon 2020 (research and innovation) increases by 37% compared to the current period, reflecting the clear orientation towards innovation.

Within smart and inclusive growth, the line “economic, social and territorial cohesion” is decreased by 14% compared to Commission’s proposal and by 8% compared to the current period. Allocations regarding paiements to transition regions are significantly impacted while less developed regions will benefit from a bigger effort. Allocation to outermost regions and northern sparsely populated areas is however raised by 50% compared to Commission’s proposals, showing the activity and support of concerned member states.

The budget allocated to the Connecting Europe Facility is increased compared to the current period but far less than what the Commission had wished.

17% less for direct payments, 11% less for rural development

The budget allocation for direct payments in the framework of the CAP decreases by 1% compared to commission’s proposal, leading to an overall decrease by 17.5% compared to the current period. Rural development allocation, agreed at 85 billion euros, decreases by 6% compared to Commission proposal and by 11.4% compared to the current 96 billion euros budget. Member States will however have the right to reallocate up to 15% of first pillar funds to the second pillar and vice-versa. For Member States which average hectare payment is below 90% of EU average, it will even be possible to raise this reverse modulation rate by 10%. This means that modulation in countries where direct payments are smaller might cut rural development budget by an additional 25%!

The budget agreement also indicates that capping of direct payments will be put in place by Member States on a voluntary basis. The convergence mechanism of payment levels is also specified and the greening principle conforted.

Budget conclusions also establish maximum co-financing rates for rural development at 75% for less developed regions, OMR and Aegean islands and for regions which GPD/capita is between 75% of EU-25 average and 75% of EU-27 average, 63% for transition regions and 53% for other regions. Besides, measures benefiting to environment and climate adaptation and mitigation will benefit from a 75% co-financing rate and amounts transfered from 1st pillar to 2nd pillar will be used without national co-financing. Further flexibility are foreseen in coherence with rural development regulation.

Rebates multiply…

The negociation also led to the attribution of numerous rebates to several Member States, resulting in an obscure final distribution.

The agreement is still uncertain

The president of the European Parliament has indicated that he would oppose this agreement, which conditions to not allow proper implementation of the European framework. European Commission leaders have however called upon the Parliament to accept the deal, even if it is way below expectations. The negotiation could go on for several months. During these months, the legislative package will have to be finalise.

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14 February 2013

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