The EC presented its new MFF proposal for 2021-2027 and a “Next Generation EU” recovery instrument to help Europe bounce back after the pandemic.
How to help the EU Member States (MS) that are the most affected by the pandemic – and how to rebuild Europe’s economy, has been the dominating topic over the past days and weeks in Brussels and other European capitals. In addition, it became clear that the EU’s multiannual financial framework (MFF) for 2021-2027 needed an update in reaction to the corona crisis. On 27 May, the time had come and the European Commission (EC) published a new MFF proposal amounting to €1’100 billion that will be topped up by an additional €750 billion “Next Generation EU” recovery instrument. The additional money will be borrowed on the financial markets, a first for the EU. This will become possible by temporarily rising the EU’s own resources ceiling to 2% of EU gross national income. The funds raised will need to be repaid through future EU budgets between 2028 and 2058. In order to achieve this, the EC will propose a number of new own resources, e.g. earnings from the Emissions Trading Scheme or a Carbon Border Adjustment Mechanism.
The Next Generation EU recovery instrument comprises three pillars: The first focuses on support to MS for investment and reforms to address the crisis. A new Recovery and Resilience Facility will support MS to implement investments and reforms that are essential for a sustainable recovery with a budget of €560 billion. This part of Next Generation EU will focus strongly on the green and digital transitions, also via additional funding for the Just Transition Fund that supports workers, companies, and regional authorities most affected by the transition to a low carbon economy. The second pillar is about kick-starting the EU economy by incentivising private investment: A new Solvency Support Instrument will help mobilise private resources to provide support to otherwise healthy companies. An important objective of this new instrument is to help companies in countries that are most affected by the crisis in order to create a level-playing field in the single market, especially for those MS that are less able to support through state aid. Furthermore, the EC is proposing to upgrade InvestEU, the EU’s flagship investment programme, by more than doubling its capacity, and to create a Strategic Investment Facility within InvestEU (see SwissCore article). The goal of the latter is to unlock €150 billion of investment thanks to the €15 billion put into it by Next Generation EU.
The third pillar is about learning the lessons from the crisis. This includes a new EU4Health programme, with a budget of €9.4 billion. It will invest in prevention, crisis preparedness, the procurement of medicines and equipment, as well as improving long-term health. Horizon Europe, the next research and innovation framework programme will also receive additional funding via the third pillar. Already during her speech at the European Parliament (EP) plenary on 13 May, the President of the EC, Ursula von der Leyen, mentioned that “the entirety of the recovery funds will be channelled through EU programmes”. At the same occasion, she promised to strengthen programmes that have proven their value and specifically highlighted Horizon Europe. The new MFF proposal foresees €80.9 billion for the Horizon Europe programme, slightly less than the €83.5 billion that the EC proposed originally in 2018 (always in 2018 prices). However, Horizon Europe would receive an additional €13.5 billion “Next Generation EU” money in the new EC proposal, bringing the total amount for the programme to €94.4 billion. Other programmes, such as Erasmus+ with €24.6 billion would not receive additional funding, rather even a slightly less as the EC proposed €26.3 billion in 2018.
After President von der Leyen presented the new proposals at the EP on 27 May, she received mainly positive comments, especially from the Group of the European People’s Party (EPP), which promised to support the EC. Manfred Weber, Member of the EP (EPP, Germany), pointed out that Europe’s economies cannot be successful without recovery. He hopes that the so-called frugal four (The Netherlands, Austria, Denmark and Sweden) would support the EC. The Socialists & Democrats Group (S&D) emphasised the importance of environmental and social sustainability in the European recovery and criticised that four frugal countries would hold hostage 23 pro-European countries, the group promised the Commission President to stand with her. Most groups in the EP supported the EC’s general direction, while emphasising their respective political pressure points, such as for instance the importance of supporting coal districts in their transition to clean energy.
The reactions from the Industry, Research and Energy (ITRE) Committee and the Culture and Education (CULT) Committee at the EP were a bit more mixed. ITRE Chair Cristian Bușoi (EPP, Romania) commented that ITRE welcomed the recovery plan and emphasised that: “Whether on CO2 emissions, digitalisation and health, the recovery plan should be driven by innovation”. The Rapporteur on the Horizon Europe programme, Dan Nica (S&D, Romania) views the new amount of €94.4 billion for the framework programme as a step in the right direction. Rapporteur Christian Ehler (EPP, Germany) also welcomed the increase for Horizon Europe, but said that “this is not enough”. He emphasised that achieving the European Green Deal will have to rely a lot on technology and innovation. He expressed his doubts whether the current proposals offer enough to achieve cutting carbon emissions in half by 2030.
The CULT Committee Chair and Rapporteurs issued a joint statement and criticised the new proposal for the MFF: “While the Commission’s proposed recovery plan has a lot going for it, the specific figures for the education, culture and youth programmes are deeply disappointing and simply not in line with the statement by the Commission President on the importance of future generations, along with education and culture.” The CULT representatives recalled that von der Leyen earlier promised to back a tripling of the Erasmus+ budget.
The new proposals that the EC published this week will now have to be agreed to by the MS and the EP.