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The Multiannual Financial Framework: The Proposals on External Action Instruments
Commission Européenne - MEMO/11/878 07/12/2011
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Brussels, 7 December 2011
The Multiannual Financial Framework: The Proposals on External Action Instruments
1. What is the Multiannual Financial Framework (MFF)? What are the proposals for the external instruments?
The MFF translates the Union's political priorities for seven years into financial terms1. It sets annual maximum amounts (ceilings) for EU expenditure as a whole and for the main categories of expenditure (headings).
On 29 June 2011, the European Commission presented its proposals for the MFF 2014-2020. Compared to the Member States, the European Union has a small budget, but with a big impact for Europeans and citizens of third countries. The Commission's proposal for a multi-annual budget for 2014-2020 responds to today's concerns and tomorrow's needs. It represents a budget for investment and growth to ease the pressure on Member States' finances, focussing on Europe 2020 priorities, impacts and results. The proposal focuses further on priority funding at the EU level that provides true added value. The overall amount proposed for the next seven years in 2011 prices is €1,025 billion in commitments (1.05% of the EU GNI) and €972.2 billion (1% of EU GNI) in payments.
- Global Europe: External financing instruments
The legislative package presented today is part of the proposals of the next MFF. It consists of a main Communication entitled ‘Global Europe’ and legislative proposals for nine geographic and thematic instruments. At a time when the world order is changing rapidly and emerging economies like China, India and Brazil are asserting their influence, Europe must stand together and be an active partner in shaping global change. These budgetary proposals will also enable the EU to further reinforce its role on the global stage and promote its interests and values.
An increased external relations budget will help make Europe count in a world of shifting alliances and emerging new powers. The overall objective for external action will be to ensure that the EU is also able to live up to its ambitions in promoting democracy, peace, solidarity, stability and poverty reduction and to help safeguard global public goods.
The EU will focus its work with its external partners on four policy priorities: enlargement, neighbourhood, cooperation with strategic partners and development cooperation.
The total amount proposed for this external relations package is €96,249.4 million (current prices) over the period 2014-2020.
Pre-accession instrument (IPA): €14,110 million
European Neighbourhood Instrument (ENI): €18,182 million
Development Cooperation Instrument DCI): €23,295 million
Partnership Instrument (PI): €1,131 million
Instrument for Stability (IfS): €2,829 million
European Instrument for Democracy
& Human Rights (EIDHR): €1,578 million
Instrument for Nuclear Safety Cooperation: €631 million
Instrument for Greenland: €219 million
European Development Fund (EDF, outside EU Budget): €34,276 million
The package will be transmitted to the European Parliament and the Council and is expected to be adopted in 2012.
2. What is new about the proposals, what changes?
The main differences of the proposal lie in the principles underpinning the new set of instruments rather than in a revised structure.
- A differentiated approach with different forms of cooperation
The EU will seek to target its resources where they are needed most and where they could make the most difference. A more differentiated approach to partnerships and aid allocation driven by the country context is a core principle of this proposal.
Assistance will be allocated on the basis of country needs, capacities, commitments, performance and potential EU impact. Differentiation will allow for different forms of cooperation such as blending grants and loans from international financial institutions, including the European Investment Bank.
- Concentration of spending
The EU will also ensure concentration of external spending to avoid the inefficiencies resulting from sectoral dispersion and aid fragmentation.
- More flexibility
In a fast-changing world, EU financial instruments have historically been hampered by a lack of flexibility. In order to further increase the EU’s capacity to respond to unforeseen events, new mechanisms have been introduced for revision of the instruments to increase flexibility.
- Simplification of rules
Simplified rules and procedures for programming and delivering EU assistance are proposed for all external instruments to ensure more effective delivery of EU assistance.
- Greater focus on human rights, democracy and good governance
The EU will aim for mutual accountability in allocating and disbursing funds. Overall, EU external instruments will take greater account of human rights, democracy and good governance when it comes to allocating external assistance to partner countries.
In line with the Lisbon Treaty provisions, the new instruments will implement new mechanisms to ensure more democratic debate on EU external assistance through a stronger involvement of the European Parliament.
Improved coordination between the EU and Member States to maximise our impact and visibility will also be a key feature of this new set of instruments, notably through joint programming of aid.
3. What are the EU financing instruments?
The proposed package includes nine financial instruments and one horizontal regulation concerning implementation modalities. One instrument has been newly created – the Partnership Instrument – replacing the Industrial Cooperation Instrument (ICI). The existing financing instruments remain valid and have been revised to adjust to the new realities, be more strategic and easy to use.
- THE INSTRUMENT FOR PRE-ACCESSION ASSISTANCE (IPA)
The EU provides financial support to the enlargement countries in their preparations for EU accession. Since 2007, this is done through a single financial instrument: the Instrument for Pre-Accession Assistance (IPA).
Continued EU support will be provided after 2014 to the countries in the enlargement process, to help them meet the necessary requirements to join the EU. This support will be delivered through the renewed Instrument of Pre-accession Assistance (IPA).
Any European country that respects EU values may apply to join the EU. At the moment, there are five candidate countries: Croatia (whose Accession Treaty is to be signed on 9 Dec 2011¸ Croatia is expected to become a Member State on 1 July 2013), Iceland, Montenegro, the Former Yugoslav Republic of Macedonia and Turkey. Albania, Bosnia and Herzegovina, Serbia, and Kosovo2 also share the European perspective. They are known as potential candidates.
Main elements of the new IPA
On the delivery side, while ensuring continuity and seamless transition from the current IPA, the new instrument will operate under simplified rules so as to facilitate access to the funding for beneficiaries. For better effectiveness and efficiency, the assistance will be made more result-oriented, flexible and tailored to specific needs:
The proposed budget for the new IPA is €14.110 billion in current prices for the period 2014-2020. This represents a stable budget at the same level of the current IPA in 2013.
The conditions for countries joining the EU are: i) stable institutions that guarantee democracy, the rule of law, human rights and respect for and protection of minorities; ii) a functioning market economy, as well as the ability to cope with the pressure of competition and the market forces inside the Union; iii) the ability to assume the obligations of membership, in particular those related to the objectives of political, economic and monetary union.
Countries also need to be able to put EU rules and procedures into effect, and implement and enforce EU-compliant legislation effectively through the appropriate administrative and judicial structures.
To support them in this process the EU provides funding via the IPA. The total pre-accession funding for the period 2007-2013 is € 11.5 billion.
More on the new IPA:
- EUROPEAN NEIGHBOURHOOD INSTRUMENT (ENI)
In the context of the renewed approach to the European Neighbourhood Policy (ENP) outlined in the Joint Communication of 25 May 2011, the new ENI Instrument will provide increased support to 16 partner countries to the East and South of the EU’s borders. Building on the achievements of the European Neighbourhood and Partnership Instrument (ENPI), the new ENI will contribute to strengthening bilateral relations with partner countries and bring tangible benefits to both the EU and its partners in areas such as democracy and human rights, the rule of law, good governance and sustainable development. It will continue to provide the bulk of funding to the European Neighbourhood countries, essentially through bilateral, regional and cross border co-operation programmes.
Main elements of the new ENI
Application of differentiation and the “more for more” principle: This principle is the key aspect of the renewed Neighbourhood policy, and will allow the EU to increase its support significantly for those partners that are genuinely implementing a broad and comprehensive democratisation process. It provides for a much higher level of differentiation in the cooperation with partner countries, reflecting their commitment to universal values, progress in deep democratisation and jointly agreed objectives. It will allow the EU to better adjust its assistance to the partner countries' needs and progress.
Reducing the complexity and length of the programming process. This will be done in order to streamline, shorten and better focus the programming so support can be delivered faster to our ENP partner countries
Streamlining the scope of the Instrument through focussing our cooperation on the key policy objectives set out in particular in the ENP action plans agreed with the partners. This will make EU support more relevant and more efficient. Objectives will include in particular promoting human rights and fundamental freedoms, stronger and more inclusive growth, and support to in the progressive economic integration into the EU internal market. Other key areas include promoting confidence building and other measures that contribute to security and the prevention and settlement of conflicts. Support for increased people to people contacts, sectoral cooperation (e.g. energy and climate change) and civil society organisations will also figure prominently.
Amending the provisions on the Cross-Border Cooperation programme. Cross-Border Cooperation (CBC) programmes aim at reinforcing cooperation between Member States and partner countries along the external border of the European Union. The programmes promote economic and social development in border areas, address common challenges, ensure efficient and secure borders and promote people-to-people cooperation. The new provisions will facilitate effective and fast implementation of the programmes, which will benefit participating EU Member Sates and partner countries and their citizens.
Promoting closer links with EU internal instruments and policies. This will be done notably by promoting mechanisms for the pooling of funds from internal and external instruments of the EU budget. The aim is to enable partner countries and their citizens to participate in successful EU internal programmes in areas such as student mobility, youth programmes or support to Civil Society, while improving the efficiency and simplification of the implementation of assistance.
Responding to the evolving relationship with Russia by amending provisions on Russia’s eligibility for ENI funding to reflect the specific status of Russia as an EU neighbour and strategic partner. Russia’s eligibility for regional and Cross-Border Cooperation programmes is retained in the new ENI, but bilateral cooperation will be addressed in the future under the new Partnership Instrument.
Simplifying and mainstreaming the implementation provisions within a new Implementing Regulation common to all EU external assistance instruments.
Budget and next steps
The proposed budget for the new ENI is €18.2 billion for the period 2014 - 2020. This represents a significant increase compared to the budget of the previous ENPI instrument. This significant increase reflects the increased priority of the ENP in the overall foreign policy of the EU.
The MFF regulations package will now be transmitted to the European Parliament and the Council of the European Union (EU Member States) for further discussion and adoption. The new MFF budget and the new regulations will enter into force on 01 January 2014.
The European Neighbourhood Policy (ENP) covers 16 partners to the East and South of the EU’s borders, namely Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, the Republic of Moldova, Morocco, the occupied Palestinian territory, Syria, Tunisia and Ukraine. Under the ENP, the EU offers its neighbours a privileged relationship, building on a mutual commitment to values and principles. These include:
The ENP also provides for political association and fosters deeper economic integration with neighbourhood countries; it improves mobility and enhances people-to-people contacts. EU external assistance under the ENP is currently funded by the European Neighbourhood and Partnership Instrument (ENPI), which covers the 16 above-mentioned partner countries and Russia.
Since the ENP was set up in 2004, the EU’s relationship with its neighbours has evolved and important political changes have taken place, most recently the “Arab Spring” revolutions in the Southern Neighbourhood. The EU started a comprehensive review of the European Neighbourhood Policy in 2010 and presented its new approach on 25 May 2011: “A new response to a changing Neighbourhood”. This Joint Communication outlines a new approach towards the EU’s neighbours to the East and South, based on differentiation, mutual accountability and a shared commitment to respecting universal values, international human rights standards, democracy and the rule of law.
The renewed vision for the European Neighbourhood Policy is reflected in the new ENI regulation, which has been proposed today as part of the MFF external relations package and will replace the ENPI which runs out at the end of 2013.
For more information:
ENPI Info Centre: http://www.enpi-info.eu/
- DEVELOPMENT COOPERATION INSTRUMENT (DCI)
The DCI covers, through its different programmes all the developing countries except the countries eligible for the Pre-Accession Instrument. The geographic programmes under the DCI cover developing countries in Asia, Central Asia, Middle East, Latin America, and South Africa.
Objectives and general principles of the DCI have been formulated in line with the Lisbon Treaty and the latest policies, notably the 'Agenda for Change' of EU development policy adopted last October 2011. It will focus on combating poverty. It will also contribute to the achievement of other objectives of EU external action, in particular fostering sustainable economic, social and environmental development as well as promoting democracy, the rule of law, good governance and respect for human rights.
The main elements of the DCI are:
The DCI will also include a new Pan-African programme to support the implementation of Joint Africa-Europe Strategy. This programme will complement other financial instruments which are applied in Africa (in particular ENI and EDF) and will support activities of trans-regional and continental nature in Africa and also specific initiatives.
A differentiated approach
The approach of differentiation will reflect needs, capacities and performance of partner countries and targets EU development cooperation where it can have most impact: The countries most in need, in particular the least developed countries, low income countries and countries in crisis, post-crisis, fragile and vulnerable situation, will be given priority.
- THE EUROPEAN DEVELOPMENT FUND (EDF)
The 11th EDF (2014-2020) will remain outside the EU budget; however, the proposals and negotiation will take place in parallel to ensure consistency.
The EDF will continue to cover cooperation with African, Caribbean and Pacific Countries (ACPs) and Overseas Countries and Territories (OCTs).
Only minor modifications are proposed compared to the 10th EDF (2008-2013). Mainly, Member States' contributions keys to the fund will be further aligned with the keys used for the EU budget.
Furthermore, the next EDF will integrate elements to ensure more flexibility and fast reaction in case of unexpected events. Regional envelope will include non programmable allocations to cover unforeseen needs with a regional dimension. A future shock-absorbing scheme will be set up which will help ACP countries to mitigate the short-term effects of exogenous shocks.
Today's proposal is only the first step of the 11th EDF package. It will be followed in the course of 2012 by a Commission proposal for the 11th EDF implementing regulation which will entail provisions on aid programming and implementation.
- PARTNERSHIP INSTRUMENT (PI)
The Partnership Instrument is the major innovation of the 2014-2020 external instruments package. It will be also a key external policy tool.
Its overall objective is to advance and promote EU interests by supporting the external dimension of internal policies (e.g. competiveness, research and innovation, migration) and to address major global challenges (e.g. energy security, climate change and environment).
The PI would allow the EU to pursue agendas beyond development cooperation. It will have a global reach with a particular focus on industrialised countries, emerging economies, and countries where the EU has significant interests. It could also underpin new relationships with countries graduating from bilateral development cooperation.
Concretely, the Partnership Instrument could support a wide range of actions from tackling climate change to protecting intellectual property rights, from fighting organised crime and piracy to protecting the environment, from increasing market access to ensuring energy security.
- INSTRUMENT FOR STABILITY (IfS)
The IfS is a key instrument of the EU to help prevent and respond to crises and create a safe and stable environment. It has been streamlined to better contribute to a comprehensive EU approach to conflict prevention and peace-building, crisis response and security threats. Its specific objectives are to:
Flexibility has been improved by expanding the maximum length of crisis response measures up to a maximum of 30 months and the deployment of a second Exceptional Assistance Measure in cases of protracted conflict to build on the results of a previous one. In addition, in exceptional situations of urgency, the Commission will be empowered to adopt Exceptional Assistance Measures for up to €3 million without prior information to Council. This improvement in speed of deployment will allow the EU to respond to crises within a period of 48 -72 hours.
- INSTRUMENT FOR NUCLEAR SAFETY COOPERATION (INSC)
The INSC's geographical coverage will be extended to all third countries, but priority will be given to candidate and potential candidate, accession and neighbouring countries. Lessons learnt after the Fukushima reactor incident and the results of 'stress tests' of European nuclear power plants will be taken into account.
- EUROPEAN INSTRUMENT FOR DEMOCRACY & HUMAN RIGHTS (EIDHR)
The EIDHR's scope has been updated on the issues of support to democracy, economic and social rights and freedom of thought. Its objectives have been better defined to protection of human rights and support of democratic processes.
The instrument will have a stronger focus on the most difficult countries and emergency situations where human rights and fundamental freedoms are most endangered. In such situations, the Union will be able to respond in a flexible and timely manner through ad hoc grants. This will particularly be the case where less speedy solutions would expose beneficiaries to the risk of serious intimidation or retaliation and in order to address the urgent protection needs of human rights defenders on the ground.
Concretely this means: informal partnerships can benefit from funds; re-granting within projects will be possible; grants for human rights defenders in urgent protection needs will be possible; direct award of grants can be used where calls for proposal are not possible (e.g. Belarus, Iran, China).
Its implementation will be more flexible and will not be labelled for certain countries in advance but be provided through open procedures, responding to needs.
- INSTRUMENT FOR GREENLAND
This proposal of a revised partnership recognises the emerging international awareness towards Greenland and its geostrategic importance. The partnership allows for moving Greenland towards a diversified economy, for an increased focus on policy dialogue in areas of increased global importance (e.g. Arctic issues) and broadening the areas of cooperation to include issues such as environment, climate change, biodiversity, raw materials and research.
- COMMON IMPLEMENTING REGULATION
This regulation offers new harmonised, simplified and flexible decision-making procedures common to four geographic instruments (IPA, ENI3, DCI and PI)4 and three thematic instruments (INSC, EIDHR, IfS). Implementing measures will be adopted faster, thus accelerating the delivery of EU assistance. Provisions on implementation have been significantly simplified. The regulation also sets down the ruled for the use of innovative financial tools, such as blending of grants and loans.
4. How do these proposals align with the proposals of the recently published Agenda for Change for development cooperation?
The proposals are fully in line with the 'Agenda for Change', which sets out a more strategic EU approach to reducing poverty, including through a more targeted allocation of funding. Future EU spending should concentrate on sectors which are key for democracy, human rights and good governance and long-term and inclusive growth. It will also target countries that are in the greatest need of external support and where aid can have a high impact.
The proposed principle of differentiation is relevant for the Pre-Accession, Neighbourhood and the Development Cooperation Instruments. DCI countries that graduate from bilateral grant aid will benefit through new forms of partnership and will be eligible for financial support through the thematic and regional programmes of the DCI and the new Partnership Instrument.
The Agenda for Change foresees a programming process that is more flexible, aligned to the cycle and priorities of the partner country's development strategy and based on strategies jointly defined with Member States. The joint programming approach is reflected in today's proposals and flexibility and adaptability to country circumstances are important elements in the proposed IPA, ENI and DCI instruments.
5. Will the EU stop providing development aid to certain developing countries?
No it will not. All developing countries will remain eligible under development cooperation instruments proposed. The EU will only stop its bilateral with the wealthier countries and the major economies on a sustained development track - i.e. countries that can generate enough resources to ensure their own development. These countries will remain eligible for thematic and regional cooperation programmes. In addition, the EU will engage in new types of partnership with these countries, in particular through the Partnership Instrument. This will be complemented by different innovative cooperation modalities such as the blending of grants and loans. More use will be made of innovative financing arrangements set up with international financial institutions, with EU funds acting as a catalyst for leveraging investment in infrastructure.
Under the DCI it is proposed that 19 countries graduate to new partnerships:
a) 17 upper middle income countries:
Costa Rica Thailand
b) 2 large middle income countries whose GDP is larger than 1% of global GDP:
6. Many poor people live in middle income countries. Does the EU not support them any longer?
The EU will not disengage from countries which will not receive bilateral aid. The EU will engage in new partnerships with them, based on mutual interests that would:
Countries that will enter into these new partnerships with the EU will continue to receive funding under the Partnership Instrument and DCI thematic and regional programmes, including blending facilities.
7. Europe in the wider world -- What is the added value of EU external assistance?
In a globalised world, where new actors are emerging, it is more and more necessary to join forces and speak with one voice as much as possible. By acting jointly, the EU can weigh in as a single and more powerful actor on a range of issues where national action offers less impact and less scope. This also means that resources can be pooled and used together on a broad range of policies and instruments.
Overall, the EU's comparative advantage over national action is based on its global field presence, its wide-ranging expertise, its supranational nature, its role as facilitator of coordination, and to the economies of scale.
Acting together enables all Member States to benefit from the EU’s wide geographical representation in third countries which is unmatched by any individual Member State. Finally, the EU, in addressing specific challenges can make use of a wide range of instruments and measures which individual countries are often unable to match.
The EU has long experience in mobilising long-term and predictable aid, which are both essential factors to achieve sustainability in development. The EU has a network of international agreements with partners and organizations all over the world, not matched by individual Member States, which gives to all of them influence in almost all fields of international relations. With 27 Member States acting within common policies and strategies, the EU alone has the critical weight to respond to global challenges, such as poverty reduction, climate change, managing migration and stability. The EU as a global player has a credibility and a neutrality which is unmatched by individual Member States when it comes to human rights, electoral observation, governance and crisis resolution.
The EU and its Member States provide more than half of global development assistance (56%). The EU is committed to helping developing countries achieve the Millennium Development Goals on time by the end of 2015.
In the current economic context, it makes more sense than ever to improve the coordination of development aid to maximise the impact while avoiding duplicating efforts. Acting together with the EU can actually save money for Member States which could add up to potential savings of up to €5 billion a year, according to a recent study (Aid Effectiveness: the Benefits of Going Ahead, 2011). Working with the EU is also cheaper. Administrative costs – estimated at 5.4% on the basis of 2009 data - are lower than the average administrative costs of the principal donors for bilateral aid. The administrative rules that apply are intended to make sure that EU taxpayers' money is properly spent, using strict criteria which can be monitored. The EU stands for transparency and good management.
Furthermore, development aid is an investment for all Europeans. By investing in developing countries we address issues such as migration, climate change, food security, piracy, sexual violence and many others. It is often far cheaper to eliminate the root causes of poverty than to deal with its symptoms further down the line.
Some examples of EU added value:
Since the beginning of the revolutionary changes in Northern Africa and the Middle East, the EU has mobilised considerable political and financial means to accompany the transition towards democracy. The added value of EU external action resides in the fast mobilisation of substantial political and financial means, coupled with the definition of a common framework of intervention.
In light of the deteriorating security situation in the Western Sahel, a region in which security and development are interlinked, the EU has defined a EU Strategy for security and development in the Sahel and mobilized both significant funding and increased political means to address a situation that could potentially have disastrous consequences. The EU's engagement responding to the security and development objectives of the Strategy amounts to approximately €550 million, mostly originating from the European Development Fund but also from thematic budget lines.
In the aftermath of the earthquake which struck Haiti in January 2010, the EU and the Member States agreed on a common response in support of reconstruction efforts. The EU pledged €1,234 billion, out of which €522 million are coming from the EU budget. With such joint commitment, the EU is by far the main international donor to the reconstruction process. It has already helped to restore the State and its basic functions, to build key roads, to ensure a continuity of schools and health structure.
For more information
IP/11/1510 – Strengthening Europe's place in the world: An external budget for 2014-2020 to respect EU commitments and promote shared values
The proposal for the next MFF foresees duration of seven years, the same as the current and its preceding two MFF.
under UNSCR 1244/1999
The specific situation of IPA and ENI with its specific characteristics due to pre-accession and cross-border cooperation will require additional implementing rules and procedures.
The EDF and the implementation of the Greenland partnership are not covered by this regulation.