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"Multiannual Financial Framework 2014-2020 for Dummies" - A quick glossary to the 7 and 8 February 2013 MFF European Summit

European Commission - MEMO/13/79   07/02/2013

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European Commission

MEMO

Brussels, 7 February 2013

"Multiannual Financial Framework 2014-2020 for Dummies" - A quick glossary to the 7 and 8 February 2013 MFF European Summit

• Capping – setting a limit. As in "capping payments to some beneficiaries in the Common Agricultural Policy" or capping rates for cohesion allocations (maximum amount of funding a member state can receive through the cohesion fund).

• Call rate (for the VAT resource) – Percentage of the proceeds of nationally collected VAT to go to the EU budget. Some Member States benefits from a "reduced call rate".

• (Expenditure) Ceilings - maximum annual amounts the EU can spend on different policy areas or on global expenditure in a given year. Note that the MFF is only about ceilings for future annual budgets.

• Central management – when a fund or programme is directly managed (selecting contractors, awarding grants, transferring funds, monitoring activities etc.) by the European Commission (centralised direct management) or by one of its agencies (centralised indirect management). (As opposed to shared management)

• Commitments - legal pledge from the EU to provide finance provided that certain conditions are fulfilled. The EU "commits" itself to reimburse its share of the costs of an EU funded project when the project is completed. You sign the commitment today, but you will have to pay for it years later. Today's commitments are tomorrow's payments. Today's payments are yesterday's commitments

• Conditionality – setting one or several conditions to the disbursing of funds. In the Commission's proposal, the ‘ex ante’ conditionality in Cohesion Policy means beneficiaries of funds must convince the Commission that their planned project is in line with Europe 2020 strategy and focusses on results before launching it. 'Macro-economic conditionality' links EU funding to structural reforms and sound fiscal policies to bring down deficit and debt in Member States (see Partnership contracts).

• Connecting Europe Facility – A Commission's proposal to set aside funding to better interconnect EU Member States in three fields: transport, energy and IT. For example: enabling renewable energy to flow from Spain to Germany or building railways "missing links" between Member States.

• (Payment) Convergence in the Common Agriculture Policy - reduction of disparities between the levels of direct payments to farmers between Member States.

• Correction mechanism (rebate) – Measure taken to compensate Member States whose contribution to the EU budget is perceived as being too high compared to their relative wealth and the benefits they get out of the EU budget. There are several types of corrections:

Corrections without time limits:

  1. UK correction ("UK rebate"): the UK is reimbursed by 66% of the difference between its contribution and what it receives back from the budget. The cost of the UK rebate is divided among EU member countries;

  2. reduced financing of the UK correction for Germany, the Netherlands, Austria and Sweden ("rebates on the rebate").

Corrections ending end 2013:

  1. reduction in VAT-based contributions for Germany, the Netherlands, Austria and Sweden;

  2. lump-sum reduction in GNI-based contributions for the Netherlands and Sweden.

• Cross-compliance requirements - in the context of the Common Agriculture Policy. Mechanism that links direct payments to compliance by farmers with basic standards concerning the environment, food safety, animal and plant health and animal welfare, as well as the requirement of maintaining land in good agricultural and environmental condition.

• De-commitments rules (N+1, N+2…)As a general rule, EU funded projects start and must be completed within a given financial period. For example, the N+2 rule in relation to cohesion policy means that member states must send claims for reimbursement to the EU for the amount allocated to year "n" at the latest at the end of the second consecutive year "n+2". Any part of the amount allocated to year "n" that was not claimed by that time will be "decommitted" (taken away from the overall funding).

• Enhanced cooperation – This procedure enables a group of at least 9 Member States to move ahead with an initiative proposed by the Commission when it proves impossible to reach unanimous agreement on it. It aims to overcome the situation where certain Member States are prevented from advancing with a common approach due to the reluctance and non-agreement of others. This procedure is for example approved for the financial transaction tax.

• Flexibility (of the EU budget) - Strict rules apply to the EU budget. It is extremely difficult to move available funds from one part of it to the other, leading to situations where you can have simultaneously an overall surplus while being short of funds in a specific area. The European parliament and the Commission ask for more flexibility in future EU budgets.

• Heading(s) – The EU budget is divided in 6 parts called headings, so is the MFF. Heading 1 covers broadly economic policies (support to SMEs, education, innovation, cohesion policy…). Heading 2 covers agriculture, fisheries and the environment. Heading 3 includes justice and immigration. Heading 4 deals with worldwide issues such as international affairs, cooperation, etc. Heading 5 is about the functioning costs of the EU (salaries of staff, buildings, pensions, etc.). Heading 6 is less frequently referred to and is about compensations.

• Inside/Outside the MFF – traditionally, some funds or projects are left outside the MFF usually but not exclusively due to their unpredictable nature; the Emergency Aid Reserve and the Solidarity Fund are used for unforeseen disasters; by their nature it is impossible to forecast how much will be needed in future. The European Development Fund is also outside the MFF because Member States contribute differently to it compared to their financing of the EU budget.

• Innovative financing tools - such as project bonds: new mechanisms to raise additional funds such as micro-contributions, taxes, public-private partnerships and market-based financial transactions.

• MFF - The Multiannual Financial Framework lays down the spending priorities and maximum annual amounts which the European Union may spend in different political fields over a fixed period (several years). The ceilings laid down in the MFF regulation are not equivalent to the EU budget. The annual EU budget itself always remains below the MFF expenditure ceilings. The MFF also covers income sources for the EU budget as well as correction mechanisms for the financial period it refers to. Currently the MFF is 7 years long; the current financial period (2007-2013) expires on 31 December 2013.

• Net balance – The difference between a Member State's contribution to the EU budget and the amount of EU funds it benefits from the EU budget. The net balance does not take into account other financial, economic and political benefits a Member State gets out of the EU such as the Internal Market enabling its companies to operate anywhere in the EU.

• Partnership Contracts – the Commission proposes to conclude partnership contracts with each Member State. These contracts aim to ensure that the allocated funds are in line with the Europe 2020 strategy.

• Payments - actual transfers of cash from the EU budget to creditors during the current year, resulting from past commitments.

• RAL (reste à liquider) - sum of commitments which have been agreed to but that have not yet translated into payments.

• Ring fenced amounts – Amounts from a programme or part of the EU budget specifically dedicated to a specific issue or instrument. Parts of the cohesion fund are for example ring-fenced for the Connecting Europe Facility (transport).

• Safety net - Minimum level of EU funding guaranteed to Member States through the Cohesion and Structural Funds.

• Sectoral legislations – Legislation specifying rules and functioning of programmes in various policy areas (Cohesion, agriculture, research, culture, etc.) Sectoral legislations fall under the co-decision procedure in which the decision is taken by both the Council and the European Parliament. Almost 80 sectoral legislative proposals have been proposed by the Commission for the period 2014-2020.

• Shared management – when the management of EU fund or programme is delegated to Member States (as opposed to central management). The vast majority of EU funded projects are under shared management.

FURTHER INFORMATION:

MFF website of Commission: http://ec.europa.eu/budget/mff/

MFF press releases of 29 June 2011:

http://europa.eu/rapid/press-release_IP-11-799_en.htm?locale=en

Interactive website on the EU budget in 2011 with many useful figures on expenditure, revenue and corrections and comparisons among countries:

http://ec.europa.eu/budget/figures/interactive/index_en.cfm

EU budget at glance – update based on 2011 Financial Report, including EU spending per country, EU contribution per country, total EU spending and development of EU and national budgets:

http://www.europarl.europa.eu/news/en/headlines/content/20111107MUN30717/html/EU-budget-at-glance-updated-with-latest-figures


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