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José Manuel Durão Barroso

President of the European Commission

Speech by President Barroso: "Europe's future budget – investing for growth"

High Level Conference on the Multiannual Financial Framework

Brussels, 22 March 2012

President Schulz,

Prime Minister Thorning-Schmidt,


Honourable Members of the European Parliament and national parliaments,

Distinguished guests,

Ladies and Gentlemen,

I would like to start by adding my own words of welcome to you all on behalf of the European Commission. I would also like to thank President Schulz and Prime Minister Thorning-Schmidt for the excellent cooperation jointly organising this second high-level conference on the Multiannual Financial Framework.

It is very good to see such a large number of distinguished participants here today, including among others European and national parliamentarians and also representatives from the Court of Auditors, the Economic and Social Committee and the Committee of the Regions. You are all key stakeholders in the EU's future expenditure and resources and your input is absolutely crucial to ensure the success not only of this process of negotiations, but also – and most importantly – in implementing the financial framework's objectives. That is to say, investing in growth for our economies, investing in jobs for our citizens.

In recent weeks, there has been less tension in the European economy and signs of greater levels of stability than we had seen in the second half of last year.

But the crisis is far from over, and there is no room for complacency. This increased stability gives us a chance to focus on what Europe's economy really needs – growth; growth and jobs. Sustainable growth what we call inclusive, sustainable, smart growth. And investment is a crucial component of spurring this growth. Basically we can say for growth we have we have the Europe 2020 Agenda, for investments we have the MFF, we have the European budget.

All European Union Member States have committed to a common growth strategy. It is called Europe 2020 and it is a comprehensive response to the challenges the EU is facing. I was pleased that at the recent European Council the Heads of State and Government again confirmed the five targets for 2020 and endorsed the specific priorities for 2012 as proposed in the Commission's Annual Growth Survey.

The Multiannual Financial Framework is one of the main tools for delivering the Europe 2020 strategy. It is a budget for growth and investment. We can not speak all the time about the need for growth and afterwards not be coherent when proposing the means for investment.

Decisions we take now will determine our capacity to meet our common goal of creating a smart, sustainable and inclusive economy over the coming years.

The budget that the Commission has proposed, is ambitious, innovative and forward-looking. In particular at a time when national budgets are under pressure, this framework will not cost tax-payers any more than at present. At the same time, with the same amount of money as today, we have sought to ensure that it focuses on areas of real European-level added value and complementarity; By investing in infrastructure, networks and research on a European scale, the European Union budget channels resources that help to complete our internal market and increase our efficiency, support the sustainability of our economy.

A Euro spent through the EU budget can usually spare several Euros for national budgets through synergies and effects of scale. And it can also leverage in private expenditure to create a greater overall impact.

This is because the European budget is a budget for investment. I have to insist on this because we know that in some quarters the European budget is presented as basically a budget for current expenditure. It is false. This investment is not investment for Brussels or for the European institutions. This investment is made back in the Member States and in the regions and cities, our citizens all over Europe. This budget supports projects and priorities across the entire Union and in line with our Europe 2020 growth strategy.

We all know that this is the case for our cohesion policy, and here we will be revising the framework and simplifying programmes to build on the policy as one of our vital tools for investing in growth and jobs. However, today I would like to look at some other key examples of the priority areas for this budget - research and innovation, education and the Connecting Europe Facility. In every case, the EU budget can make a real and distinctive contribution.

Firstly, an area to which I attach great importance is research and innovation. Investment here is about future-proofing our economy. It is about competitiveness, it is about creating the jobs of tomorrow. We know that those countries that have consistently invested the most in research and innovation, have weathered this crisis much better than those that were lagging behind. Research and innovation gives our companies a competitive edge, and employment growth in research and development-intensive sectors is generally higher than in other sectors. If Europe wants to remain a world leader in some of these fields, we need national funding bodies, private enterprise but also we need European funding to work effectively together.

Without European scale, without the synergies of the European area, we will not be able to compete and to be at the same level as our partners and competitors. The world is changing dramatically and it is obvious that we need to put together our resources.

Investment at the European level means we work together to tackle the big challenges we face, such as improving our healthcare, greening our transport, and many areas of our economy. The potential for energy efficiency in Europe is huge. But also improving safety and security of our food.

We also have to work together on being more innovative in Europe - making the leap from idea to market. It is not enough to have great ideas – we need to provide the necessary conditions so that Europeans can turn their ideas into businesses and jobs.

So we must maintain a high level of ambition for European research and innovation. Horizon 2020, a proposal of € 80 billion, is a very important contribution for our future.

That brings me to my next point, education. It is estimated that by 2020 nearly 35% of all jobs will require high skills, innovative thinking, and the ability to adapt. We need our education systems to be up to this challenge.

To contribute to this, the Commission has proposed for the new framework period, the new Erasmus for All programme. Building on the success and reputation of the Erasmus programme, this would give up to five million people the chance to study or train abroad. This increased size and scope of Erasmus reflects the Commission's high level of ambition to invest in the necessary skills and training for our young people. We are proposing investment in this area that could double the number of our young people benefitting of this very important European programme.

Education systems are, and will remain, a national competence. But the added value of giving young people the chance to work and study abroad is clear in helping citizens acquire more and better skills, in opening new doors, and in encouraging free movement and adaptability.

Free movement of transport, energy and ICT throughout Europe is the logic behind of what we have called the Connecting Europe Facility for which we propose a budget of € 50 billion. Missing links in these sectors today prevent the single market from operating to its full potential. We need coordinated investment at European level to fill in these gaps and to make trade, business and travel easier for European citizens and also European companies including SMEs. The aim is to overcome the limits of the traditional logic of nationally budgeted envelopes, and to create a dynamic for investment that benefits the whole single market. One example is energy interconnectors, where targeted European investment may be needed in one Member State to allow the renewable energy of one or several Member States into the grid. We can only have a real sustainable renewables energy policy if we have the grids at European level.

The Commission's proposal is a key example of a truly European approach to address common issues through the European Union budget and has already gained support from a number of European leaders.

The Connecting Europe Facility is also an area where the use of innovative financial instruments can make a real difference by attracting private sector investment and thus maximising the impact of the EU budget and working with other European entities like the European Investment Bank (EIB).

At the beginning of this month, European leaders gave their backing to the project bond pilot, which the Commission hopes will pave the way for the wider use more systematic use of this approach through the Connecting Europe Facility. Project bonds can help to generate the critical mass between public and private funding needed to finance large-scale projects with potential to stimulate economic growth.

Another essential feature of our proposals is the simplification of all our spending programmes. We have listened to those who have told us that overly complex rules can act as a disincentive to taking up funding possibilities. In response, the Commission has proposed a radical simplification across the financial framework and looks to the other institutions and the Member States to support these efforts. We all know, let's be frank about this, that in theory everybody is for simplification. I have never heard someone proposing "complexication", but when we come to the concrete details, often everybody has a specific rule or specific norm and this is indeed very negative. Not only for the budget, but also for the perception that European citizens have about the budget and this makes it always very difficult to read.

In total, the Commission has proposed over 120 simplifications to the rules governing European Union funding for SMEs, towns and regions, students, scientists and also NGOs working in the area of development aid. They include: a reduction in the overall number of programmes, more coherence and clarity of rules, clearer objectives and indicators, simplified forms of grants and a decisive move towards a faster delivery of payments. These are direct measures to ensure smoother and faster access to EU funding for applicants, so that money can be more efficiently mobilised in order to boost the European economy and jobs.

This is a question of credibility and is in the mutual interest of everyone. We will be watching closely and reporting regularly through our scoreboard.

Credibility is also at the heart of our proposal for funding of the EU budget. Credibility, transparency and sustainability. We have proposed a system of own resources, which would endow the European Union with a transparent and sustainable system of financing. Our proposals for own resources, based on a Financial Transactions Tax and modernised VAT resource, would ensure a fair distribution of impact across the Member States. It is also more socially equitable, in line with wider efforts to shift the tax burden away from labour and towards taxation which is less detrimental to growth. And importantly, our proposals would reduce very substantially the Member States' Gross National Income (GNI) contribution to the Union's budget. Some preliminary estimates suggest the reduction of this national contribution to the budget could be half – 50% of what could be without these own resources. I will not now go into detail, I know Commissioner Lewandowski will in the next session of this seminar propose to you and explain to you logic of these proposals.

Own resources, as President Schulz just mentioned are not a new idea. The Treaty is crystal clear on this point. The Union should be financed by own resources. We should have the courage to reform a system that is now far too complicated and badly outdated. Let me tell you I now with experience of at least two other Multiannual Financial Framework negotiations in different capacities as the Commission President and representing my government before it is indeed a way of avoiding some moments of negotiations that are not the finest moments of European integration process with all these logical 'juste retour'. So I think it could be a great contribution also to the consolidation, not only of transparency, but the true common spirit

At a time when resources are scare and when every euro counts, we are doing more than ever to ensure that the budget is effective and resources not wasted.

Most obviously we will continue to monitor the institutions and mechanisms in place at every level to implement the budget. Where institutions are weak and efficient management can not be guaranteed we will take action including suspending funds. I know this is not popular, but it is a condition for credibility.

We also have our macro–economic conditionality concerning excessive deficits. This is important because the most effective use of the budget comes when there is macro-economic stability, when there are no structural imbalances and no distortions. The excessive deficit procedure was agreed by all Member States and has to be applied in a consistent manner. Its ultimate objective is to foster confidence in the economy, once again creating conditions for growth and job creation.

Looking ahead now at the next steps, I am pleased that good progress is being made under the Danish Presidency as concerns the detailed preparatory work on the package of sectoral proposals. The Commission is working very closely with the Presidency on the preparation of the negotiation elements and I thank Prime Minister Thorning-Schmidt for her personal commitment to the whole process. I want to particulary welcome the remarks made just now regarding this commitment to work together with us and of course the European Parliament. That is why because I know the personal commitment of Prime Minister Thorning-Schmidt that I believe that each institution should be firm, but we shoud also be kind to one another. We look forward to further good cooperation with the Council in the run-up to the European Council in June. We count on the continued constructive and open engagement of Member States in the drive to reach agreement by the end of this year.

I also look to the European Parliament, which we hope will be more involved in the current discussions, to uphold our high level of ambition when negotiating and approving this package, and I know that President Schulz has shown great personal engagement and I want to thank him for that. Let's be clear: it is important that the European Parliament is not only informed ex-post, it is important that the European Parliament is heard ex-ante and that we have a real serious, constructive negotiations.

I am glad that the Commission's proposal was widely accepted as a solid basis for negotiations. Even those that are not, let's put it frankly not enthusiastic about our proposal considered it a good solid, credible basis for negotiations. In the coming months, we must all do everything we can to ensure that this budget is a means to invest in a strong and competitive Europe. That it is a budget that works for Europeans, for everyone of our citizens.

Thank you for your attention.

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