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Member of the European Commission

Responsible for Financial Programming and Budget

"The Commission proposal for the financial framework 2014 – 2020 - too ambitious or too realistic?"

Introductory statement at the General Affairs Council

Brussels, 27 January 2012

As this is the first meeting in the new year, let me first of all wish you all happy new year or to put it in my terms – A happy new budget! 2012 promises to be a particularly challenging year with discussions on the next MFF as a constant in our agenda. At the end of this year, in line with the important European Council conclusions of December, we will hopefully have concluded the negotiation process. The start of this process is today under the Danish Presidency who I wish, of course, a lot of success - particularly on the dossier that is most dear to me!

I strongly welcome the possibility to have at an early stage a discussion on the overall figures of the MFF following a so-called top-down approach.

I am so happy because it gives me the opportunity to explain to you how the Commission used a top-down approach for its proposal:

  • First, we have taken the overall ceilings of the financial framework of 2013 and only adjusted it for inflation. The technical term is "constant in real terms".

  • Second we have kept the two major spending blocks – agriculture and cohesion – nominally constant, i.e. we have not adjusted them for inflation. By effectively freezing 70% of the budget, we created substantial savings.

  • Third, we have proposed to use these savings for increases in other policy areas and new activities, such as:

  • the important increase for research, development and innovation,

  • the creation of the new 'Connecting Europe' facility, integrating the transport and energy networks of the continent.

  • increases for cross border mobility in education,

  • increases for SME's and start up enterprises,

  • etc.

The discussion today will focus a lot on the question if the Commission proposal is too high or too low – or in other more diplomatic terms too ambitions or too realistic. For this debate it is useful to recall some facts:

What has the past performance of the EU budget been in comparison to the evolution of national budgets? It turns out that most Member States have not decreased their spending; on the contrary they have been increasing it. For example:

  • Between 2000 and 2011, national budgets in the EU increased by 62 % while the EU budget payments increased by slightly less than 42%.

In 2011, 20 national budgets out of 27 have increased. Even in 2012, 19 Member States are increasing their national budget.

The best measure for the question "too-ambitious-or-too-realistic?" is to ask how the EU budget developed in percentage of GNI. Why is this so? Absolute figures are completely meaningless when analysed over a horizon of 10, 20 or 30 years. Therefore, only relative comparisons can shed some light on the degree of ambition of our proposal. And the result of this is staggering:

The share of the EU budget, expressed as a percentage of EU GNI, is likely to decrease significantly over the next period to reach 0,94 % of EU GNI by 2020. Its proposed average over 2014-2020 is 1%. Let's just recall that this share was:

  • 1.18% of EU GNI as average between 1993-1999 and

  • 1.06% of EU GNI as average between 2000 and 2007 and 2007 and 2013.

This means that the average share has gone down by around 20% between 1993 and 2020. For many this seems more on the side of "too realistic" than "too ambitious".

Therefore, I want to stress that when the Commission proposed to stabilize the EU budget on average at the 2013 level, it has duly taken into account the current climate of national austerity and fiscal consolidation.

The stabilisation of the MFF at the 2013 level in real terms means in fact that the economic growth of the EU for the period 2014-2020 will not be translated into additional public expenditure at EU level. I invite you to find any examples of a similar budget discipline being imposed ex ante on a national budget until the year 2020. Even the so-called debt brakes that are under discussion do not impose this. This means our proposal will be in many cases stricter than the foreseen debt brakes for Member States.

Angela Merkel gave an interview that was printed in several European news papers yesterday. In this interview she said, and I quote in German:

"Ich möchte das Geld europäischer Fonds gezielt für Maßnahmen verwenden, die Wachstum und Beschäftigung fördern. Ich denke dabei an Unterstützung für mittelständische Unternehmen oder Existenzgründer, an Beschäftigungsprogramme für junge Leute oder Mittel für Forschung und Innovation. Deutschland ist bereit für diese sinnvollen Zwecke die Strukturfonds einzusetzen."

I am happy to say that this is exactly what the Commission proposed in June. In the framework of our new cohesion policy we strictly link these programmes to the implementation of growth enhancing structural reforms. This will be done in the so-called partnership contracts. The Commission can suspend cohesion or structural funds in case Member States do not envisage or implement structural reforms in the partnership contract. This means that there will be a much stronger leverage to impose structural reforms than in the past.

Let's be under no illusions here: Those Member States that are most affected by the crisis need to do serious structural reforms – again there is no doubt about this. But they also need to complement this with targeted growth-enhancing public investments which they are not able to do alone - given the precarious state of their public finances. I think this is getting an increasing consensus on European level.

Investments on EU level, in particular if coupled with the newly proposed macro-economic conditionalities, can be an important way to bring these countries back on a growth track.

Let me conclude: The Commission proposal constitutes a middle ground, a proposal that aims to finance our common EU priorities but in a fiscally responsible way. It is not an unrealistically high opening bid like the price for a carpet in an oriental bazaar! It is a reasonable proposal. Furthermore, it is embedded in a completely new policy framework that is geared towards the implementation of structural reforms and fiscal rigidity.

I particularly call on those who have a sense of fairness and balance to defend what they themselves have called a good basis for negotiations. Now I am looking forward towards a good discussion.

Thank you!

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