Financing the European Union

Responding to requests for a common recovery plan to complement national efforts to tackle the impact of the coronavirus pandemic, substantial new EU financial instruments have been rapidly introduced such as temporary support to mitigate unemployment risks in an emergency (SURE). The European Council meeting on 17-21 July agreed a recovery package based on a 2021-2027 Multiannual Financial Framework (MFF) of €1 074.3 billion, topped up with €750 billion in extra resources for EU programmes, financed by borrowing on financial markets under the Next Generation EU (NGEU) instrument (the so-called 'recovery fund') backed by an increase in own resources. The package also included agreement on a regulation to protect the EU budget in case of deficiencies in the rule of law. In line with its resolution of 23 July 2020, the European Parliament swiftly took the steps needed to allow the launch of the recovery fund, and to improve on the European Council agreement to ensure that the EU finances respond to needs and expectations now and in the future. These improvements included top-ups to priority programmes and more flexibility in the use of the MFF, a legally binding place for the introduction of new own resources, better scrutiny of the mobilisation of the NGEU instrument, and enhancements in the application of the rule of law mechanism. Final agreements within and between the institutions, secured in December 2020, enable the new MFF to be in place as of 1 January 2021. This paper describes reforms already secured by the European Parliament and suggests further ideas that could be considered to improve the financing of the European Union, restore the link between EU strategy and financing, and better communicate the benefits of spending at EU level.