Parliament seals 2014 EU budget and the spending ceiling until 2020

European Parliament. Extraordinary meeting of the Committee on Budgets on Multiannual Financial Framework 2014-2020 in the EP in Strasbourg – The Committee first heard as statements by Alain Lamassure (EPP, FR), Chair of the EP Committee on Budgets and a cutaway by MEP Ann Jensen, EP rapporteur on the EU budget for 2014. (EP Audiovisual Services).

Finally, the European Parliament, after obtaining from the Council (that is the member state governments) what was possible to squeeze out in these times of widespread austerity, yesterday approved both the 2014 budget and the 2014-2020 financial framework, which sets limits on EU’s spending for the next seven years. Yesterday, the Budgets Parliamentary Committee voted both those financial exercises.

In detail, yesterday, Parliament’s Budgets Committee approved the EU’s long-term budget (Multi-annual Financial Framework – MFF) for 2014-2020 and 2014 budget, along the lines of the deal struck earlier this week between the legislators and the member states. Parliament’s final votes on these budgets are scheduled for next week in the full house. Presumably, the largely positive vote in the Committee anticipates the plenary’s decision. The MFF was approved by 28 votes to 5 with no abstentions, while the draft amending budget 9 for 2013 (flood compensation, shortfalls in research) approved by 33 votes to 2 and 0 abstentions.

Amending budgets

Amending the 2013 budget was at the centre of disagreement between the Parliament and the Council. It concerned the built in shortcoming of EU budgetary exercises. To explain this, it is needed to analyse, in short, the very structure of EU budgets. Every November, the Council and the Parliament approve next year’s financial balances, which contain two main items; actual spending and appropriations (undertaking of liabilities). The latter are usually larger than the former. As the years pass those differences accumulate.

In September 2013 there were still unpaid bills of €3.9 billion, pending even from the 2012 exercise. This is money owed to member states, local authorities and other entities for having completed projects co-financed by the EU. Already at the beginning of 2013, the Commission had estimated that all the unpaid bills amounted to €11.2 billion, not at all a small amount. Because of this oversized magnitude of pending obligations, the Parliament feared that the Council will try to cover a part of it from 2014 resources, thus even further reducing the already cut down next year’s budgetary spending.

Insistent legislators

The Parliament has consistently stressed the need to fill the entire payment gap for 2013 prior to agreeing on the MFF, the next long-term EU budget period starting in 2014. It didn’t make sense to agree on a budget for 2014 – the first year under the new MFF – if the previous year ends with a series of unpaid bills. When the Commission tabled its first request for additional funds (€11.2 billion), the Council proposed a two-tier approach: €7.3 billion were approved early this year and the outstanding amount (€3.9 billion) was left to be settled later on in the year.

At this point, it has to be clarified that, towards the end of 2012 when the 2013 budget was discussed and approved, the Parliament, the Council and the Commission had agreed to cover all those gaps within the following year. However, the Council while approving in July to pay €7.3bn, left the €3.9bn in the air. It was exactly the €3.9bn that separated the Parliament and the Council until this week.

In its resolution of 3 July 2013 regarding the overall 2014-2020 MFF spending, the Parliament had stressed that the €3.9 billion had to come through before the end of this year otherwise the Parliament would not give its green light to the MFF and the 2014 budget. Time passed and November came. Finally, after negotiating through last Monday night, the Parliament and the Council struck a deal early on Tuesday, which remedies that €3.9bn in payment shortfalls during the current fiscal year.

In short, last Tuesday morning everything was clarified and yesterday’s vote in the Budgets Parliamentary Committee was a rather typical procedure.