EP votes on tougher rule of law conditions, all of Hungary's EU funds could be frozen
The European Parliament voted on the proposals for the EU's Multiannual Financial Framework (MFF) for the next cycle in its plenary session on Wednesday, and the results could provide a good preview of how the EU budget could be reshaped from 2028.
The EP committee has already concluded that the resources available are insufficient to address the accumulating challenges and this week's discussions have focused on this. Although a number of amendments were voted down,
the European Parliament finally adopted its proposal for the next cycle budget on Wednesday with 317 votes in favour, 206 against and 123 abstentions.
Speaking at a press conference after the vote, Roberta Metsola, President of the Parliament, said that they had picked up the pace and had a strong mandate, as the 2024 EP elections - which also coincided with the municipal elections in Hungary - had the largest voter turnout ever.
According to Metsola, new solutions are needed and, if possible, resources should be increased, because on the one hand, the MFF should ideally be able to handle certain crisis situations, and on the other hand, the repayment of loans taken out during the Covid pandemic should start soon, which, according to the current cycle rules, could take up to 20% of an annual budget from 2028.
Although new joint borrowing is now expected due to strategic independence, the MFF essentially determines what the EU can manage and how it can manage it over the seven-year cycle. The lion's share is contributed by the Member States, who pay 1% of their Gross National Income (GNI) into the pool. This is topped up by the EU's own sources of revenue, such as customs duties on products entering the single market or, for example, the Member States' contribution for non-recycled plastic packaging.
The current revenue structure allows around 7% of the EU budget (MFF), including staff expenditure, to be spent on the functioning of the institutions, while the remaining 93% directly benefits citizens in the Member States. However, the distribution of funds within countries is mainly the responsibility of national governments.
In addition, although the European Commission is responsible for the final setting of the targets, the decision can only be taken with the approval of the European Parliament and, more importantly, the Council composed of national leaders.
While the majority of the directly elected EP typically wants to increase resources, some national leaders are reluctant to contribute more to the common pot, but the usual mix could change under increasing pressure.
There is already a strong consensus between the Commission and MEPs that more resources are needed and that access to them should be greatly simplified. However, there may be different ways of achieving this.
While it has long been said that the EC could use most of the available budget on a country-by-country basis through national plans, following the example of the Recovery and Resilience Facility (RRF) for the 2020 pandemic, the Parliament's recent decision sets high expectations for budget reform.
Carla Tavares (S&D, Portugal) and Sigfried Vasile Mureșan (EPP, Romania), who drafted the proposal,
clearly rejected the idea of transforming the MFF into 27 national budgets at the expense of the common policies that have been in place until now.
While there is scope for dual-use (military and civilian) investment in cohesion policy, and agricultural policy can be made more responsive to food security, an important objective is not to reduce the resources devoted to these areas.
This is not to say that the parliament is not open to reorganising the areas, but Mureșan says that any reform must keep three main expectations in mind.
- The process for drawing down different funds should be simplified and standardised.
- The MFF as a whole needs to be made more flexible, so that it is not limited to reacting to crisis situations by reducing its fixed parts.
- Better alignment is needed with the priorities of EU citizens, which are currently most visible in the keywords of security and competitiveness.
An important factor in this may be that the allocation of funds at local level was mentioned several times, as the rapporteurs argue that regions and municipalities are likely to be better managers of EU funds than governments with other priorities.
This does not mean, of course, that they want to curtail the powers of national leaders, but the basic message is that countries are increasingly coming together under the European flag. In any case, the rapporteurs reported a very good working relationship with the Commission's Budget Commissioner, Piotr Serafin, who also made several references to regional calls.
In addition, there was a strong focus on conditionality, where Mureșan said that the link between resource freezes and the rule of law is currently very unclear. Clear lines should be drawn here and it should be made transparent which breaches of obligations result in which funds being withheld. According to him,
this is necessary to ensure that Hungary, for example, does not play the role of a political "victim".
Regardless, it is important to get the funds to the people, so they are thinking of smart conditionality mechanisms that would take away the competence to distribute the funds from governments that do not meet the conditions and draw down the funds at lower levels of government.
As there are currently no similar proceedings against other member states outside Hungary, this might be acceptable to the other Council members, but decisions on this or the MFF as a whole require unanimity in the body of 27 heads of state.
In any case, the outlook has never been better. The Commission, the majority of the Parliament and the Council are thinking along the same lines, so much so that MEPs believe there is even a realistic chance of a modest increase in the 1% levy.
However, the emphasis is not on more resources, because it makes sense to increase expenditure only when the unnecessary costs have been taken out of the system.
Cover photo (for illustration purposes only): EU
