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The Commission has proposed an annual EU budget of about €200 billion for 2025; besides, it will be complemented by approximately €72 billion of disbursements under the NextGenerationEU program. This substantial financial envelope is aimed at supporting the EU member states actions in meeting their political-economy’s priorities while integrating the changes agreed in the mid-term revision of the Multiannual Financial Framework (MFF) in February 2024.
Background
The draft budget 2025 directs funds to where they can make the greatest difference, in cooperation and in line with the needs of the EU member states and the European partners around the world to make Europe more resilient and fit for the future to the benefit of the EU citizens and businesses. This will be done by fostering the green and digital transitions, by creating jobs while strengthening Europe’s strategic autonomy and global role.
It will enable support to key critical technologies through the Strategic Technologies for Europe Platform (STEP).
The suggested EU budget-2025 will also provide – in line with the MFF mid-term revision – continued support for Syrian refugees in Turkey and the wider region, the Southern Neighbourhood states including the external dimension of migration, as well as the Western Balkans.
Besides, it will provide stable and predictable support to Ukraine.
The draft budget for 2025 is part of the Union’s long-term budget as adopted at the end of 2020 and as amended in February 2024; including subsequent technical adjustments, the budget will assist the states’ development by turning present EU-wide priorities into concrete annual deliverables.
Commission’s opinion
“The EU budget continues to provide Europe with the means to tackle current and future challenges, notably by supporting the green and digital transitions and increasing the Union’s overall resilience. We have also been able to strengthen our position externally: the mid-term revision of the MFF was essential to enable our Union to respond to the consequences of Russia’s war of aggression in Ukraine on a stable footing, reinforce our capacity to respond to natural disasters and deliver answers to the global competition on key critical technologies”.
Johannes Hahn, Commissioner for Budget and Administration.
Citation from: https://ec.europa.eu/commission/presscorner/detail/en/IP_24_3247
Revising priorities
In February 2024, the EU leaders endorsed all the priorities of the Commission’s proposal and agreed on the first-ever revision of the EU’s long-term budget; it was also approved by the European Parliament at the end of February 2024.
The key elements of the revised budget include:
= Critical support for Ukraine: a new Ukraine Facility, based on grants, loans, and guarantees, with a total capacity of €50 billion over the period 2024-2027, will address Ukraine’s immediate needs, reconstruction, and modernisation on its path towards the EU.
= Strengthening sovereignty and competitiveness: the Strategic Technologies for Europe Platform, STEP will boost the EU’s long-term competitiveness in critical technologies, digital and deep tech, clean tech, and biotech, with new flexibilities and incentives for cohesion funding and the Recovery and Resilience Facility, and a €1.5 billion top-up to the European Defence Fund.
= Further action on Migration and external challenges: an increase of €9.6 billion will support the internal and external dimensions of migration and help partners in the Western Balkans, southern neighbourhood and beyond.
= Stronger response to unforeseen crisis: to enable the EU budget to continue to respond to unforeseen circumstances, such as the energy crisis, food crises and the aftermath of Russia-Ukrainian military conflict amid rising inflation and interest costs; the Flexibility Instrument will be reinforced by €2 billion while the ceiling of the Emergency Aid Reserve will be increased by €1.5 billion and split into two separate instruments: the European Solidarity Reserve and the Emergency Aid Reserve.
= More crisis resilience: an emergency mechanism and a new financial instrument will provide clarity on the budgetary mechanisms for financing the costs associated with NextGenerationEU, NGEU.
More in: https://commission.europa.eu/strategy-and-policy/eu-budget/long-term-eu-budget/2021-2027/whats-new_en#revision-of-the-eu-budget-2021-2027
Financing on-going European priorities
= €53.8 billion for the Common Agricultural Policy and about a billion for the European Maritime, Fisheries and Aquaculture Fund, for Europe’s farmers and fishers, as well as strengthening the resilience of the agro-food and fisheries sectors and providing necessary actions in crisis management.
= €49.2 billion for regional development and cohesion to support economic, social and territorial cohesion, as well as infrastructure supporting the green transition and Union priority projects.
= €16.3 billion to support the EU partners and interests in the world; among others: €10.9 billion under the Neighbourhood, Development and International Cooperation Instrument- Global Europe (NDICI-Global Europe), €2.2 billion for the Instrument for Pre-Accession Assistance (IPA III) and €0.5 billion for the Growth Facility for the Western Balkans, as well as €1.9 billion for Humanitarian Aid (HUMA).
= A further €4.3 billion in grants under the Ukraine Facility, with €10.9 billion in loans.
= €13.5 billion for research and innovation, of which €12.7 billion for Horizon Europe, the Union’s flagship research program. The Draft Budget also includes the financing of the European Chips Act under Horizon Europe and redeployment from other programs.
= €4.6 billion for European strategic investments, of which, e.g. €2.8 billion for the Connecting Europe Facility to improve cross-border infrastructure, €1.1 billion for the Digital Europe Program to shape the Union’s digital future, and €378 million for InvestEU for key priorities (research and innovation, twin green and digital transition, the health sector and strategic technologies).
= €2.1 billion for space exploration, mainly for the European Space Program, which is aimed at bringing together all the Union’s action in this strategic field.
= €11.8 billion for resilience and European values, of which, among others, €5.2 billion for the rising borrowing costs for NGEU, €4 billion Erasmus+ to create education and mobility opportunities for people, €352 million to support artists and creators around Europe, and €235 million to promote justice, rights and values.
= €2.4 billion for environment and climate action, of which €771 million for the LIFE program to support climate change mitigation and adaptation, and €1.5 billion for the Just Transition Fund to make sure that the green transition works for all.
= €2.7 billion for protecting EU external borders, of which €1.4 billion for the Integrated Border Management Fund and €997 million (total EU contribution) for the European Border and Coast Guard Agency, Frontex.
= €2.1 billion for migration-related spending within the EU states, of which €1.9 billion aimed to support migrants and asylum-seekers in line with the EU values and priorities.
= €1.8 billion to address defence challenges, of which €1.4 billion to support capability development and research under the European Defence Fund and €244.5 million to support Military Mobility.
= €977 million to ensure the functioning of the EU Single Market, including €613 million for the Single Market Program and €205 million for work on anti-fraud, taxation and customs.
= €583 million for EU4Health program to ensure a comprehensive health response to people’s needs, as well as €203 million to the Union Civil Protection Mechanism (rescEU) to be able to deploy operational assistance quickly in case of a crisis.
= €784 million for security, of which €334 million for the Internal Security Fund for combating terrorism, radicalization, organised crime and cybercrime.
= €196 million for secure satellite connections under the new Union Secure Connectivity Program.
Source and reference to: https://ec.europa.eu/commission/presscorner/detail/en/IP_24_3247
The draft EU budget for 2025 includes the expenditure covered by the appropriations under the long-term budget ceilings, financed from the so-called EU “own resources”. These are topped up by expenditure under NextGenerationEU, financed from borrowing on the global capital markets. For the “core” budget, two amounts for each program are proposed in the draft budget: i.e. commitments and payments’ “commitments” refer to the funding that can be agreed in contracts in a given year; and “payments” – to the money actually paid out.
Addition info in the Commission websites: = Questions and Answers on draft annual budget 2025; = All EU annual budget documents; = Annual budget procedure; = Revision of the EU budget 2021-2027; = 2021-2027 long-term EU budget & NextGenerationEU; = EU budget in motion; = EU as a borrower.
Note on Ecofin agenda
On 21 of June 2024, the Ecofin council concluded that in 2024 it is “expected modest growth, picking up further in 2025”, with the labour markets “holding up well and with the high employment”.
However, the Ecofin also noted “many structural challenges to tackle, mostly with a relatively negative impact on the EU’s competitiveness”. It also highlighted the need to strengthen the sustainability of public finances while preserving public investment and growth through reforms.
All this requires a process of fiscal consolidation, to be steered by the EU’s new fiscal rules, which are fully embedded in the spring semester’s recommendations.
More on Semester in our article in: https://www.integrin.dk/2024/06/21/european-semester-spring-forecast-shows-gradual-expansion-amid-high-geopolitical-risks/
In updating the Recovery and Resilience Facility (RRF), the Ecofin notes total disbursements to more than €240.3 billion; there are 13 payment requests ongoing and the Commission expects to process about 30 more requests during 2024. It would bring total RRF disbursements for 2024 to about €80-100 billion, which makes “a grand total of €300 billion disbursed since the RRF was launched”.
The Commission’s updated RRF guidance will help the states to speed up implementation of their plans; for example, the new guidance: a) provides more flexibility for amending RRPs; b) reduces the frequency of revisions to operational arrangements; and c) clarifies ways to combine RRF funding with other EU funds.
As to taxation, there was no agreement on the Commission’s proposal to bring the EU’s VAT rules into line with the digital age, which is “disappointing for a fair taxation agenda”. The Commission intends “to remedy the current situation where the platform economy is not taxed fairly and appropriately, leading to distortions of competition between the traditional and platform economies”.
Citations from: https://ec.europa.eu/commission/presscorner/detail/da/statement_24_3434