The Multiannual Financial Framework of the European Union, also called the financial perspective, is a seven-year framework regulating its annual budget. It is laid down in a unanimously adopted Council Regulation with the consent of the European Parliament. The financial framework sets the maximum amount of spendings in the EU budget each year for broad policy areas and fixes an overall annual ceiling on payment and commitment appropriations.
The Multiannual Financial Framework for 2014 to 2020 set a ceiling for expenditure at 1% of European Gross National Income, a reduction from the prior framework. Per the European Council, €959.51 billion in commitments and €908.40 billion in payments for the given timeframe were allotted for expenditure. The EU's expenditure in this period was in six categories or "headings" with respective ceilings for spending. 1. Smart and inclusive growth a. Competitiveness for growth and jobs: the ceiling for this program, supporting research and innovation, investment in trans-European networks and development of small and medium-sized enterprises, was €125.61 billion, which exceeded the previous ceiling for 37%. b. Economic, social and territorial cohesion: with ceiling in amount of €324.94 billion for this subheading. The main goal was reduction of asymmetric levels of development of the EU's regions and expansion of the support of the Union's cohesion policy. 2. Sustainable growth,natural resources: the ceiling equals to €372.93 billion. Aimed covering environmental action, the common fisheries policy and the common agricultural policy. 3.Security and citizenship: the set limit in amount of €15.67 billion. Asylum and migration related actions were financed, as well as initiatives connected with internal security and external borders. 4.Global Europe: the spending limit of €58.70 billion. Mainly covered Union's activities on international level. 5.Administration: with €61.63 billion limit on expenditure, which was decreased in amount of €2.5 billion in comparison with the previous MFF in order to consolidate public finances. 6. Compensations: ceiling in sum of €27 million was set to support Croatia in contributing less than gained benefits during the first year after its accession to the European Union. Below are the ‘special instruments’ used for the MFF of this period: Emergency aid reserve, with annual amount of €280 million, was used to deal with unpredictable events such as financing humanitarian aid, managing civilian crisis and conducting protection operations in non-EU countries. EU solidarity fund, with annual budgeted amount of not more than €500 million, was designed for the cases of major disasters in any of the member states or in countries negotiating with EU regarding accession. Flexibility instrument, with fixed annual amount of €471 million, was dedicated to clearly identified needs out of the scope of the MFF ceilings. European globalization adjustment fund, with mobilization up to €150 million annually, aiming to support workers, who became unemployed because of globalization, economic crisis, etc., in finding new opportunities of employment. Contingency margin equals to 0.03% of the EU's gross national income was intended to be used as last-resort instrument in reacting to unforeseen circumstances. Specific flexibility to tackle youth unemployment and strengthen research was giving an opportunity to spend an additional €2.543 billion on youth unemployment and research. In order to maintain the total annual ceilings and headings' allocation the same, the amount was fully balanced out within and/or between headings. The framework did receive a number of amendments and changes during its effective period following a midterm review. Particularly, the budget was shifted towards cushioning labor impacts resulting from the migration crisis straining the budget at the time,
2021 and Onwards
Negotiations for the new financial framework for the years 2021 through 2027 remain underway following stalled talks in late February 2020, prolonged further by shutdowns across EU nations provoked by the coronavirus pandemic. Negotiations currently center on modern and evolving issues and threats to European safety and stability, namely cyber-attacks, terrorism, disinformation, natural disasters, climate change, human rights violations, and gender inequality. Debates related to the European Green Deal have also taken center stage, with considerable attention paid to the budget allocated for the project and the Just Transition Fund aimed at providing a speedy transition for more fossil fuel reliant regions. Belgium-based think tank Bruegel has noted that the hulking financial contributions necessary to finance the climate initiatives have remained a sticking point in debates, particularly for the German delegation. On 21 July 2020, the European Council agreed to the multiannual financial framework for 2021-2027.
