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Wednesday, 20 November 2013 13:37

One trillion euro to invest in Europe's future – the EU's budget framework 2014-2020

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EU News

The European Parliament voted in favour of the EU's Multiannual Financial Framework (MFF) for the years 2014 to 2020. Two and a half years of intense negotiations, since the Commission had tabled its proposals on 29 June 2011, have come to an end.

  • How much is in it and for what?

The EU's Multiannual Financial Framework 2014-2020 allows the European Union to invest up to EUR 960 billion in commitments (1.00% EU GNI) and EUR 908.4 billion in payments (0.95% EU GNI). Instruments for unforeseen circumstances (like the Emergency Aid Reserve, the European Globalisation Fund, the Solidarity Fund and the Flexibility instrument) and the European Development Fund are situated outside the ceilings of the MFF. If fully activated, they represent additional 36.8 bn (or 0.04% of EU GNI). The EU's budget framework 2014-2020 defines spending priorities that are geared to sustainable growth, jobs and competitiveness in line with the EU's growth strategy Europe 2020. For example, compared to the current framework, Heading 1A (Competitiveness for growth and employment) is increased from EUR 91.5 billion (= 9.2% of the budget) to EUR 125.6 billion (13.1% of the budget)[1].

  • 12 Highlights

The future budget is a modern budget for the European Union in the 21st century. Below are 12 highlights that illustrate a number of important innovations and show the budget's clear European added value.

  • 1. People looking for a job can count on support from the future EU budget, which provides a significant contribution to job creation through the European Social Fund (ESF) and the European Regional Development Fund. At least EUR 70 billion (i.e. about 10 billion per year) will be available under the ESF for this, complementing national action in this field. The new Youth Employment Initiative linked to the ESF and worth at least EUR 6 billion will support the implementation of the Youth Guarantee in the years 2014-2015. Overall, the reformed cohesion policy will make available up to EUR 366.8 billion[2] to invest in Europe's regions, cities and the real economy. It will be the EU's principle investment tool for delivering the Europe 2020 goals: creating growth and jobs, tackling climate change and energy dependence, and reducing poverty and social exclusion. This will be helped through targeting the European Regional Development Fund at key priorities such as support for small and medium-sized enterprises where the objective is to double support from EUR 70 to 140 billion over the 7 years. There will be stronger result-orientation and a new performance reserve in all European Structural and Investment Funds that incentivises good projects. Finally, efficiency in cohesion policy, rural development and the fisheries fund will also be linked to economic governance to encourage compliance of Member States with the EU's recommendations under the European Semester.
  • 2. More young people than ever before can plan their stay abroad with support from the new Erasmus+ programme of the European Union. Aimed at boosting skills and employability, the programme will have a budget of almost EUR 15 billion[3], which is more than 40% higher than current levels in real terms. More than 4 million people will receive support to study, train, work or volunteer abroad, including 2 million higher education students, 650,000 vocational training students and apprentices, as well as more than 500,000 going on youth exchanges or volunteering abroad. Up to 200,000 students planning a full Master's degree abroad, for which national grants or loans are seldom available, will benefit from a new loan guarantee scheme run by the European Investment Fund. 600 partnerships in sport, including European non-profit events, will also receive funding. Two-thirds of the budget is allocated to learning opportunities abroad for individuals, within the EU and beyond; the remainder will support partnerships between educational institutions, youth organisations, businesses, local and regional authorities and NGOs, as well as reforms to modernise education and training and to promote innovation, entrepreneurship and employability.
  • 3. European culture, cinema, television, music, literature, performing arts, heritage and related areas will benefit from increased support under the EU's new Creative Europe programme. With a budget of EUR almost 1.5 billion[4] over the next seven years (in real terms 9% more than current levels) the programme will provide a boost for the cultural and creative sectors, which are a major source of jobs and growth. The European Capitals of Culture, European Heritage Label, European Heritage Days and the five European prizes (EU Prize for Cultural Heritage/Europa Nostra Awards, EU Prize for Contemporary Architecture, EU Prize for Literature, European Border Breakers Awards, and Prix MEDIA) will also receive support from Creative Europe.
  • 4. EU-funded research and innovation will do more to improve Europeans' quality of life and enhance the EU's global competitiveness. The new programme for research and innovation Horizon 2020 is equipped with a budget of almost EUR 80 billion[5] - around 30% more than in the current framework in real terms. Horizon 2020 is clearly a centre-piece of the EU's drive to create new growth and jobs in Europe. Researchers and businesses across Europe can count on strongly increased and simplified EU support. It will provide a boost to top-level research in Europe, including the European Research Council, strengthen industrial leadership in innovation including through investment in key technologies, greater access to capital and support for SMEs and it will help address major societal challenges like climate change, developing sustainable transport and mobility, making renewable energy more affordable, ensuring food safety and security, or coping with the challenge of an ageing population. Very importantly, it will also help to bridge the gap between research and the market by, for example, helping innovative enterprise to develop their technological breakthroughs into viable products with real commercial potential. International cooperation will be an important priority of Horizon 2020. Under Horizon 2020, the Marie Skłodowska-Curie Actions will receive more than EUR 6 billion in 2014-2020[6] - 30% more than current levels. This will allow the EU to support more than 65,000 researchers. The European Institute of Innovation and Technology (EIT) will receive EUR 2.7 billion in 2014-2020[7] to enhance links between higher education, research and business, and to support entrepreneurial start-ups and specialised post-graduate training.
  • 5. Small and medium-sized enterprises are the backbone of Europe's economy accounting for around 99% of all European businesses and providing two out of three private sector jobs. Thanks to the new COSME programme, they can expect EUR 2.3 billion[8] in support to foster their competitiveness and boost growth and jobs in Europe. COSME is the first EU programme targeted to SMEs and will facilitate their access to markets inside and outside the EU and offer easier access to finance through loan guarantees and risk-capital.
  •  6. Growth and jobs in Europe crucially depend on infrastructure investment. Citizens and businesses are hindered all too often because the infrastructure networks across Europe, be it in transport, energy or ICT, are incomplete, inefficient or simply not existing. With EUR 33.3 billion (26.3 bn for transport[9], 5.9 bn for energy, 1.1 bn for digital)[10], the new Connecting Europe Facility (CEF) will be the key instrument for strategic infrastructure investment at European level. It will help build the roads, railways, electricity grids and gas pipelines, and the infrastructure and services for the Digital Single Market by bringing the crucial financial support needed to close the missing links in Europe's infrastructure networks that otherwise would not be built. Better interconnections will enhance business opportunities and energy security, and make work and travel easier. It benefits citizens and businesses alike, across all Member States. In the area of transport the Connecting Europe Facility will help to realise the new and long awaited transport infrastructure policy where nine major corridors will form the backbone for transportation in Europe's single market and revolutionise East-West connections. In the field of energy infrastructure, the Connecting Europe Facility is essential to meet the principal objectives of energy policy, affordable energy for all consumers, security of supply and sustainability. The CEF, together with the solutions for accelerated permit granting and regulatory incentives introduced by the new TEN-E guidelines regulation, will now radically improve the investment climate for these projects. The CEF is also the first ever EU-level investment programme in broadband networks and digital service infrastructures to help making the digital Single Market a reality.
  • 7. Scarce public money increases the need to unlock other sources of finance and thus generate a leverage effect for the EU budget compared to straight grant funding. This is precisely the purpose of financial instruments, such as loans, guarantees, equity and other risk-sharing instruments, which can be used more widely in the 2014-2020 budget. They will be implemented in cooperation with the European Investment Bank (EIB), the European Investment Fund (EIF) and national promotional banks. The purpose of these instruments is to address specific market failures in areas such as financing for SMEs, research and development projects, energy efficiency and key infrastructure. For example, the Commission's new SME Initiative will support bank lending to SMEs in Member States particularly affected by the financial crisis through partial loan guarantees and securitisation instruments. Another innovative instrument, the Project Bond initiative, provides an alternative, non-bank financing channel for key infrastructure projects such as railway lines, motorways and energy transmission networks. It thus opens up these projects for institutional investors, such as pension funds and insurance companies, seeking stable, long-term cash flows, while developing an alternative to traditional bank loans as a source of finance. Financial instruments will be used in programmes such as COSME (SME finance), Horizon 2020 (Research & Innovation), Erasmus+ (for its loan guarantee scheme - see point 2) and the Connecting Europe Facility (infrastructure).
  • 8. The EU budget for 2014-2020 marks a major step forward in transforming Europe into a clean and competitive low-carbon economy. At least 20% of the entire budget will be spent on climate-related projects and policies. The 20% commitment triples the current share of 6-8% and could yield as much as EUR 180 billion in climate finance in all major spending areas, including structural funds, research, agriculture, maritime policy and fisheries, and development.
  • 9. The reformed Common Agricultural Policy (CAP) is a strong response from the EU to the big challenges of today, such as food safety, climate change and sustainable growth and job creation in rural areas. It also responds better to people's expectations: Direct payments will be fairer and greener. Farmers will also enjoy a stronger position within the food production chain and the new CAP will be more targeted, efficient and more transparent. It supports a market-oriented agriculture (for example with no more export subsidies, which were phased out over the past years). Agricultural products represented a high 7% share of in EU exports in 2011 with a value of more than EUR 100bn - more than cars or pharmaceuticals. The CAP therefore is therefore an important driver for jobs and smart, sustainable and inclusive growth. For 50 years, the Common Agricultural Policy has been a genuinely European policy of strategic importance. As it is a true Community policy, more than 70% of agricultural funding in Europe today comes from the EU and no longer from national or regional coffers. Its share in the MFF 2014-2020 will be as follows: EUR 312.7 bn billion or 29% for market-related expenditure and direct aids (pillar 1); and 95.6 billion or 9% for rural development (pillar 2).[11] Still in 1984 the overall CAP made up around 70% of the total EU budget.
  • 10. The funding rules will be much simpler and therefore easier to understand for beneficiaries and less prone to errors. Altogether around 120 simplification measures are being introduced. For example: In cohesion policy, rural development and the fisheries fund EU investments will be simplified through common rules for all these European Structural and Investment Funds as well as simpler accounting rules, more targeted reporting demands and more use of digital technology ("e-cohesion"). In COSME, a "zero bureaucracy" approach will be applied and e-submission and e-reporting will be promoted. Horizon 2020 provides major simplification through a single set of rules for all research and innovation funding previously provided through different programmes.
  • 11. An open and safer Europe is crucial for our citizens. The future budget will help ensure that EU activities which stimulate economic, cultural and social growth may develop in a stable, lawful and secure environment. It will help people to feel at ease when living, travelling, studying or making business in other Member States. The future budget will support cooperation on civil and criminal law, allow people to better exercise their rights as EU citizens and promote equality. It will also provide finance to tackle cross-border issues, such as asylum, migration, border control and visas, and the fight against crime and terrorism. The EU's capacity to respond quickly and effectively to migration or security related crisis will be stepped up through an emergency response mechanism. The amounts foreseen for citizens, asylum, migration, health, consumers and security under the so-called Heading 3 will increase by 26.5% compared to the previous period.
  • 12. As a responsible global player the EU will continue its engagement with the rest of the world. The relations with our immediate neighbourhood, East and South, and with our strategic partners will remain a top priority. As global interdependence grows our security and prosperity needs to be promoted beyond our borders. That is why the overall objective for external action under the new Multiannual Financial Framework (MFF) will be to ensure that the EU remains an influential and effective partner that promotes democracy, peace, solidarity, stability, poverty reduction and prosperity, both in our immediate EU Neighbourhood and across the wider world. It remains fully committed to achieving the Millennium Development Goals. EU funding will focus even more on helping the poorest in the world by concentrating support on fewer countries (like Sub-Saharan Africa) and fewer sectors (like sustainable and inclusive growth and good governance). The EU will furthermore maintain its efforts in crisis prevention in order to preserve peace and strengthen international security. Our external assistance instruments will also strengthen the EU's engagement with third countries on issues that are of global concern, such as climate change, environmental protection and regional instabilities, and allow the EU to respond rapidly and effectively to natural and man-made disasters around the world.

For more information:

ANKO-S.A. Regional Development Agency of West Macedonia,member of enterprise Europe Network  www.anko.gr & www.anko-eunet.gr Tel:+30.24610.24022, e-mail:anko@anko.gr, fax:+30.24610.38628,1-3 str.Fon Karayanni, 50100 Kozani, GREECE

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