Long-term EU budget 2021-2027 and recovery plan
The EU has put in place a global financial envelope of 1.8 trillion euros in 2018 the prices for the coming years to face the socio-economic consequences of the COVID-19 pandemic and to meet the long-term priorities of the EU. It combines:
- € 1,074.3 billion Multiannual financial framework (MFF)
- € 750 billion Extraordinary Recovery Instrument, Next Generation EU (NGEU)
1.8 trillion euros
combined CFP and NGEU funds
The package will help transform the EU by supporting the European Green Agreement and the digital transformation, and improvement resilience.
All the amounts presented on this page are in 2018 prices.
New generation EU
The European recovery plan requires massive public and private investment at European level to create jobs and repair the immediate damage caused by the COVID-19 pandemic, while supporting the EU green and digital priorities.
In order to empower the EU to meet the challenges posed by the COVID-19 pandemic, the Commission will be authorized to borrow 750 billion euros on behalf of the Union on capital markets.
750 billion euros
Next Generation EU Recovery Instrument (NGEU)
The Next Generation EU Recovery Instrument will transfer these funds to EU programs as follows:
- Recovery and resilience mechanism: € 672.5 billion (loans: € 360 billion, grants: € 312.5 billion)
- ReactEU: 47.5 billion euros
- Horizon Europe: 5 billion euros
- InvestEU: 5.6 billion euros
- Rural development: 7.5 billion euros
- Just Transition Fund (JTF): € 10 billion
- RescEU: 1.9 billion euros
The multiannual financial framework
The multiannual financial framework (MFF) covers the period 2021-2027. Under the MFF, EU funding will focus on new and strengthened priorities in all EU policy areas, including green and digital transitions. Cohesion Policy and the Common Agricultural Policy will continue to receive significant funding and will be modernized to ensure that they best contribute to Europe’s economic recovery and the EU’s green and digital goals.
€ 1,074.3 billion
Multiannual financial framework 2021-2027
The MFF covers the following main areas of expenditure:
- single market, innovation and digital: € 132.8 billion
- cohesion, resilience and values: 377.8 billion euros
- natural resources and environment: 356.4 billion euros
- migration and border management: € 22.7 billion
- security and defense: 13.2 billion euros
- neighborhood and world: 98.4 billion euros
- European public administration: 73.1 billion euros
MFF and EU next generation spending should be consistent with:
- EU climate neutrality target by 2050
- EU climate targets for 2030
- Paris Agreement
30% of total MFF and EU next generation spending should target climate related projects.
of total EU spending on targeting climate-related projects
To allow the financing of specific unforeseen expenses which could not be financed otherwise, a Single margin instrument (SMI) have been established. The annual ceiling for the SMI is set at 772 million euros per year (2018 prices).
Three special thematic instruments will provide additional financial means for specific unforeseen events:
- Brexit adjustment reserve support the Member States and economic sectors most affected by Brexit (€ 5 billion)
- European Globalization Adjustment Fund to support workers who lose their jobs in restructuring linked to globalization (186 million euros per year)
- Solidarity and Emergency Aid Reserve (SEAR) to respond to emergencies resulting from major disasters in Member States and candidate countries, and to respond rapidly to specific emergency needs within the EU or in third countries (€ 1.2 billion per year)
EU revenue: own resources
Decision on own resources
The own resources decision, which defines how the EU budget is financed, was adopted by the Council on 14 December 2020. To enter into force, the decision had to be approved by the 27 EU Member States. in accordance with their constitutional rules. It will apply retroactively to January 1, 2021.
From 1 January 2021, the following own resources ceilings are set for the EU:
- for installments: 1.40% of the GNI of all Member States
- for commitments: 1.46% of the GNI of all Member States
These ceilings will be exceptionally and temporarily increased by one 0.6 additional percentage point cover all EU liabilities resulting from the planned borrowing to finance the NGEU recovery effort, until all borrowed funds have been repaid.
Sources of income
A new Own resource based on non-recycled plastic packaging waste is established from January 1, 2021. This will encourage Member States to reduce the consumption of single-use plastics, promote recycling and boost the circular economy in line with EU environmental policy objectives.
The new tax will be calculated on the basis of the weight of plastic packaging waste not recycled in each Member State, with a call rate of 0.80 euro per kilogram. It includes a mechanism to avoid an overly regressive impact on national contributions.
In addition, the EU will work on the introduction of other new own resources over the next few years.
These new sources of funding are in addition to existing own resources:
- traditional own resources: mainly customs duties and sugar levies (Member States will retain, as collection costs, 25% of the amounts collected)
- VAT based own resource: a uniform rate of 0.3% is applied to the VAT base of each Member State, the taxable VAT base being capped at 50% of GNI for each country (the methodology will be simplified)
- Based on GNI own resource: resulting from a uniform rate applied to the gross national income of the Member States, this rate is adjusted each year in order to balance revenue and expenditure (unchanged)
For the period 2021-2027, flat-rate corrections will reduce the annual contribution based on gross national income by Denmark, Germany, Netherlands, Austria and Sweden.
New budgetary conditionality mechanism
A new regulation puts in place what is called a “general conditionality regime” to protect the EU budget. It applies where it is established that violations of the principles of the rule of law in a Member State affect or seriously threaten to affect the sound financial management of the EU budget or the protection of the financial interests of the EU. EU in a sufficiently straightforward manner.
Sector programs 2021-2027
The long-term budget provides the framework for financing almost 40 EU spending programs over a seven-year period. Most of the EU’s sector funding programs are expected to be adopted in early 2021 and will apply retroactively from early 2021.
Here is some examples of new and strengthened programs under the 2021-2027 MFF.
In order to support the digital transition, a new financing program, Digital europe, is created to promote the deployment and large-scale adoption of key digital technologies such as artificial intelligence applications and advanced cybersecurity tools. The digital aspect of the Mechanism for interconnection in Europe will also benefit from a significant increase in funding.
A new EU4Health The program will provide a solid basis for EU action in the health field based on lessons learned from the COVID-19 pandemic.
In the field of research and innovation, the Horizon Europe will benefit from a significant increase once funding on the basis of the EU stimulus instrument becomes available.
In the space sector, the EU is proposing a fully integrated space program, which brings together all the activities of the EU. By improving efficiency, it will contribute to the deployment of new space services that will benefit EU citizens and businesses.
To support the most vulnerable carbon-intensive regions in their transition to a climate neutral economy, a new Just Transition Fund is created. It will receive funding under the next long-term budget and the EU stimulus instrument.
Youth programs, such as Erasmus + and the European Solidarity Corps, will also be reinforced, with the Erasmus + program expected to triple the number of participants during the new MFF.
Support migration and border management has also been considerably strengthened, in particular to finance up to 10,000 border guards available to European Border and Coast Guard Agency by 2027.
In the field of security and defense, a new European Defense Fund was created to promote the competitiveness, efficiency and innovative capacity of the EU’s defense, technological and industrial base.