• Posted 01-Dec-2020

The European Parliament presents six different possible scenarios in case there is a delay or a persisting obstruction of the new Multiannual Financial Framework

A group of experts of the European Parliament’s Budget Committee have explored the various scenarios that may apply in case of a delay or a persisting obstruction of the new Multiannual Financial Framework (MFF) and the recovery package. It is important to note that in their opinion they attempt to screen the range of possible options and neither what is more realistic or more desirable. The group of experts has presented the following six different scenarios.

Rule of Law

The Rule of Law regulation is legally independent from other elements in the package. It can enter into force at any time, and apply to any MFF/programme/budget in force. In practice, however, and despite the provisional agreement and QMV voting requirement, the Council synchronises its finalisation with the rest of the package. In the case that the obstruction persists, the following 3 options may apply:

• It can be dissociated from the package and be adopted at any time by a qualified majority in the Council;
• The Council can keep in on hold until the full package is settled; and
• It may be dissociated and postponed for later, after the adoption of the rest of the package.

Own Resources Decision (ORD)

In case of delays, the previous ORD continues to apply until the new one is voted.  The Commission will not be able to raise funds on financial markets for the Recovery instrument until the new ORD is voted. In the meantime, any new budgets adopted need to respect the old Own Resources ceilings.  In addition, “old” rebates disappear, but “new” rebates - as well as the new plastic contribution - will apply retroactively once the new ORD is in force.

If the obstruction persists, the old ORD continues to be applied, but:

• The Commission would still not be able to borrow from the Recovery instrument;
• The headroom would be too small to back any borrowing & lending instrument;
• Old Own Resources ceilings may force a smaller MFF; and
• Uncertainty over rebates may have knock-on effects on the possible conclusions of other files.  

Recovery instrument (Art. 122 Rec)

In case of a delay the recovery instrument will start with a delay, after the ORD is adopted and ratified.  In the case that the obstruction persists, the Recovery instrument can only become effective if the ORD is unanimously agreed and ratified because the latter would empower the Commission to borrow the recovery funds and increase the necessary headroom. Combined alternatives mentioned in the past days include:

• The enhanced cooperation between willing Member States;
• The empowerment to borrow would be provided directly by the Recovery instrument through Article 122 which would mean that the empowerment to borrow would be provided directly by the Recovery instrument regulation, however, lack of headroom may require alternative financing and alternative repayment; and
• Establishment of intergovernmental mechanisms, out site of the Union framework.

MFF Regulation

In case of a delay, after the 01st of January 2021 the ceiling and other provisions of the year 2020 are extended until the new MFF regulation is in place. In the absence of unanimity on the new MFF Regulation, the extended 2020 ceiling continues to apply. The extended ceiling is sufficiently high to accommodate an extension of old programmes or the launch of new programme. Nevertheless, the ceilings would be constrained by the old Own Resources ceiling.

Sectoral Programmes

Sectoral programmes can, in principle, be concluded at any time, however, in practice, they will wait for the new MFF to be approved.  In the case that the obstruction persists the following options can be applied:

• “Shutdown”: no legal bases to implement most programmes expenditure of the Union Budget;
• New programmes can be launched by qualified majority vote on the basis of extended 2020 MFF ceilings;
• The duration of old programmes may be extended by omnibus regulations (emergency measures) in a qualified majority vote; and
• A mix of options 2 and 3, possibly giving priority to the continuation of some programmes, while others would be adjusted or continued to the overall political deal.

2021 budget

In case of a delay, the 2021 budget can be adopted:

• as a successful outcome of the conciliation procedure or on the basis of a 2nd Draft Budget after the conciliation has failed; or
• on the basis of prospective MFF ceilings, assuming the new MFF 2021-2027 will be in force by the end of the year 2020, and on the basis of new programmes with amounts in reserve until the sectoral basis acts enter into force during 2021. 

If the obstruction persists, there are 2 options:

• Probably based on a 2nd Draft Budget from the Commission, the 2021 budget may be adopted by QMV:
  • within extended 2020 ceilings (if it appears that the new 2021-2027 ceilings will not be in force) and on the basis of either old or new programmes;
  • possibly, subject to a comprehensive amending budget once the new MFF/new programmes are in force.
• The budget may enter into provisional twelfths, but:

• most legal bases are left expiring: new commitments (and corresponding payments) can only be implemented for CAP direct payments, administration, agencies, humanitarian aid and some limited actions;
• the duration of basic acts of old programmes are extended; and
• new programmes are adopted, but it may be difficult to implement provisional twelfths if and where there is no perfect alignment between “old” and “new” budget chapters in the budget nomenclature.

EOC Team