Donor budget basics: The EU's MFF

As the EU nears the midpoint of its 2021-2027 budgetary cycle, negotiations for the midterm reallocations will concluded by the end of 2024, and 2028-2034 budget negotiations are already starting. Understanding the black box of the EU’s Multiannual Financial Framework is an essential tool for EU advocates and advocates in EU Member States. The MFF is the roadmap for the bloc’s spending, both in terms of sectoral priorities and overall volumes.

As the EU budget is composed of contributions from Member States, national trends influence MFF negotiations.

This Donor Tracker Insight aims to help advocates gain a clearer understanding of the processes of creating the MFF, the level of the EU institutions, the dynamics between the organization and its constituent governments, and the unique opportunities for advocacy that the MFF structure provides.

What is the MFF?

The MFF is the main collective spending plan for the EU, setting limits for the volume of finance in key areas, referred to as payments, and commitments, or the value of allowable contracts or grants. The MFF prioritizes stability in spending plans to avoid shocks to the 27 contributing member states. As part of this, it includes so-called “special instruments” to respond to unforeseen events, such as the Flexibility Instrument and the Solidarity and Emergency Aid Reserve (SEAR).

The Flexibility Instrument is used to finance actions that cannot get funding through other sources of the budget without exceeding the expenditure ceiling, and has for instance been used to respond to migration challenges. The SEAR can be used to tackle emergency situations due to major natural disasters or public health crises in Member States and accession countries. Moreover, it can also help non - EUcountries with emerging needs stemming from conflicts, the global refugee crisis or worsening natural disasters due to climate change. The volume reserved for special instruments is typically decided during the MFF creation process, but funds may be allocated throughout the budget cycle, or not at all.

The 2021-2027 MFF

Under the EU’s 2021-2027 MFF, which totals EUR1.1 trillion (US$1.2 trillion) funding is divided into six major headings, or thematic policy areas:

• Single Market, Innovation and Digital;
• Cohesion, Resilience, and Values;
• Natural Resources and Environment;
• Migration and Border Management;
• Security and Defence;
• Neighbourhood and the World; and
• European Public Administration.

The EU’s 2021-2027 budget is augmented by the NextGenerationEU instrument, which comprises EUR806.9 billion (US$861.7 billion), mainly for COVID-19 response. Initially proposed in 2018 as a means to support Member States in becoming more digital, sustainable, and resilient to a variety of shocks, the instrument was modified after a second proposal in May 2020 to respond to the effects of the COVID-19 pandemic. Two months later, following four days of negotiations between the Heads of State and Government of the Member States, the NextGenEU package was agreed upon. NGEU combines grants with loan packages for each Member State, which can be used at the Member State’s discretion, with approval from the Commission. Unused funds are funneled into the RepowerEU instrument, which aims to decrease the EU’s dependence on Russian energy.

The majority of EU ODA is allocated under heading six of the MFF, Neighbourhood and the World, through the Global Europe: Neighbourhood, Development and International Cooperation Instrument, 93% of which should be reportable as ODA, and Humanitarian Aid, which total EUR70.8 billion (US$83.6 billion) and EUR10.3 billion (US$12.2 billion) respectively for the 2021-2027 period.

How was the 2021 MFF different from the 2014 MFF?

In addition to restructuring budget lines and modest increases to ODA, the 2021-2027 MFF is notable for its priorities. While the temporary NextGenerationEU instrument focuses primarily on global health and COVID-19 response, the MFF as a whole includes the following goals:

• Allocating 30% of EU spending to fighting climate change, with specific focus on biodiversity conservation and gender equality; and
• Allocating 10% of 2026 and 2027 funding specifically to biodiversity conservation.

The 2021-2027 MFF also introduced new sources of revenue for the EU budget, including a contribution from Member States based on their amount of non-recycled plastic waste.

What is the MFF timeline?

What stakeholders shape the MFF?

Altogether, there are four main groupings of stakeholders engaged in the MFF process:

The European Commission

• The Commission proposes the priorities of the MFF which are translated into sectoral headings in the MFF package;
• The Commission is also responsible for drafting the MFF package, which includes the MFF framework regulation, a document that sets spending limits for each budget line, and the own resources decision, which outlines sources of revenue for the MFF;
• Key actors for ODA within the Commission include the Commissioners for International Partnerships, Environment, Climate Action, and Civil Protection and Humanitarian Aid, Budget and Administration, and Neighborhood and Enlargement; and
• Additionally, the Directorates General, ministries or departments answering to specific Commissioners, contribute to the Commission's work on the MFF.

The European Council

• The European Council, comprising the 27 Heads of State and/or Government of the Member States, reviews the Commission’s proposal and develops conclusions on it. These conclusions focus on defining the political priorities of the EU for the next seven years, while also taking into account the needs of specific Member States; and
• The European Council's agency in the MFF process has continued to increase over the 2014 and 2021 MFF processes. Heads of State and Government on the European Council in past cycles have been seen to exert strong influence through blocking votes, preparing conclusions on policy outside their purview, and evaluating other Member States' implementation of the MFF.

The Council of the EU

• After the Commission’s proposal, the Council of the EU, a rotating body of 27 representatives—one from each Member State—determines specific allocations for sectoral funding based on the negotiations of each Member State’s representatives;
• The Council’s composition shifts depending on the topic being debated, a characteristic referred to as its configuration. In particular, members of the ENV, or environmental, and FAC, or Foreign Affairs are central to determining ODA allocations;
• The General Affairs Council configuration also plays a key role in its development of the Negotiation Box, a document which summarizes potentially contentious, political, or high-priority topics for debate by the European Council; and
• Due to the overlap between Council and Member State personnel, in that the members of the European Council and the ministers comprising the sectoral Council configurations are all Member State personnel, Member States also push for their own agendas in the Council. Thus, while explicit pressure from the Member States may not be apparent, there are multiple opportunities for them to pursue specific policy outcomes, such as the Netherlands’ push for decreased spending in the 2014-2020 MFF.

The European Parliament

• Less central to the MFF process, the Parliament and Member States still exert modest influence on the EU budget. While not actively involved in the setting of priorities or budget lines, the European Parliament must still approve the MFF with the Council of the EU through the Consent Procdure, and may engage the Council through rejections or approvals of budget lines, which resulted in an increase to the Global Europe Heading of the 2021-2027 MFF.

How can advocates influence the MFF?

Given both the magnitude of ODA allocations decided in the MFF process, and the infrequency of negotiations, advocates have limited windows of opportunity for direct access to ODA priorities and volumes. The MFF timeline provides several opportunities for advocacy throughout the development of the Commission’s proposal for the next budget period. At this point, targeted advocacy on priority issues at the Member State level to relevant policymakers is most effective, as members of the Council are debating priorities and spending limits. The Commission has also been known to request reports on key issues in the lead up to its proposal, such as those on climate change and gender mainstreaming, which foreshadowed the bloc’s increased prioritization of these sectors.

Due to the long-term nature of the MFF, the budgeting process also includes a midterm review, during which the Commission may propose adjustments to the budget. While the midterm review process is consistent across MFFs, subsequent revisions are less so. The 2014 MFF was the first to include specific language for revisions vis-à-vis the review process. In June 2023, the Commission’s proposal included increased for support to Ukraine, migration, and international development worth EUR66 billion (US$71 billion).

In November 2023, the Council of the EU presented a draft revision to the Commission's proposal, showing Member States are calling for the proposal to be cut by at least 20%. Until the end of 2024, advocacy targeting Member States and the European Parliament as they debate the Commission’s proposal could prove critical to development funding levels. This process also coincides with the review of the EU’s main ODA line, the NDICI, which could offer additional opportunities for advocacy.

As the midterm review process nears its conclusion, advocates should also look ahead to the beginning of negotiations for the 2028-2034 MFF, which will likely begin in late 2025 to early 2026. While Member State priorities vary, national trends of decreasing or stalling ODA budgets in the years since the COVID-19 pandemic could indicate a shrunken development instrument in the upcoming budget.

Similarly, uncertainty due to the war in Ukraine, continued global food insecurity, and increasing representation of far-right parties in Member State governments could drastically impact states’ willingness to fund the EU’s development priorities, given these parties' frequently Euroskeptic and fiscally conservative leanings.