« Reforming the budget, Changing Europe  »

Stefan LehnerDirector, European Commission, Directorate-General for Budget

Office of the Committee for European Integration Warsaw, 8 April 2008

Heads of Representation, Lisbon 12 June 2007

Commission undertakes a review of the EU budget

„In accordance with the conclusions of the European Council, the Commission has been invited to undertake a full, wide-ranging review covering all aspects of EU spending, including the Common Agricultural Policy, and of resources, including the United Kingdom rebate, and to report in 2008/2009.“

(Inter-Institutional Agreement between the European Parliament, the Council and the Commission, 17.5.2006)

Heads of Representation, Lisbon 12 June 2007

Payments ceiling: Own Payments ceiling: Own resources and EU Financial resources and EU Financial

framework framework (in % of Gross national income (GNI); till 2002: GDP)(in % of Gross national income (GNI); till 2002: GDP)

0,90%

0,95%

1,00%

1,05%

1,10%

1,15%

1,20%

1,25%

1,30%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Enlargement -> EU15

(Change from GDP to GNI)

Multiannual financial framework: ceiling for overall payments

Own resources ceiling

Enlargement -> EU25

Enlargement -> EU27

Heads of Representation, Lisbon 12 June 2007

Structure of the EU Structure of the EU financial framework 2007 - 2013financial framework 2007 - 2013

Preservation and management of

natural resources42,9%

The EU as a global partner5,7%

Competitiveness for growth and employment

8,6%

Citizenship, freedom, security

and justice1,3%

Total administrative

expenditure5,8%

Cohesion for growth and employment

35,6%

Total: € 975 billion (in current prices)

Heads of Representation, Lisbon 12 June 2007

EU Budget trends

The profile of EU spending has changed considerably over 25 years. But has it changed enough?

For example: The Common Agricultural Policy absorbed 61% of the budget in 1988. By 2013, the share of CAP spending could almost halve (32%), though CAP will stay a major part of EU spending.

Expenditures structure (1988-2013)

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

Commonagricultural policy

Cohesion policy Other policies

% o

f to

tal

1988

2013

Heads of Representation, Lisbon 12 June 2007

Key objectives of the reform

Analyse longer-term challenges and issues facing the EU

See how European budget can be shaped to serve EU policies better and to meet challenges of the decades

ahead

Seek a new consensus on EU spending priorities, how the budget is managed and how to fund it.

The review will NOT make a proposal for the next financial framework

Heads of Representation, Lisbon 12 June 2007

Preparing for Tomorrow’s Challenges

New policy challenges have emerged:

Globalisation: Europe has to improve its capacity to adjust to structural change: Scientific and technological progress, innovation and mobility are getting more important.

Energy supply, protection of the environment und of the climate : global demand for energy is growing, so is Europe’s import dependency. Europe is a leader in environmental protection, but the mitigation of climate change and of its consequences are main challenges in the future.

Security and safety: E.g. increased demographic and income disparities and the instability of neighbouring regions increase migratory pressures.

Solidarity: The pressure on the European way of life and its economic and social cohesion will increase.

Globalisation has brought home the need for Europe to have an effective presence worldwide if it is to project its interests and values successfully.

Heads of Representation, Lisbon 12 June 2007

EU facing stiff competition

Source: International Monetary Fund, «Finance and Development», June 2006

Asia leads the world in growth

Heads of Representation, Lisbon 12 June 2007

Bruttoausgaben Forschung&Entwicklung 2001 - 2005

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

2001 2002 2003 2004 2005

% B

IP

EU (27 countries)

United States

Japan

Lisbon-target

Challenge:Boosting knowledge and

innovation

The EU is still far below the Lisbon target for research expenditure.

Gross domestic expenditure on R&D 2001 - 2005

Heads of Representation, Lisbon 12 June 2007

Challenge: Facing the consequences of climate

change

Changes in crop yieldsChanges in precipitation

Changes by the end of this century compared to end of last century

Heads of Representation, Lisbon 12 June 2007

Climate changes:

Significant consequence

s for rural and

maritime areas

Challenges for rural and maritime areas

Source: International conference « Climate

changes »

Heads of Representation, Lisbon 12 June 2007

Challenge:Securing a sustainable energy

supply

The EU’s dependency on foreign energy is increasing constantly

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

total oil natural gas solids

2000 2010 2020 2030

EU IMPORT DEPENDENCY (%)EU IMPORT DEPENDENCY (%)

Heads of Representation, Lisbon 12 June 2007

Challenge:Guaranteeing security to EU

citizens

New security threats are more diverse, less visible

and less predictable

Consumer protection

Disease prevention

Food safety

Environmental disasters

Fighting crime

Heads of Representation, Lisbon 12 June 2007

Challenge:Challenge:PromotingPromotingSolidaritySolidarity

& Cohesion& Cohesion

In 2004, the top regions (with 10% of the EU population)

had a GDP per head that was almost 5 times higher than that in the bottom regions (with 10% of the EU

population).

4th Cohesion report, May 2007

Heads of Representation, Lisbon 12 June 2007

Challenge:Engaging an interdependent

worldIn an interdependent world, an effective

presence and strong efforts to provide support are a vital

necessity.

Peace and DemocracyPoverty

Education

Access to water

Heads of Representation, Lisbon 12 June 2007

How to respond to the challenges: Which role for the

EU budget ?Re-applying the

principle of European value added/subsidiarity

Discussing anew the level at which the objectives of the

proposed action can best be achieved (EU, national,

regional, local)

Choosing the appropriate tool(the principle of proportionality)

Coordination Legislation Public spending: National and/or EU

The reform of the EU budget expenditure will emerge from a critical review of the new challenges and the existing obligations, in the

light of the principles of European value added and proportionality

Heads of Representation, Lisbon 12 June 2007

Significant shift in EU budget funding

The EU budget is increasingly based on the GNI contribution, from 11% of the total in 1988 to 74% in 2013.

Revenues structure (1988-2013)

01020304050607080

Traditionalown

resources

VAT-basedown resource

GNI-basedown resource

% o

f to

tal

1988

2013

Heads of Representation, Lisbon 12 June 2007

The current financing system has provided sufficient resources to finance the EU budget

BUT

Member States tend to judge policies primarily in terms of "national returns" and not so much in terms of the added value of policies for EU citizens.

Financing EU policies - principles

Heads of Representation, Lisbon 12 June 2007

Debates on net contributions led to a rise

in budgetary «corrections»

UK correction – 66% of the difference between contributions and its receipts

Lump sum payments to the Netherlands and Sweden

Reduced VAT rates and reduced UK correction payments for the Netherlands, Sweden, Germany, Austria

Retention of 25% of traditional own resources for all Member States collecting them

The financing of the EU budget has become incomprehensible

Heads of Representation, Lisbon 12 June 2007

The challenge of reformingthe financing system

A consensus on spending priorities could facilitate a reform of the EU own resources.

Should alternative sources be envisaged taking in to account the national sovereignty on fiscal policy?

Could a new system better contribute to and support related EU policies?

Should corrections disappear or be generalized ?

The overall composition of the Union's own resources system will be an important

element in the review

Heads of Representation, Lisbon 12 June 2007

The Timetable

12th September 2007

15th April 2008

Autumn 2008

[2008]/2009

Consultation Paper setting out the challenges and issues at stake

Launch of public consultation phase

Deadline for submission of contributions

Political Conference

Commission presents the Review

Heads of Representation, Lisbon 12 June 2007

Consequences of the Review of the Financial Framework ?

The European Council can take decisions on all the subjects covered by the Review, in full respect of the established rights of the European Parliament.

The Review will also be taken into account in the preparatory work on the following Financial Framework (starting in 2014).

Heads of Representation, Lisbon 12 June 2007

The Commission consultation

A Commission website presents the issues and collects contributions:http://ec.europa.eu/budget/reform/index_en.htm

Contributions can be sent until 15 April 2008 to

budget-review@ec.europa.eu

« Reforming the budget, Changing Europe  »

Stefan LehnerDirector, European Commission, Directorate-General for Budget

Office of the Committee for European Integration Warsaw, 8 April 2008