Budget MEPs have adopted a draft resolution warning about the impact of rising recovery borrowing costs on next year’s EU budget, putting flagship EU programmes at risk.
The draft resolution by rapporteur Johan Van Overtveldt (ECR, BE), Chair of the Committee on Budgets, was adopted on Wednesday by 26 votes against 2 and 5 abstentions. Members of the Committee on Budgets are “deeply concerned that, without the necessary action being taken, the increasing borrowing costs for the European Union Recovery Instrument (EURI) are likely to limit severely the EU budget’s ability to finance the Union’s priorities and policies and to respond to emerging needs.”
Interest rates higher than predicted in 2020
The 2021-2027 multiannual financial framework (MFF) programmed €12.9 billion in 2018 prices (€15 billion in current prices) over the seven-year period to cover the borrowing costs associated with EURI. This figure was based on an assumption of interest rates for borrowing gradually increasing from 0.55% in 2021 to 1.15% in 2027, whereas they already now stand at 3%.
Consequences for flagship EU programmes like Erasmus
If no action is taken, programmes such as Erasmus+, EU4Health, the citizenship, equality, rights and values programme, Creative Europe and others are likely to face cuts, while high inflation is reducing the real-term value of the whole EU budget, MEPs say. Extra resources normally available in the margins of the MFF are already exhausted as a result of multiple crises such as Russia’s war of aggression against Ukraine or the COVID-19 pandemic. Without a swift and decisive response, it will be “all but impossible” to finance important new initiatives, such as the proposed European chips act, without cutting essential existing programmes or funds, the text stresses.
Need for urgent reform of EU finances
MEPs call for an “urgent and ambitious MFF revision” with the “necessary architecture and financing to manage EURI repayment costs effectively, while preserving the necessary levels of funding for programmes and policies”, ensuring that the EU can also cope with future needs and respond to crises. Such a revised MFF “must be in place by 1 January 2024”, MEPs underline. In addition, they urge the introduction of new own resources according to the legally binding roadmap, in order “to ensure a reliable and sufficient overall level of additional revenue, including to cover EURI borrowing costs.”
The draft resolution will be submitted to a vote by the full house on 10 May. The Commission is expected to table the draft annual budget 2024 at the end of May and propose a review or revision of the MFF in June.
In 2021, the Commission has started borrowing funds on the financial markets to finance the “NextGenerationEU” recovery instrument. In adopting the MFF, Parliament, the Council and the Commission agreed that expenditure covering the financing costs of the recovery instrument must aim at not reducing EU programmes and funds. And according to Article 311 TFEU, “the Union must provide itself with the means necessary to attain its objectives and carry through its policies.”
