24 Sep 2014
EU BUDGETBrussels Daily
EU BUDGET: “(not) enough is (not) enough!
Highlights of EU budget Commissioner Jacek Dominik’s statement at the interinstitutional meeting on the payments situation in the EU budget.
Brussels, 24 September 2014
What is the situation of the EU budget today, in simple terms?
Budget implementation 2014 is record-high: overall, 80% of the available appropriations have already been used, and important programmes and actions are quickly running out of appropriations. We have never seen this before, as early in the year.
Furthermore, only € 175 million are available for transfer to cover payment needs elsewhere. We have fully exhausted the room for redeployment within the 2014 budget.
To make matters worse, the payments ceiling for 2014 is € 9 billion below the implemented budget 2013.
Clearly, we are no more “in business as usual”.
It is therefore essential to mobilise the Contingency Margin for 2014 in full, and to rapidly adopt the draft amending budgets 3 and 4 in full. Let us not forget that the net impact on national treasuries of the 4 amending budgets we have tabled this year amounts to a mere € 100M to be divided between 28 Member States. Let us not forget that draft amending budget 3 originates from events and decisions beyond the control of the Commission: the unforeseen excess backlog for Cohesion policy at the end of 2013, the frontloading of Horizon 2020, Erasmus and COSME and the financial package agreed for Ukraine.
The € 2.1 billion cuts as proposed by the Council in its reading of the 2015 Draft Budget will further worsen the tight situation of payments. For Research (Horizon 2020), the 10% reduction would concretely affect around 600 projects involving around 1.400 SMEs!
But, you will ask me, what are the practical consequences of the current situation of payment shortages on individual programmes? Well, let’s talk about them in detail:
Horizon 2020: The Commission has had to reduce the level of pre-financing for new commitments, from 60% under FP7 to 35% under Horizon 2020. Currently over 70 projects amounting to € 36 million are blocked, and are incurring interests for late payments.
Erasmus+: We expect a disruption in the payment of grants to beneficiaries (mainly students).
Cohesion: Payment delays hit the smallest and most vulnerable beneficiaries (SMEs, NGOs, small local organisations) the hardest – they do not have the financial capacity to “pre-finance” expenditure already incurred for a long time.
Environment: and climate action (LIFE+): 26 invoices to public bodies amounting to € 11 million are suspended, waiting to be reimbursed.
Development Cooperation Instrument (DCI): Unpaid pending invoice amounting to € 14 million due since 7 July.
European Neighbourhood Instrument (ENI) – Ukraine, Georgia and Moldova: Lack of EU support puts the implementation of key reform strategies at risk.
Humanitarian Aid: Africa Projects and the Sahel region, in Haiti and the Horn of Africa are delayed.
You can see why my key message for today is that “business as usual” can no longer be the case.
Enough is enough… or should I say not enough is not enough!
The past practice by which the voted budget, due to Council pressure, is set well below the level proposed by the Commission in the Draft Budget, and well below the real needs for payments is against the principles of sound financial management. From now on we have to avoid this vicious circle of having to repair cuts in the voted budget via painful amending budgets: the two-step procedure is bad for beneficiaries of EU funds as well as for the budgets of the Member states.
The so-called “backlog” amounting to €26 billion at the end of 2013 consists of invoices received in a given year which are not paid by the end of that year. Consequently, the backlog of invoices needs to be paid the following year; the larger the backlog, the larger the share of the following year’s budget needed to cover it.
We will not solve the situation overnight. We need a step-by-step approach: the first step is to have our proposal for the 2015 EU budget adopted as it stands as well as the draft amending budget for 2014. This would stabilise the volume of the backlog. Then in subsequent years we need to keep the same sound approach to budget planning, mainly adopting annual budgets that match the needs and using flexibility to its maximum to gradually decrease the backlog.
We need to simply implement the political deal reached on the MFF as subscribed by all three Institutions. That deal stated that the 2014-2020 period will see reduced payment ceilings BUT this would be compensated by the use of maximum possible budgetary flexibility.
Pushing payments into future years is not a solution: this is not sound management and it would have serious negative consequences for the beneficiaries of EU programmes, such as regions, farmers, researchers, SMEs and NGOs.
Let me summarize the situation as follows: Imagine a big house with 500 Million people in it and the EU budget being the roof: that roof has been leaking for years due to under-financing and the Commission is running from one room to another with buckets to catch the water. We urgently need to address this roof problem, to seal those leaks and to invest in that roof. The last thing Europe needs is for someone to retort: “but where is the problem? You still have spare buckets”!!!