The 2021 EU Annual Budget Explained

Habemus draft annual budget for 2021 proposed by President von der Leyen’s Commission, and a statement of estimates.

Habemus draft annual budget for 2021 proposed by President von der Leyen’s Commission, and a statement of estimates.

As everything else in 2020, this draft budget reflects the unusual time it was prepared in. To recap from where we left it last time with the budget talks - back in May - the Commission proposed a reinforced MFF (Multiannual Financial Framework, for those new to the jargon), plus a Recovery Instrument - the Next Generation EU. Let’s just say the budget needed a more adapted outfit to the current weather. Next Generation EU will help the EU budget save the day in times of urgent challenges. In more serious words, Next Generation EU is meant to be additional revenue to the relevant budget lines[1], to support crisis response and recovery measures and reinforce programmes key to such recovery, like Horizon Europe for instance. So, this budget proposal sets appropriations of EUR 166,7 billion in commitments, and EUR 163,5 billion in payments.[2]

Of course, this will go in parallel with Europe’s long-standing priorities highlighted by Commission von der Leyen: the European Green Deal, a Europe fit for the digital age, an economy that works for all, promoting our European way of life, a stronger Europe in the world and a new push for democracy.

Here is what you need to know for next year.

Coronavirus – response and recovery. It is already obvious we cannot avoid the elephant in the room, so how will this work? To keep it simple, the recovery package is built on 3 pillars: tools to support the Member States’ efforts to recover from the crisis; measures to boost private investment and to support companies; and reinforcing the EU programmes that we know, to find solutions and strengthen the single market. Firstly, Member States will get support for recovery and resilience via grants and loans, under Next Generation EU – which is estimated at EUR 131,6 billion for 2021. This money will support recovery investments for national healthcare systems resilience and sectors like tourism and culture, SMEs, youth employment, education and combatting child poverty. The second pillar is about private investment to help companies emerge from the crisis – to this end, EUR 10 billion are programmed in 2021 for the InvestEU Fund.

The green transition – the European Green Deal. We all heard about the famous European Green Deal and its ambition to make Europe the first climate neutral continent by 2050. How is this supposed to work starting 2021? Well, the European Green Deal Investment Plan will unlock EUR 1 trillion over the next decade to help finance the climate transition. The InvestEU guarantee will support this, and a considerable increase proposed for the LIFE programme. The Commission aims to allocate at least 25% of the budget to the climate policy during 2021-2027. Under Next Generation EU, the European Agricultural Fund for Rural Development (EAFRD) will help farmers and rural areas to deliver the green transition. The Just Transition Fund will get EUR 1.5 billion in 2021, which will be increased by the Next Generation EU with EUR 8 billion.

The digital transition and an economy that works for all. Most of the support for digital programmes comes via a new Digital Europe programme together with the Connecting Europe Facility and InvestEU, in a cluster targeting technological infrastructure and networks. Here is where Horizon Europe will also be supported by the Next Generation EU in response to the current pandemic. EUR 12 billion are planned here from the 2021 budget and EUR 5 billion will be dedicated to research in health, resilience, and the green and digital transitions. Empowering people through education and skills will be supported via the European Social Fund+ together with Erasmus+ and the European Solidarity Corps. Although the Erasmus+ and European Solidarity Corps together were programmed to double in size this next MFF, there is no increase in 2021, compared to 2020.

Increased resilience, security, and defence focus, reinforced migration and border management, and a stronger Europe in the world. This part here is to strengthen Europe’s ability to overcome future crises: resilience of EU health care systems and extra support for partner countries, in particular the Western Balkans, the Neighborhood and Africa. The Commission also proposes two other budget headings for resilience, security, and defence, and to migration and border management. We apparently learned our lessons: funding for health must be given higher priority in the future, so the new EU4Health programme will give support for the upcoming health challenges. RescEU will also be boosted by the Next Generation EU in logistical infrastructure needed to respond to different types of emergency.

What’s next? The Council agreed on the 2021 draft EU budget with EUR 162.9 billion in commitments and EUR 164.8 billion in payments. Now the Council needs to submit its position to the Parliament on October 1st. The Parliament is expected to adopt amendments to the Council’s position at the beginning of November.

Until we meet again in the blog space, come join us in our courses for some back to school vibes and everything you wished you knew about EU funding.


[1] Single Market, Innovation and Digital - Cohesion and Values - Natural Resources and Environment - Resilience, Security and Defence - Neighbourhood and the World

[2] What are commitments and payments? Commitments are the total volume of promises for future payments that can be made in a given year. Commitments must then be honoured with payments, either in the same year or over the following years. Payments are the actual money paid in a given year from the EU budget to cover commitments of current and previous years.

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