Although it was largely absent from the European election campaign, the negotiations over the next so-called Multiannual Financial Framework (MFF)— the EU’s budget—will take up a prominent place on the European agenda in the coming months. The European Council and the European Parliament have just 18 months to reach an agreement on the next seven-year MFF, and this has to be done in parallel with the finalization of 45 regulations that provide the legal basis for the various EU spending programs.

Agreeing on the EU’s budget has always been difficult, but the current MFF negotiations are particularly tough. The post-2020 budget has to make up for the Brexit gap caused by the United Kingdom’s departure, a financial shortfall estimated at €84-98 billion over seven years. It can do this either by making unpopular cuts to cherished programs (agriculture, cohesion policies, etc.), getting larger contributions from the member states, or both.

On top of that, the EU is confronted with new spending needs in areas such as migration and border control, external security, and digital transformation, which require anything between €91 and €390 billion of additional resources between 2021-2027, according to the commission.

Member States Are Digging In

The outgoing commission led by Jean-Claude Juncker did a good job in trying to “square the circle.” The original MFF proposal, presented in May 2018, offered an intelligent political compromise to member states. Richer countries would agree to moderately increase their contributions to the EU budget to keep EU spending for the remaining 27 member states roughly at the same level (in real terms) after Brexit.

Poorer countries, in exchange, would consent to a certain degree of spending re-allocation, with significant increases in new spending priority areas (an 80 percent increase for security and defense, a 160 percent increase for migration and border control, a 60 percent increase in research, innovation, and digital), and moderate increases or reductions in cohesion and agriculture (+6 percent and -4 percent respectively).

Finally, new sources of revenue, such as a small levy on corporate profits and a share of the proceeds from the EU Emissions Trading System, would be introduced to make the numbers work and partially offset the impact of Brext on member states’ net contributions.

The commission’s balanced proposal, however, has failed to change the dynamics of MFF negotiations in the European Council. After roughly one year of discussions, various net-payer member states made clear their opposition to any increase in net contributions. Meanwhile, the countries that benefit most from agriculture and cohesion funds have built up coalitions to preserve the existing envelopes in these two areas, and a majority of member states continue to reject any reform of the system of EU own resources. There is thus a strong risk of ending with a European Council compromise on an EU budget close to 1 percent of EU GDP, with no increases in new spending areas and agriculture largely preserved from cuts.

One crucial factor is the new European Parliament’s reaction to the council proposal. An absolute majority of elected MEPs must approve the MFF. In a more fragmented parliament, obtaining this majority could be difficult, particularly if the council comes up with a not-so-ambitious proposal.

An Opportunity

This leads us to another, related factor. A particularity of the current MFF negotiations is that they coincide with a change in the EU executive. This is in fact the first time this has happened since the creation of EU multi-annual financial frameworks in 1988—and it offers an opportunity for the new EU commission to try to align EU spending with its political agenda.

The Juncker commission did not get this opportunity. It took office in November 2014, less than a year after the adoption of an EU multi-annual budget covering its entire executive term (2014-2020). As a result, it had very little capacity to influence EU spending choices and had to struggle to finance one of its main flagship priorities, the “Juncker investment plan.”

While the Von der Leyen Commission cannot remake the MFF proposal from scratch, it will have some leverage on MFF negotiations if it allies with the parliament. The commission and MEPs can also work to introduce some modifications to the 45 legal regulations that are the basis of the various EU spending programs. For some of these programs (for instance, the new EU research program Horizon Europe) there is already a partial agreement between the council and the parliament, but as long as the regulation has not been formally adopted, the new parliament is not legally bound on issues agreed by the previous parliament and can always re-open the agreement. In other cases (for instance, the Common Agriculture Policy) neither the parliament nor the council has taken a position, and thus it is easier for the parliament and the new commission to introduce changes to the original proposal.

The question is how much appetite Ursula von der Leyen’s commission will have to modify the MFF proposals tabled by its predecessor. Von der Leyen has taken various positions in her wide-ranging candidature speech to the European Parliament. Some of them have no budgetary implications—for instance, completing the Capital Market Union or relaunching the Dublin asylum rules reform. Others do not imply a major break with the budgetary proposals tabled by the previous commission, like the creation of a Budgetary Instrument for Convergence and Competitiveness for the eurozone.

Testing Times

In some areas, however, von der Leyen has called for budgetary changes that would require amendments to the existing MFF proposals. An example is the promise to triple the Erasmus+ budget, as requested by the parliament (going beyond the Juncker Commission’s proposal to almost double it), or to create a European Child Guarantee to combat child poverty.

Another area in which the new commission’s ambitions may require new or different funding is on climate. Achieving climate neutrality by 2050, a goal endorsed by the von der Leyen, will not be possible without significant additional investments in energy and transport, a major disinvestment in fossil-fuel energy and high-carbon infrastructure, and a serious commitment to support territories and individuals most affected by the transition.

No-one knows yet what will be included in the “sustainable Europe investment plan” announced by von der Leyen, but she has already committed to set up a “Just Transition Fund” to support people and regions most affected by the energy transition, an idea which is cherished by the parliament but not included in the Juncker Commission’s MFF proposal. It is also possible that the new commission backs the parliament’s demand to increase the percentage of EU budget funds dedicated to climate action from 20 to 30 percent (instead of the 25 percent proposed by the Juncker Commission). This would require, in turn, re-adjusting the specific climate engagements set for the different programs and funds.

MFF negotiations may well be the first “litmus test” for Commission President von der Leyen. If she is capable of partnering with the new parliament and delivering on her budgetary promises, she will demonstrate to her critics that she has the necessary skills to head the commission—of which only a small majority of MEPs were convinced back in July.

The post Europe by Numbers: The Von der Leyen Budget appeared first on Berlin Policy Journal - Blog.

In May 2014, the European Parliament in Brussels was the scene of some must-see TV. The European Broadcasting Union, mostly known for organizing the Eurovision song contest, held a televised debate between the five people running to be the next European Commission president.

The parliament’s plenary chamber was turned into a dramatic TV set, complete with changing lighting and suspenseful music. The Brussels bubble was enthralled. But even though the debate aired on TV stations across Europe, the ratings were dismal. This led people to ask the fabled “tree in the forest” question—if a presidential election takes place, but nobody is there to hear it, does it make a sound?

The truth is that even among the EU politics wonks in the audience, there was skepticism about whether one of these people would actually become the next EU Commission president. That’s because the parliament’s political groups were essentially holding this contest without getting permission from the EU’s national leaders, who are the ones who appoint the head of the commission.

But in the end, one of those people did end up becoming president: Jean-Claude Juncker, the candidate of Angela Merkel’s center-right European People’s Party (EPP). This improbable outcome was the result of shrewd political manipulation by Juncker’s right-hand man, some might say puppet master, Martin Selmayr.

Five years on, here we go again. The contest is shaping up, and the parliament has sworn it will not confirm any candidate who was not put forward by one of the European parties. But many are skeptical that one of these so-called Spitzenkandidaten (“lead candidate”) will once again become president. Even though they were proved wrong last time, this time around the nay-sayers have more cause for their incredulity.

Spitzenkandidat’s Birth

The whole exercise has less to do with European democracy than it does with EU institutional power games.

The idea was first devised 15 years ago, by the people drafting the European Constitution. That charter eventually became the Lisbon Treaty, passed in 2009, and a nebulous phrase regarding the selection of Commission president survived: the 28 national leaders of the EU will select the Commission president by “taking into account” the result of the European elections.

The European Parliament insists this means that the leaders must select the candidate of the political group that won the most seats in the election, or the one that can get a majority vote in the parliament. Last time around, it was the EPP that received the most votes and so, under a procedure similar to national parliamentary democracies, its candidate, Juncker, got first crack at trying to form a majority. That he did, by getting the votes of MEPs from the other two main parties, the center-left Party of European Socialists (PES) and Alliance of Liberals and Democrats (ALDE).

The national EU leaders didn’t accept the legitimacy of what became known as the spitzenkandidat system, from the German word for top or lead candidate. But they never did anything early on to stop the process from going ahead, much to the annoyance of then-British Prime Minister David Cameron, who warned the leaders the process was going to become an unstoppable freight train unless they clearly rejected it early in 2014.

Cameron was right. By the time the election was over, Selmayr was able to convince his friends in the German media to launch a full-scale pressure campaign on Merkel to accept Juncker as the democratically-elected president of Europe. Never mind the fact that most voters had no idea the contest was even happening, and even political elites had laughed it off as a bizarre experiment. Merkel felt the pressure, and in turn strong-armed other EU leaders to accept the result. Only Cameron and Hungarian leader Viktor Orbán voted against confirming Juncker.

In February 2018, the EU’s national leaders again said they do not recognize the legitimacy of the spitzenkandidat system. Lithuanian President Dalia Grybauskaite, always good for a cryptic tweet, warned “don’t count your spitzens before they’re hatched”.

Lackluster Candidates

The parties have again chosen their candidates now. In 2014 they included two former prime ministers (Luxembourg’s Juncker and Belgium’s Guy Verhofstadt for the Liberals), one current prime minister (Greece’s Alexis Tsipras for far-left GUE), and a parliament president (Martin Schulz for the PES, who later went on to lead the SPD’s failed election campaign to be chancellor of Germany).

This time is quite different. The EPP was the only party to hold a primary campaign to select its nominee, and in what many considered a “backroom deal,” they rejected the dynamic former Finnish Prime minister Alex Stubb in favour of the mild-mannered EPP group leader Manfred Weber, largely unknown outside the Brussels bubble (and not very known within it either).

PES failed to hold a primary contest and anointed the only man interested in the job, the current Commission Vice President Frans Timmermans, who is relatively well-known on the European stage for taking on Hungary and Poland for their rule of law violations.

The Liberal ALDE group has so far refused to put forward any candidate at all. That’s because French President Emmanuel Macron has come out strongly against the spitzenkandidat system, and the Liberals are hoping to woo him into placing his En Marche party within their group. They are waiting to see what the lay of the land is in February before deciding whether to put forward a candidate.

The euroskeptic European Conservatives and Reformists (ECR) group, formed by Cameron in 2009 by uniting his Conservatives with the strongly nationalist Polish PiS party, refused to participate in the process in 2014 because they viewed it as a further attempt at forming an EU super-state. But with the Brits on the way out and the future of the group unclear, the Poles have chosen to put forward Czech MEP Jan Zahradil as the ECR’s candidate. The Greens have put forward two candidates, Dutch MEP Bas Eickhout and German MEP Ska Keller. GUE, the far-left political group that put forward Tsipras last time, has not yet decided whether to participate.

Watch Out for Barnier

Out of all the candidates, the only one with significant political stature is Timmermans, a prominent politician in the Netherlands who has some clout on the Europeans stage. But given the social democrats’ waning political fortunes, it is doubtful that a PES candidate could become Commission president. Right now it looks like the PES could come third or even fourth in May’s election. Given that there are currently only three center-left governments in Europe (in Spain, Portugal, and Slovakia, with Sweden’s government set to fall any moment), it would be bizarre for the EU Commission president to be from the center-left.

Indeed, the betting money in Brussels right now is on a man who is not one of the candidates—the EU’s chief Brexit negotiator Michel Barnier. He is center-right but was unable to enter the EPP nomination contest because his current job is not yet over. But don’t be surprised if he is put forward by EU leaders following the European election, if they choose to disregard the spitzenkandidat process. The big question will then be whether the European Parliament will carry through on its threat to reject any president who was not a candidate.

The underwhelming nature of the candidates so far could mean that ALDE has everything to play for when the liberals make their decision on a candidate in February. And much will depend on Macron’s political fortunes.

When he first came out against the process in early 2018, Macron’s voice carried some weight. His En Marche party, having just won a majority in the French parliament, was expected to win many seats in the European Parliament, too. But now, with the yellow vest movements having damaged his political power both domestically and internationally, Macron may not have the political capital to spend on a bareknuckle fight against the winning spitzenkandidat.

A Damp Squib in 2019

Macron’s big issue with the system is that he views it as an EPP-stitch up. The center-right was certain to win the largest number of seats in 2014, and the center-right designers of the system knew that. They are also almost certain to win the most seats this time, although by a less crushing margin than in 2014.

Macron has proposed that the European elections be fought on ideological grounds, with the centrist pro-EU parties rallying around a single platform against the anti-EU populists—to give European voters a clear choice. It is still possible that the ALDE candidate could emerge as such a de-facto pro-EU candidate, either before or after the election. One name that has been bandied about as someone who could deliver that message convincingly and engagingly to the public is Margrethe Vestager, the Danish EU Commissioner for competition.

Because it is not enshrined in law, the spitzenkandidat process is only as strong as the political groups make it. On the current path, the process is very likely to be a damp squib in 2019. Without Selmayr’s aggressive support, the second time around could also be the last for this democratic experiment.

That is, unless ALDE delivers a surprise in February.

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