POLITICO’s guide to the EU budget deal

After more than two years of negotiations and a global pandemic, EU leaders have agreed on their spending plans for the next seven years.

The 2021-2027 Multiannual Financial Framework (MFF) will be €1.074 trillion and will be accompanied by a €750 billion EU recovery fund, under the groundbreaking plan that will also see countries jointly borrow on the financial markets for the first time.

But who gets what — and under what conditions? POLITICO has the breakdown.

Crisis recovery 

Most of the coronavirus recovery fund — €312.5 billion in grants and €360 billion in loans — will be spent through a new Recovery and Resilience Facility (RRF) to help countries get their economies through the crisis. The grant portion is linked to national recovery plans, meaning it is tied to economic reforms: Countries will get payouts based on their progress toward certain targets. Under pressure to save euros, leaders discarded the idea of a €26 billion “solvency instrument” that was intended to prop up companies in danger of failing due to the crisis.

Agriculture

The Common Agricultural Policy budget is set at €336.4 billion, comprising €258.6 billion for the first pillar (which mostly funds direct payments to farmers) and €77.9 billion for rural development, which funds green and social schemes. That’s a decrease of some €46 billion from the 2014-2020 CAP budget for the EU27. The new deal also includes €7.5 billion in rural development grants from the EU recovery fund, intended to help farmers meet the bloc’s climate ambitions. That figure was halved during the final stages of negotiations — but perhaps as a gift to soften the blow, leaders agreed to ring-fence close to €5.4 billion in gifts for 15 countries from the CAP rural development budget. France receives the largest share, while Germany, Italy and Spain are the next-biggest beneficiaries.

Cohesion

Cohesion funding — designed to put Europe’s countries and regions on a more equal footing — stands at €330 billion, and there’s also a €47.5 billion top-up under a new ReactEU program that’s part of the recovery fund. Over the past two years, Southern and Eastern countries fought hard to raise the Commission’s original proposal, which called for €330.6 billion in cohesion spending — a 10 percent cut compared with current spending for the EU27.

Climate

Leaders agreed to earmark 30 percent of the full budget package for climate objectives, a win for campaigners. They also agreed to create a new Just Transition Fund to help polluting regions fund a shift to cleaner industries. But that will receive €17.5 billion in total from the final deal, after the proposed allowance from the recovery fund was whittled down considerably. Poland will be able to access only 50 percent of its Just Transition Fund allocation until it commits to implementing the EU’s objective of reaching climate-neutrality by 2050, but saw that as a win compared with earlier language.

Health

Health groups were promised a “game-changer” of a program under the new budget, but — in the midst of a global pandemic — they’re sure to be disappointed. The new health program will receive €1.7 billion. That’s still up on the Commission’s pre-crisis proposal, but a tiny drop compared with agriculture or regional funding. Plans to add close to €8 billion for health from the EU recovery fund were axed in final negotiations. RescEU, a separate program used to stockpile medical equipment as well as other emergency assets, will receive €3 billion in total.

Research and innovation

Horizon Europe will get €80.9 billion in total (€75.9 billion from the MFF plus €5 billion from the recovery fund). That’s €16.2 billion more than the previous budgeting period if you put aside how much went to British researchers, but research and innovation saw a big loss during negotiations after the Commission put forward a major proposal as part of its efforts to shift the budget priorities away from traditional programs.

Digital

The Digital Europe program to fund high-performance computing, artificial intelligence and cybersecurity got just under €6.8 billion — a huge boost from the €183 million allocated to digital under the last budget period. But it wasn’t enough for the European tech industry, which in the past few weeks had pressured for a bigger budget to compete with China and the U.S. The Commission initially suggested spending €8.2 billion.

Infrastructure

Transport infrastructure gets €11.4 billion (plus a dedicated €10 billion from regional funding), including a specified €1.4 billion for railways, a figure which is down from the last budget period. A total €5.2 billion will go to energy infrastructure, €1.8 billion for digital infrastructure and €13.2 billion for the bloc’s space program — all of which are small increases from the previous seven-year budget.

Development and migration

The Neighbourhood, Development and International Cooperation Instrument will be allocated €70.8 billion from the EU budget. The bloc has spent €71.8 billion on neighborhood and development programs during the current budget period. Migration and border management programs, similarly, will get a bigger pot of cash in the new budget, but less than the Commission wanted: The deal sets a budget of €22.7 billion (the Commission asked for €30.8 billion).

Plastics, emissions and digital taxes

The plans lay out a path to add new income streams to the EU budget, but only one is concrete: a levy based on non-recycled plastic waste to be applied as of January 1. Proposals for a carbon border tax and digital tax should come in early 2021 — with the aim of introducing the taxes by 2023 — as well as a future proposal for collecting revenues from the bloc’s carbon Emissions Trading System into the EU’s budget (despite opposition from Poland). That could be extended to cover aviation and maritime. Finally, leaders promised to “work towards” other levies “which may include a Financial Transaction Tax.”

Rule of law

The proposal to link EU funding to the rule of law was one of the most contentious in the negotiations as Hungary and Poland opposed a strong link, and the final agreement watered down earlier language. “A regime of conditionality to protect the budget and Next Generation EU will be introduced,” it stated, with possible sanctions to be adopted by a qualified majority in the Council. “The European Council will revert rapidly to the matter.” But both sides claimed victory — making sure this fight will run on.

Refunds and gifts

The final deal includes annual discounts on the budget contributions — so-called rebates — of five countries: Germany (€3.671 billion per year); the Netherlands (€1.921 billion per year); Sweden (€1.069 billion per year); Austria (€565 million per year); and Denmark (€377 million per year). It also contains a range of customized gifts to different countries, including €200 million each for Belgium and Bulgaria and €1.6 billion for the Czech Republic.

Brexit

The budget includes €5 billion for a special Brexit Adjustment Reserve that will go to countries and industries “that are worst affected,” an addition that Ireland’s Prime Minister Micheál Martin was particularly pleased about.

Eddy Wax, Louise Guillot, Jillian Deutsch and Laura Kayali contributed reporting.

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