 Felly, rydyn ni'n gweithio i'r ysgolwyddiadau i'r IA, ar y cyfnodol yn ysgolwyddiadau i'r IA, ac yn ysgolwyddiadau i'r IA'r Gerdjian Kopman, er think, a the last time in 2013 when Ireland at the presidency, I was in the Irish government at the time and I know the very intensive round of negotiations in the role of the presidency in trying to strike a deal. I think it was Tony Blair who once said that coming to an agreement on the EU budget or the MMM as we know it is a bit like Europe coming close to World War three such as the very, very difficult task in hand but it is especially given the huge challenges many years we are now a net contributor and that will of course change somewhat the political discussion and narrative in the coming years but it's of course it's still a very important instrument for agriculture in this country and for other areas poorer parts of the country would still need investment from the European Union so that debate will also be interesting so it's great pleasure to welcome you I should remind people that the speech is on the record but the questions and discussions thereafter are very much on the principle of channel house rules and it's my great pleasure to ask Gert Jan now to address us at the IEA and then we'll have questions thereafter. Thank you very much. It's a real pleasure to be here and to be back here I should actually say because I remember talking in this wonderful hall about the fallout of the financial crisis in much darker days than today looking at the state of the banking Union so what I thought I should do is to run you through a little presentation of the proposals which the Commission has made on the multi-annual financial framework to talk a little bit about the underlying ideas and the process and speculate a little bit about where we are likely to land I'll try to speak for about 25 minutes so that we have plenty of time for for discussion afterwards already begin with the the introduction now first point to make the multi-annual financial framework is effectively a seven-year framework for a budget which is an investment budget and it's a small budget compared to national budgets as you know national budgets are in the order of 40% between 35 and 50% of GNI the EU's budget is just slightly above 1% of GNI so it's a much smaller animal but it focuses on on on things that can only be done at the European level so it has European value added and it helps to achieve objectives that member states acting on their own cannot achieve so within that seven-year framework once it's set once world war three is over then we have smaller skirmishes on the annual budget but this annual budget takes place within the frameworks of the within the framework of the MFF now I think that this MFF proposal which was adopted in May and June of last year is radically different from from what we have today in in several respects and I'm not just talking about the fact that the UK is exiting and the UK is a significant net contributor as you know but it's also a budget that focuses on challenges that are new and which we have seen over the past years in the EU require a response that is financed at the European level and I'll come back to that when I walk you through some of the proposals it also contains a new mechanism to protect the EU budget from generalized deficiencies in the rule of law as you know about 80% of the budget is executed by member states or with member states and therefore they're responsible for making sure that in case there are difficulties funds can be returned if the rule of law doesn't function properly then this guarantee no longer exists and therefore we need to have remedies in place to address this so that's a a second important feature what I would say is also strongly emphasised in this budget is what I what we call with a horrible word performance in other words we want to be sure that the funds actually deliver that the programs deliver the objectives and we measure that and that we adjust there's been simplification a lot of red tape has been removed for example in the area of agriculture where there's been great simplification and we've also tried to make the budget more flexible to make sure that over a long period seven years we can reallocate resources to areas where where new priorities emerge seven years is very long by national standards as you know so we need to have adequate flexibility in the budget now I'm going to talk a little bit about the numbers because I think it's important as I said before the budget is not big and the commission's proposal as you can see on the right hand of this slide is for a budget of 1.11% 1.114% of GNI including the European Development Fund which at the moment is an off-budget intergovernmental instrument that is worth about 0.03% of GNI and that compares if you look at expenditure in the 27 member states so excluding the UK under the present MFF compares with 1.16% so 1.13% in the budget and 0.03% for the EDF 1.16% so there's actually a cut in the budget as a proportion of GNI reflecting the fact that the commission has decided to deal with the consequences of Brexit by effectively cutting the budget to the tune of 50% of these consequences and asking for higher contributions from member state for the remainder and I would also say 1.11% if you go back a little bit in time to the early 90s and even the early 2000s you will see that it's actually a budget that remains relatively modest compared to what we have seen in Europe before now I've talked about new priorities and if you bear with me let me maybe talk you through this graph which I think is very important which represents the composition of the budget at a very high level of aggregation so the top line here represents the common agricultural policies and fisheries policy and what you see here are the shares of this policy in the total budget similarly the second line the green line represents cohesion including the social funds the third line represents all the other programs which you see listed on the right hand side and which are essentially addressing future priorities new priorities but also policies that are aimed at generating higher productivity which in an age in Europe we definitely need the bottom line represents the administrative costs which stand at 6.4% of GNI important to note sometimes people think that all of this money goes to administration but actually it's quite small and what you see here over time is that these shares have evolved significantly over the past three decades the share of agriculture has been on a on a downward trend from above 60% and that's essentially because normally these budgets have been frozen at nominal level and inflation has been eating away at the support cohesion increased significantly to reflect enlargements and then it has been flat and now it is on a slightly a decreasing trend and as you see what sets this budget apart from all the other budgets is that the future oriented policy so to speak would for the first time represent the lion's share of the budget so in that sense there is a significant shift it's not a huge budget but it is a budget that has significantly been adjusted to express it a little bit differently we can talk about the total amount which which stands at approximately 1280 billion euros over the seven years and it is broken down in headings which are like budget chapters if you will so the single market innovation innovation digital sectors represent just less than 200 billion euros and that comprises not just the enormously successful horizon program but also a new program on space where Europe is not just a standard setter but is actually responsible for putting the basic infrastructure up that ensures that we have autonomy and we're not completely reliant on the US or the Russians second heading cohesion and values of course comprises the structural investment funds and is worth about 440 billion euros the third heading comprises the cap including the fisheries policy but also the small life program and is worth about 380 billion euros security and defense very new area very small area also in budget returns 28 billion euros a radically new external instrument called endici I'm sorry for this horrible abbreviation but it stands for an instrument that integrates both the edf and our neighborhood policy which would be worth about 123 billion euros and then as I said there is a European public administration at about 85 billion euros so that's the breakdown now I'll walk you through some of the more significant changes which you saw reflected at a high level of aggregation a previous slide to see how these different policies have evolved and what you see here is that the commission has chosen to really prioritize research innovation and digital and the increase here is about 60 percent our youth programs mostly irasbus but also the volunteer the volunteering corps solidarity corps have been increased by about 120 percent climate and environment by 70 percent migration by 160 percent from a very low basis obviously are these are percentage increases security by 80 percent and our external action by about 30 percent so this represents about 109 billion euros of increases in areas where over the past years we have seen that we've been struggling in every annual budget discussion to find the means to deal with the fallout of the turkey crisis for example where we've had to set up very innovative to use a polite word structure such as a trust fund partly financed by the member states partly financed by the budget repro programming the whole budget trying to cut areas that were offering possibilities to do so in order to to find something and we've we've found it very difficult in reality to to to achieve this this is not a way to deal with geo political challenges we need to be able to address these in a much more robust manner and that's why you see these increases in these areas another feature that is important is that the commission sees 25 percent of this budget going to measures that have a demonstrably positive impact on the fight against climate change and because the budget is a bit bigger and at the moment we're aiming at 20 percent that represents a significant increase of about 100 billion euros going to the fight against climate change and this is real conditionality this is not just greenwashing so you know there this will have to be measured and monitored on an annual basis and discussed with the budgetary authority parliament and council as we move forward now i want to spend a little bit of time on some of the priority areas because i think it will give you a flavor of why these increases are so important and uh the first is the horizon uh uh euro program which i as i've said this this heading increases by about 60 percent and we think it is absolutely fundamental because ultimately with demography demography flat and aging becoming a real phenomenon going forward yeah we will simply not be able to sustain the european way of life if we do not have higher productivity growth in europe and this means that we will need to ensure uh that research and development and innovation are boosted uh this is being achieved through a program that actually is vastly successful and i don't want to sound arrogant but the evaluations independent evaluations done of the horizon program are really very interesting uh food for thought because they show that if we design programs that really emphasize excellence that focus on getting the best minds together across the 28 member states and providing support for the best ideas selected not by us the bureaucrats but by the researchers themselves we can have very meaningful impacts one concrete instance the european research council has been an unmitigated success we were losing in the international race for talent and for scientific excellence uh our first position which you know we've had for a long time on account of the fact that you know europe is where science was invented um so we're losing it to the to the us but the european research council because it was so much focused on excellence giving small grants to scientific uh excellence uh so to to scientists who who produce new ideas published in uh refereed journals a class refereed journals uh these funds have succeeded in regaining this first position and with that we've seen very interesting developments we we don't want to talk about too much maybe in some in some quarters but which we should be proud of we see researchers from the us and from china actually working in european universities funded by the european research uh council so this actually works it delivers tangible evidence of scientific excellence so that's one important part the other important part is that we are addressing through um the european innovation council um the next big step which is to ensure that this research which is excellent as i've just said actually translates better into uh innovation something europe is not so good at as we know now a research program public subsidies are only a small part of the puzzle there um deep capital markets venture capital uh a single market uh for uh uh our banking union is very very important but but funds help uh if if we don't have venture capital to the tune of what is available in the us then maybe we need to ensure that there is a little bit of seed money available from public coffers so the european innovation council is actually to put in very simple terms aiming at replicating the success of the european research council and research in the area of of of innovation so these um increases in the budget are backed up by very solid evidence of european value added these are things which arguably member states cannot achieve to a similar level of excellence by acting alone if you organize competition amongst 27 member states you're likely to get better ideas coming out than if you organize 27 competitions and what is notable of course in this respect is that the distribution of these funds in terms of where they go doesn't follow just a retour logic doesn't follow the logic of you know everyone gets more or less what he or she pays in no it is very skewed um and that of course is triggering a political debate of its own and we have to ensure that countries that are lagging behind a lot notably the eastern europe catch up but that cannot be done at the expense of the principle of excellence that requires funding in their basic research infrastructure for which the cohesion funds are necessary so this is a very important one now i will say a word about another important evolution that has just led to a result which is a budget for the euro area at least i should be a bit more modest an instrument for convergence and competitiveness for the euro area that will be introduced in the budget as a tool aimed at effectively fostering greater convergence in economic structures in the euro area by financing on concessionary terms and against strong conditionality investments and reforms that will make the economic infrastructure of euro area member states more resilient and more robust when faced with shocks this is not a fully fledged euro area budget it is a small instrument this is not a stabilization tool that allows to balance out economic shock so i'm not pretending it's more than it is but it is a very important first step because it's the first time that the euro area such is equipped with a budgetary tool that is integrated in the EU budget and that provides co-financing for such reforms on the basis of guidance set by the euro area by the euro group therefore so the principle here is is super important and ultimately it goes back to the very fundamental issue of ensuring that the euro area can function effectively with a degree of economic governance underpinning it as well not just monetary integration so this has been decided in principle at the european council last month and now it will need to be finalized as part of the mff going forward i've already talked a little bit about the rule of law which aims at sound financial management at ensuring that the budget is protected i won't go into too much detail there's a lot of detail on the slide slides will be available for you but in effect what it means is that member states who after having been invited to rectify deficiencies are not doing this will see funds being suspended and ultimately withdrawn this is a very important proposal for the reason i've mentioned and it is making a good progress in the negotiations in the council now i also think we should say a word about the revenue side of the budget i've talked a bit about the expenditure side of the budget the revenue side of the budget is important it largely consists of contributions on the basis of a gni key but they're also traditional on resources customs duties and there's a contribution based on on vat commission has proposed to extend this um also by bringing in some fresh revenues uh i will not say too much about the ccc tv the common consolidated corporate tax base because it has pretty much been discarded in the negotiations but there's still a debate about the revenues from emission trading which are likely are set to increase over time um where there is still an ongoing debate there's a contribution from member states based on the percentage of non recycled plastics this is an environmental levy if you will which which seems to have gained a broad support and then there's an interest in new own resources and this is understandable because you will you will see that national contributions obviously will have to go up we have proposed some savings on the other hand there will also be a higher share of member states contributions required given that the brexit gap is is what it is now we believe that rebates actually are to be phased out because the logic of the net contributor thinking in a budget that is becoming modernized is is increasingly more difficult to sustain but equally we cannot have member states subject to enormous shock so this has to be done gradually and finally the own resources ceiling this is a little bit technical which is the maximum amount that can be drawn from the budget is proposed to increase to 1.29 percent of gini i will not go into too much detail but this is important for a lot of the lending operations which the union engages in for example under the eunger plan what is the state of play of the negotiations well the parliament clearly feels that the commission has been too modest and has asked for the budget to be increased to 1.3 percent of gini which roughly speaking means another 200 billion euros this has not met with great enthusiasm in the in the council but the logic the parliament followed was to say just put cap and cohesion back to where it was in the previous in the current mff and reinforce all the other programs significantly more than you have done and obviously you also need the own resources to be part of the package the european council in june of this year decided that it would revert to this issue in depth in october with a view to reaching an agreement before the end of the year and that is actually an important step in the negotiation process where up until now the european council has not taken such a strong view i've talked a lot about the budgetary framework but obviously the budgetary framework only works if the underlying programs are actually adopted these are the workhorses of the budget and they were all proposed alongside the commission's budgetary proposals in may of last year may june of last year and they've made good progress but there's still a lot of work still to be done so in red you will see the area where the least progress has been achieved which unfortunately is the common agricultural policy in green you see the programs where a partial agreement has been reached and in yellow you see the many proposals where effectively the council on the one hand and the parliament on the other hand have advanced but have not yet engaged in trilogues with a view to reaching an agreement and those are the key programs you see listed in the right hand in the bottom right hand corner so still a lot of work to be able to actually spend the money and against that background it might be worth just looking at the amount of time that is needed between reaching an agreement in the european council in the budgetary framework and actually being able to spend the money under the programs and ensuring that the own resources are available here we have mapped i i'm not sure you can actually read this in detail but we've mapped what happened last time round where in February 2013 an agreement was reached in the european council that's the top line and then obviously there was a negotiation with the european parliament who had to give who has to give consent which was reached effectively only in june leading to a formal consent in november so so that took another essentially eight months and then you know the council had to adopt the multi annual financial framework regulation the sexual proposals the ones you just saw saw in the in the previous slide were also not financed at the time so negotiations continued right until april 2014 so four months into the existing the current mff and the own resources decision was only adopted in may of that year so what we're saying here is that an agreement in december of this year is actually already on the very late side and we have a collective interest to ensure that this budget is then effectively agreed at the level of the european council because otherwise we will simply not be able to start in 2021 and with all the geopolitical challenges the challenge of brexit this would not be a good outcome as you see here very practically very graphically this delay in 2014 led to a collapse in commitments in 2014 and and that is precisely what we we do not do not want to replicate this year round so what is the timeline as we see it today we start from the european council of june where the euro area budget instrument in terms of the big decisions was was agreed we have the first hond de vu in october of this year and we then hope that the european council in november and december of this year as per their commitment would seek an agreement on the package we would then have negotiations between the council and the ep until ep consent and then the mff regulation the spending programs and obviously the annual budget 2021 which is still necessary to be able to spend money in 2021 would be adopted in the course of next year so this simply illustrates the different steps that need to be taken and illustrates also how ambitious this line is it's clear that with brexit playing in the background the european council will be busy but it's also clear that equipping ourselves with a budgetary framework is actually a crucial part of the response to brexit so that we are capable of delivering the policies that are needed to deal with the fallout of whatever form of brexit will be faced with naturally as we know also in light of the decisions taken yesterday the appointments for the next institutional cycle play out this autumn and will therefore also imply a very careful management a need for very careful management to ensure that this timeline can be maintained that's where we are there's a lot of information a lot more substance available on this particular website but obviously i'm very happy to take any questions or comments you may have at this juncture thank you very much