The revision of the budget of the European Union, proposed this Tuesday by the European Commission, contemplates 20,900 million euros to face the rise in interest rates and inflation, in a total adjustment of 99,000 million euros.
“The sharp acceleration of inflation and interest rates had an impact on the Union budget, specifically through a sharp increase in the financing costs of the EU Recovery Fund,” says the European Commission in the review of the Multiannual Financial Framework (MFF) 2021 – 2027 this proposed Tuesday.
European sources explained that an increase in the MFP is at stake, compared to what was agreed three years ago, of some 99,000 million euros for the three areas of intervention -reconstruction of Ukraine, migration management and reinforcement of competitiveness through a new european fund sovereign – and by technical adjustments.
These technical adjustments include, from the outset, an estimate of close to 19,000 million euros to face the rise in interest rates and almost 1,900 million euros for administrative expenses due to inflation, according to the same European sources.
At a press conference in Brussels on the occasion of the presentation of this proposal for a revision of the MFF, the president of the European Commission, Ursula von der Leyen, even pointed out that “the world has changed radically” in the context of the approval of the budget, in 2020, with “a crisis behind the crisis” and with the war in Ukraine and its “painful” side effects such as rising energy prices, rising inflation, and rising interest rates.
“The new macroeconomics is also reflected in the increased financing costs and fixed costs of our own budget and these issues are also addressed in our proposal,” said Ursula von der Leyen.
As part of the priorities, the European Commission proposes a reserve of €50 billion to support Ukraine’s recovery, €15 billion for migration management and external challenges (in the EU and to support third countries with illegal migration routes) and 10 billion for ‘green’ and technological investments (through a European sovereign wealth fund).
Regarding the endowments for Ukraine, an integrated and flexible instrument is proposed that will allow grants, guarantees and loans, the latter amounting to 33,000 million euros, which are expected to be repaid.
Regarding investments, the creation of the Strategic Technologies Platform for Europe (STEP) is suggested, a kind of European sovereign wealth fund that will reinforce the current EU instruments for the rapid provision of financial support in biotechnologies and digitization.
This new European sovereign wealth fund aims to strengthen the EU’s strategic investment to compete with China and the United States, at a time when these countries are advancing with massive public support for ‘green’ investments.
“Following a series of disruptions in the global supply chain, the EU is working to increase its open strategic autonomy. Significant investment is needed to foster long-term competitiveness in technologies critical to Europe’s leadership,” he says in Brussels.
The review of the MFP also provides for an amount of three billion euros for a Flexibility Instrument that aims to “provide the Union with the means to respond to unforeseen needs,” adds the institution.
At stake is a review of the MFF for 2021-2027, which together with the EU Recovery Fund amounts to €2.018 billion at current prices (€1.8 billion at 2018 prices), in a response adopted in 2020 to repair the economic and social damage caused by the pandemic and contribute to the digital and ecological transition.
Source: TSF
