Committee on Legal Affairs – Extraordinary Meeting
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JURI European Parliament
Follow its sittingsSpeaker 3
There are also horizontal priorities which the commission should take care of, such as climate action, biodiversity, and gender equality. They should be defined, and there should be a system to systematically monitor, follow up, and track the expenditure. As an overarching principle, we see the opportunity to define the concept of EU value added in the legislation and apply it systematically across all policies, and this should also be used when allocating EU funds to programs and initiatives. So far, the commission based the EU value-added concept on the basis of guidelines. And, of course, we see an opportunity that EU value added should be evaluated and exposed.
The Commission did a spending review in 2018, but the European value-added discussion was not included in this exercise, and this was kind of a prerequisite for the allocation of funds. We also had some important lessons learned from the report seven of 2025 on FC, where we concluded that the investment mobilized was overstated by 26% and was additionally insufficiently demonstrated. So, we have identified an opportunity to design a better methodology to estimate amounts and demonstrate the additionality of investments mobilized by the EU budgetary guarantees. Now a slide on the EU budget simplification. On one hand, simplifying the budget instruments, rules, and procedures can increase transparency, reduce administrative burden, and improve fund absorption.
But on the other hand, as I said before, we try to warn that this should not come at the expense of accountability, effectiveness, efficiency, and economy. So, we see budget simplification in three layers. The first layer can be summarized as a simplification of the financial landscape. I would like to refer also to our old report, 5 of 2023, on the EU financial landscape, which we considered to be a patchwork that requires further simplification and accountability. So, all the instruments should, by default, be within the EU budget sphere.
The second player of simplification is, I can call it, the simplification of the delivery modes and the commission introduced in the recent review of the financial regulation, financing not linked to cost, but also trying to use a concept of lump sum payments. And the third layer of simplification, I could refer to our special report 28 of 2023, where we focused on public procurement in the EU in the period between 2011 and 2021. And we found that there was lower competition for contract awards. We see public procurement as an area with great potential for simplification. So, the future discussion on the public procurement directives is, from our perspective, very important.
The report of '23 identified that in the area of public procurement, the single bidders increased from 23% to 42%, almost doubling in the period of ten years. Also, the number of bidders per contract has decreased from 5.7 to 3.2 per procedure. And at the same time, the length of public procurement has increased from 63 days to almost 100. So, again, we see a huge potential for simplification. On EU budget flexibility, this is an area where finding the balance between predictability and flexibility is perhaps also a political question.
And nevertheless, we tried to publish a special report 18 of 25 on EU budget flexibility, where flexibility has worked over time, but the framework for flexibility was far too complex. Sometimes, it led to a depletion of possibilities and also overlaps in the use of flexibility options. So, for the future, definitely, the flexibility framework can be simplified. Now, an area which links the EU budget to the European Semester. In this area, we have done a special report 16 of 2020 on the European semester, where we concluded that the country-specific recommendations addressed important issues, but the implementation of these should be done better.
We also published a report, '25, on labor market reforms. And in these reforms, we found a lack of a harmonized approach in setting up milestones and targets, which affects comparability between member states and also, in our perspective, poses a risk of unequal treatment among member states. And I guess this is the issue that will need to be discussed in the future as well. Now, on the simplification in terms of opportunities concerning financing not linked to cost. Based on our work in RRF, we have identified a number of opportunities.
This was summarized in our RRF review, number 2 of 25. So first of all, the first issue is to focus the EU budget use on the results. And if linking the spending to the results is not possible, we recommend not using such a system. Looking at the performance, we have seen the opportunity that performance should go beyond specifying payment conditions. In other words, there should be a robust performance framework that logically links the top-down approach in budgeting.
We also highlighted the issue of zero-cost measures, and there needs to be clarity in the legislative proposal on whether zero-cost measures are allowed or not, because under any circumstances, we have to ensure that the three measures in financial regulation are met. In our statement of assurance work in the years '21 to '24, we have identified that the number of milestones and targets has not been clear enough. So, they have been awake. From our perspective, this led to an excessive margin of maneuver for the assessment of the European Commission. We also looked at the area of supervision and control responsibilities.
And, of course, they need to ensure proper accountability, transparency, and compliance with national and EU rules. And we found that the commission relied too much on the work of the member states without checking. But during the implementation of the RRF, this was continuously being improved by the commission. And the last two points: we see an opportunity that there should be full traceability for the EU funding. So we should, at all times, know where the money goes from the top to the very bottom, to the level of final beneficiaries.
An observation that stems from the RRF work is that if there was a breach at the national level of rules, either national or EU rules, there was no recovery ensured for the EU budget. So, I think this needs to be carefully crafted in the EU legislation for the future period. Let me move to the next slide, linking the discussion to the rule of law and the protection of the EU budget and EU expenditure. We have published special report three of 24 on the rule of law in the EU, and we consider that risks remain. We have concluded that the confidentiality regulation enhanced the EU framework for protecting its financial interests against breaches of the rule of law.
Nevertheless, we observed that member states sometimes ensured formal compliance with remedial measures, which may have led to ineffective improvements. And we have also highlighted the risk of remedial measures being reversed. Therefore, we need to be careful that the changes implemented are really effective in ensuring the rule of law at the national level. We have also published review two of 24, where we identified areas for improvement, including transparency and accountability. To achieve that, it was meant to be through publicly available information, methodology, and assessment. So this is another opportunity to communicate better with the public and strengthen the company.
Position.
Speaker 3
Financial estimates were that it should cost about EUR 25,000,000,000 to 30,000,000,000 per year. And then, we have noted the increase in interest rates, which led to additional funding needs of EUR 17,000,000,000 to EUR 27,000,000,000 in 2023 only. We have also identified a few opportunities in the area of resources, and this is continuous; what we've been suggesting in the past is that the own resources should be stable, relatively simple, and based on comparable and reliable data. And always, when there is a discussion about own resources, we try to highlight that we need to focus on closing the customs gaps, which is an important issue that we highlight in our annual report every year. It could be about 10% of the overall customs revenue.
And when it comes to comparability and reliability of data, we have published a quite interesting report on Euro revenue based on non-recycled plastics packaging waste, where we identified a number of issues with the data. On the next slide, of course, this is close to the heart of any auditor: to have a proper audit. Right? So, of course, we seek that the legislation is specific about our audit rights. And if there are some elements or agreements outside of the legal order to implement EU policies, we are suggesting that we should have a representation in the audit, eventually, boards.
Now let me move to the opinion, which is somewhat linked to the review. I would like to mention a few areas: the size of the uBudget, simplification of the budgetary architecture, proportion of shared and other management modes, profile of annual commitments, ceilings, and adjustments of the ceilings for shared management. And we have three specific areas for you to consider. First, regarding the increase of the financial envelope, there are many angles from which you can look at the increases. So for us, the basis of comparison is comparing the old financial perspective with the new, including the repayments of NGU borrowing.
And this means that the budget is increasing by 59% in current prices or 39% in stable 2025 prices. Overall, the budget will represent 1.26% of the EU GNI. Now, on the simplification itself, the proposal intends to simplify the budgetary framework. So there was a decrease in the number of headings from 7 to 4. There is a proposal to decrease the number of programs from 52 to 16.
And this may eventually lead to a decreased number of rule books. We also provide a warning that the real simplification will depend on how the new legislation is applied in practice on the definitions of milestones and targets, for example, and how this will then be implemented later by the commission. Of course, we will see the future. We also noted the proportion of shared and other management modes. So you can observe that the shared management is decreasing from 66% to 46%.
And in the opposite way, the other shared management moans are increasing from 34 to 54. And this shift in implementation means towards centrally managed instruments may have implications for the accountability structures and may also pose a significant challenge for the Commission because the operational responsibility of the Commission will significantly increase. We also looked at the profile of commitment appropriations, and we have noted that the annual ceilings do not reflect at least 80% of the flexibility amount in heading one national programs that will only be available after the midterm review in 2031. And this, in our review, reduces budgetary predictability for the beneficiaries. It might complicate long-term planning, delay implementation, and eventually affect absorption.
Now, let me move to specific comments. We have made three. There is a commission proposal to better protect the EU budget from inflation deviations, and we pointed out two possible consequences of the proposed adjustment methodology. We have also noted that, compared with the previous regulation, the commission proposes to no longer require the examination of the scope of reallocation of underused funds within the affected heading before revisiting it, and the requirement to offset any increase in one heading by lowering another. And, of course, based on long-term experience, we also suggest keeping the time allowed for the negotiation of the future MFF at the same limit as for the previous ones.
Thank you very much for your attention. Of course, to the extent it is possible, I will be happy to answer your questions. Thank you.
Ilhan Kyuchyuk
Great. Thank you very much for your presentation, Mr. Gregor. And I open the floor for the Q and A part, starting with Axel Vos, coordinator for EPP.
Yes?
Axel Voss
Ah, okay. So, thanks a lot for the presentation. I have a lot of small questions. And at first, if you're coming to simplification, does this also mean effective tools, competitiveness of our industry, our company businesses, and legal clarity? Is this included? Second, if we're coming to the EU budget, are you just looking for, let's say, more or better effects in this whole budget, or are you also considering whether the rights of the Parliament are respected or not?
This is also something that I would like to have. Secondly, no. Thirdly, probably already. If we are talking about corruption and misused money. Are you also recommending, and I think this is in cohesion policy?
There has been a lot of misused money. How can you reduce it? Are you also referring to new procedures or something like that? And the efficiency of EU funding and financing. Is this also a kind of evaluation of the effectiveness and how you can improve this?
This is something I would also like to ask about AI, how you're using it, and so on. And would this also be a kind of recommendation for a legislator and so on? But you don't have to answer the last question, please. But if you're on these others, that would be wonderful. Thanks.
Thank you.
Speaker 7
Thank you, Chair, and thanks a lot for the exchange, in particular here in Luxembourg, where we do not ignore the other institution that is located here, namely the European Court of Auditors. And speaking as a German, we will send one of our best colleagues to the European Court of Auditors very soon. And looking forward to having this exchange with him next year when we are here. Nevertheless, on the matter that we are discussing here, let's say, points that I would like to raise. First of all, from our committee's perspective, the justice program is the one of utmost relevance for our committee.
Speaker 8
And here, I'm wondering to what extent the European Court of Auditors will have a closer look at that particular program, whether a specific opinion will still be issued on it, and whether there is anything in that regard from the reports that can present us with more details for our current work on the justice program. Second, I was particularly intrigued by your conclusions on RRF, which I largely share, in particular on the question of results and performance, and basically, if there is no possibility to measure results, not to go there. And that makes me wonder whether your remarks on the proposed NRPs were a bit too timid, as this looks like basically repeating the mistakes from RF and now bringing them into the budgetary cycle. So, in that sense, I'm wondering whether you could go a bit more into detail on your assessment of the proposed national reform plans and their added value from a proper spending perspective. Lastly, and somewhat related to this, we recently had in the building across the street an opinion from an advocate general, upon invitation of this institution, namely on the rule of law violations when spending RRF money and receiving money from the budget, specifically the Hungarian case.
You had a report on the rule of law where you brought in the end, and I quote, "audit field work ended before the commission decided on 13 December 2023 that Hungary had partially achieved certain horizontal enabling conditions." This decision was taken into account but not audited. So, whether that still holds as of today or whether you already have further findings on this particular situation, given, let's say, the advocate general's opinion that is rather in favor of Parliament's view on the matter that the Commission unlawfully dispersed the funding in December 2023.
Thank you.
And.
Speaker 11
Now, I would like to ask, I am from the AGRI Committee. I'm one of the coordinators there. And you mentioned two issues involving the critical element of the CAP and the single fund. And I'd like to understand how the Court of Auditors intends to move forward on these particular issues, particularly the TAP. We've seen the mobilization of farmers throughout the European Union, taking up this particular issue.
Speaker 9
So, I simply wanted to know how the Court of Auditors intends to deal with this. Thank you.
Ilhan Kyuchyuk
That is not the case. And I go to Daniel Zalimas on behalf of Renewable Group, also the coordinator.
Dainius Žalimas
Thank you. Thank you very much for your interest, and I can give an exhaustive presentation. However, I have several questions which may not be directly related to your presentation but are still very relevant to the work of our committee. So, first of all, one of your recent reports, a special report on the enforcement of EU law. And, of course, it is highly valuable for our deliberations.
Many of your key findings, including concerns about the length of infringement procedures, the functioning of a pre-litigation phase, and the transparency of case prioritization criteria, are also reflected in the Yuri report on monitoring the application of EU law. We are soon going to vote on it. So, since we share similar concerns, what do you see as the main priority now to make enforcement work better in practice? Should we focus beyond making procedures faster, increasing transparency, or using formal proceedings and sanctions more decisively? And what concrete follow-up, I guess, has the Commission undertaken in response to your special report on the enforcement of EU law?
And the next question is also about your special report on the transparency of EU funding granted to NGOs. You note that despite certain progress, there is still no fully consolidated and reliable overview of how EU funds are allocated to NGOs, and that the reporting system remains fragmented across programs. At the same time, the European Parliament has underlined the crucial role of civil society organizations in defending democracy, the rule of law, and fundamental rights. So, in your view, how can we improve transparency and accountability of NGO funding without introducing additional reporting and compliance requirements that may disproportionately affect smaller and local nongovernmental organizations? Do you see the current concentration of funding among a limited number of NGOs as a potential risk for pluralism, suggesting that future reforms should also focus on broadening access to your funding?
Thank you.
Speaker 9
Thank you, Mister Zelimas, last but not least, to our voters and vice chair of the committee.
Speaker 12
Thank you very much. Two questions. One on your presentation, and one on own resources more broadly. I think I saw in your report that there was hesitation phrased on the unpredictability potential, unpredictability of own resources, ETS, CBAM, for instance, given that we're talking about fluctuating markets. I think even on a tobacco tax, you could say that there could be a fluctuation in time if public health advertising does its job.
But in that context, I was wondering what more you could say on own resources, given also that I think you say there is doubt on whether the current MFF as proposed would have sufficient headroom. But then, is the MFF large enough to absorb those own resources risks as you see them? I was wondering if you could reflect a bit more on that. And then, just one question from your presentation. It went too fast, but I think I saw something about spending generally needing to be linked to results.
Speaker 13
But if that's not possible, then it should not be done. And I was just wondering how firm this recommendation is, then. Was that a recommendation, and how firm is it? Thank you.
Ilhan Kyuchyuk
Thank you, Mr. Vegor. Good luck with the answers. You have around 10 minutes.
Speaker 3
Thank you so much for the questions and for your interest in the subject. I tried to note everything down, but you check on me to see whether I manage to go through this. On simplification, I think we have looked at the simplification in the three layers I have described. First, the simplification of the financial landscape, by integrating everything into the EU budget. So, this is one layer.
The second layer is the use of simplified cost options, so financing is not linked to cost and lump sums, etc. And, as a third layer, we mentioned the example of public procurement. But in the other areas that you mentioned, simplifying the legislative framework in general, we haven't looked at this aspect. Of course, it's very important for European competitiveness, but that's outside the scope of what we have done. We haven't looked at the role of the European Parliament either, but of course, we try to support you as much as we can with our knowledge of the RF.
And I think the same principles might be applied to future discussions. On corruption, control, and misuse of funds, of course, every year in our annual report, we try to report on instances of potential fraud. Roughly every year, we report about 20 projects or transactions to both EPPO and OLAF, depending on the responsibilities, but we still have this double reporting obligation. So, it's only a fraction of the overall budget. It's not comparable to the error rate that we are reporting.
The fraud and corruption is quite likely a small proportion there. How to reduce corruption and fraud? I can only express my hope that the combination of Olaf and EPPO will be able to tackle that. I think in the area of both fraud and corruption, the trickiest part is the detection and reporting from the level of member states, and I feel that there is an asymmetric approach from different member states. Some member states report a lot.
They have efficient administrations that can also use nondocumentary evidence, but some others do not report much. So that's a challenging area, but very tricky to recommend how to improve, and definitely beyond the scope of ECA because this is a member states' prerogative. On the AI and the use of AI, we keep trying. We keep investing. So it costs several hundred thousand euros every year, either for licenses, analysis, etc.
But for auditors, using AI for our audit purposes is very difficult because we need to have, according to international standards, a kind of solid audit evidence. And if this is somehow lost in the procedures of AI, we would perhaps not be compliant with the international standards. What is more challenging is to audit somebody who is using AI for the same problem. They have some inputs, but how the AI reaches the output of the administration is very difficult for us to audit. So, we will need to focus on the output of the institutions anyway.
But everybody keeps experimenting. We also join forces with the commission and try to join their tools. On the justice program, I'm not aware of the details, but this was also part of the opinion on competitiveness. But we haven't, as far as I know, made a specific reference to the program. But I may double-check with our chamber three if there are some comments to be shared.
On our lessons from RRF, well, results and performance, this is, of course, the issue. We have tried to analyze performance for the last few decades in specific special reports, and we have also tried to introduce an annual report on performance. This also links to the other question. If the programs are focused on outputs only in the definition of milestones and targets, it's very difficult to measure performance at a later stage. So that's why we had this firm recommendation or opportunity that we should rather try to link the spending to results and impact.
At the same time, we must note that this is very difficult to do because performance is very much delayed after the implementation. And in the previous periods, we have actually observed that the impact and result can be observed only after the financial period finishes. So, this is a very challenging area, very difficult to do. On the rule of law, I cannot be too specific as I was in the presentation. In the first special report, 3 of 24, we warned about the risk that the remedial measures at the member states' level are sometimes not effective enough.
They are kind of per se compliant, but in practice, still not. So, this is a risk that we have identified. Or in some cases, there might be a risk of these remedial measures being reversed after payment of EU funding. So, I cannot add much more there. On the Common Agricultural Policy, we have also published a specific opinion.
So you may see further details there, but we see the flexibility that is proposed. I think I mentioned it in the initial presentation that if member states add to agriculture policy based on their own decisions, this might go against the common concept of the Common Agricultural Policy. So this may eventually distort the competition. On the two special reports on EU law and the transparency of NGOs. I'm not sure if I can add here on the spot, but I'll chat with the reporting members, and eventually, we will come back to you.
And finally, on the own resources, well, yes, this is something that we have been calling for a long time: the own resources should be as simple as possible and based on a tax base or an area that is predictable and stable over time. And, of course, we have tried to provide the example in the special report on plastics that I referred to, also 2024, where the EU revenue was based on data that was not comparable among member states. And the member states are using two types of data collection, but this does not really work together. It's not comparable. So, this type of experimental own resources is something that shall perhaps be avoided.
But anyhow, my expectation is that the council's debate on our resources will not be easy. So, the final solution might eventually be very different from what is proposed right now. On the performance, I think I have covered it in the previous answer as well. And the last point, I hope, is the headroom. Well, overall, I think that the budget increase up to €2,000,000,000,000 eventually gives enough resources.
The question is whether this will survive the council discussion, whether this volume of the EU budget will survive. And from the auditor's perspective, we always try to refrain from discussing the size of the EU budget because, in the end, it's a political decision. What we care for is to try to see whether the size matches the ambition. And this is, of course, very difficult because right now, the EU is facing quite many challenges. Perhaps it will be very difficult to finance from the EU budget.
Thank you.
Ilhan Kyuchyuk
Thank you, Mister Gregor, for being with us today and also for answering, I think, almost all the questions. I am happy that you are willing to come back with some of the answers to the members' questions. That was it for this part. Any other business, dear colleagues? That is not the case. The next meeting is tomorrow in Brussels.
Thank you.
Thank you very much.
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