Committee on Budgetary Control Ordinary meeting
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CONT European Parliament
Follow its sittingsSpeaker 1
I mean, the member state, firstly, on a national level, they organize and set up different institutions to manage the programs. More simply, how many program authorities in each member state are working and are implementing as if programs, equation policy programs. So this is the first level, national dimension. Program level, we dive into the program realities into function. One is implementation, and one is control and audit.
In relation to the implementation, we try to study the level of delegation. So how the single managing authority was able to delegate to an intermediate body, both vertically, meaning from a national level to local level, horizontal, same governance level. And the other hand, on the control and audit system. So how much is separate the different bodies implementing the program, managing authority, accounting function, certifying authority, or audit authority, are located in different institutional bodies. This is the level of separation.
More the these three bodies are located in one single institution, less we have a lower level of separation. Higher separation corresponds to having these different bodies split in different institutions, meaning different ministry or different regional authorities. So based on this organization, we then address the correlation with performance. So we understand, try to understand if the national setup, control, or delegation management has an impact on the performance of the programs. Institutional arrangement, to give you an overview, we have single.
So when we have one single managing authority, multiple, we have more managing authorities at the national level. At multilevel, we have our managing authority both at regional level and national level. As you can see from this slide, basically, the decision to have one or another institutional arrangement is very much based on geography or dimension of the single member state. But then we need to understand how these different categories and models correspond to the performance. And the performance for us was based on capacity spending, capacity to not make mistakes, and capacity achievement deliverables, which means in financial absorption, output delivery, audit, or error.
We combine these three dimensions in one single composite performance index. What do we come out from our first task analysis? First of all, is that, and this is the first finding. There is no correspondence between the institutional arrangement and the level of performance. So whatever you have, if it is a multiple system, if you have a single model or if you have a multilevel go model, this does not impact on the capacity of spending or on the capacity to avoid errors.
What really matters is not the national setup. It's what happened within the program. So the decision that single program took to separate the function, for example, or to delegate competence and responsibilities to intermediate bodies. More you separate function, higher is compliance. But more are separated function, lower is the performance.
So you have trade-off compliance against performance. The same things you can see in the delegation. Less delegation, more performance. Higher delegation, less performance. Then beside this correlation and quantitative analysis, do interviews with ECA, with the DG Regio audit authorities, and with the national authorities.
And also, these things, I think, are interesting for you. First of all, is that the risk based audit is probably the right choice because it helps to focus and maximize, optimize the user resources. But this also entails a big risk. If you do a risk-based audit, wrongly, then you have a negative cascade effect. And the other elements that come out of our analysis, we correlated the number of frauds during the programming period and the international index of transparency and the World Bank Index.
High fraud doesn't mean a high level of corruption. So high fraud means only that the system is more capable of detecting frauds on time. Then we move to the single programs, and we try to have, as I say, our reality check and try to understand what are the difficulties in compliance and in absorbing the resources for the program authorities, limited capacity preparation, which means beneficiaries' capacities, economic crisis, gaps in control system. One of these gaps is in audit risk-based assessment that I was mentioning earlier. Another one is the communication among different levels and different institutions, and then multilevel coordination.
But those difficulties actually mirror the driver of good performance. Driver of good performance is fabulous, type, stable, qualified, and experienced authorities. And this goes together with the difficulties, which is institutional and political instability, high digital maturity, the fact that you are fully digital in managing your programs, and effective use of simplification tools. When we mean effective use of simplification, we mean specifically the simplification cost option. Concrete case, I give you just the overview of our best practice, and then we can cluster them.
And, for example, Poland and Czech Republic and Malta are exceptional in their use of digital tools. Poland, for example, uses IT to detect conflict of interest. Romania actually was an extended use of simplification cost options, while Lithuania and Croatia were they particularly care about managing more human resources. Human resources are key, I repeat. And this doesn't mean simply having good people, but also cultivating good people and retaining the good people in the program.
So, what are the main takeaways? For us, the main takeaways is, first of all, is that administrative capacities matter, matter a lot. And we need to keep the investments in administrative capacity. European Commission already invest a lot at the EU level with a number of initiative, like the peer reviewing, like the TAI X, like the other instruments of capacity building, different networks, in different networks. But also the local and the national level, there are important initiatives investing in capacity, for example, a road map.
Digital transformation, not only vertical systems, but also horizontal. System that are able and capable to operate among themselves in a horizontal way, interoperability. For example, interoperability with Arachne. And now, and last, the use of AI. I mean, in our interview, we understood that both ECA, for example, Battuta National Auditors, are more and more keen on investing in AI, not to do replies humans, but actually to enhance human.
All these things that we need to innovate the care, we need to do with care. First of all, we need to consolidate what have worked in the previous period in the way that we were seeing evolution, not revolution, expand the user simplification cost option, digital default, a singularity principle, a founder convergence. These are things that were working in the past, and we need to keep them to increase our compliance and to increase our capacity of spending. Prioritize gradual reforms, which means not to be fixed or to be conservative, but to, as the history of equation policy, legal family telling us, to be gradual. FNLC, so financial not linked to cost, which is one of the topics of the new programming period, is for sure positive, is for sure a way of focusing on result.
But then we need to be careful because this also entails not changing only in the procedure, but also in methodologies and also in the IT system, also in the capacity, and also specifically in the culture, administrative culture, because FLIC means moving from compliance mindset to resolve mindset. And finally, pilot them. So we need to have evidence. When we need to, we want to do big changes in our legal system. We need to have evidence that there are benefits of these changes.
I want to end my presentation with a quotation from one managing authority, and he told me, you know what, Alessandro? What is simplification for us? For us, meaning the people working on the ground, is very much stability. For us, simplification is stability. Thank you.
Andreas Schwab
Thank you so much, Mr. Valenza. I will remind myself simplification is stability, and I would like to give the floor now to Ms. Odoardi, for any further elements that could be added. Okay. No problem.
So it has been an exhaustive presentation by Mr. Valenza. Thank you very much. I would now turn my eyes to our members to ask questions. Mr.
Stikovsky wanted to join us already, but unfortunately, he hasn't managed to yet because he's in another meeting. If there is no question here from the room, then I would just like to thank you for your study and for the work you did on our behalf. We will send to our members all the notes that have been submitted to us, and we will come back to you with all questions in case there are follow-up questions. Thank you very much for your presentation. And we will then go further in our committee at 03:30.
Speaker 4
So in half an hour, with the eco opinions on the legislative proposal for the next MFF. Mister Murphy, the president of the European Court of Auditors, will be here to give a presentation. Thank you very much. So, colleagues, thanks for having come back. It's my pleasure to kick off now item number 11, which is the ECA opinions on the legislative proposals for the next MFF, an overview.
Andreas Schwab
I'm very pleased, together with all of you, to welcome the president of the European Court of Auditors, Tony Murphy. We already had the chance to speak a bit. The European Court of Auditors is a very important institution for us. Your insight, your capabilities are very useful. And I think it would be very helpful for us to give you the floor to have a horizontal overview of the European Court of Auditors' opinions and for being here with us today.
I don't have to remind everyone of the importance of your institution. The potential effects for the control with your spending are very important, and that's the reason why our committee has asked to be opinion-giving committee to a large number of legislative files in this package. I know that it has added to the workload of members also here in this committee, and also to the staff during the peak of the discharge procedure. And so I also want to use this opportunity to thank everyone involved, especially my colleagues and all the advisers for their hard work. And like that, I would like to give the floor to you, Tony, to speak to us. Thank you so much.
Thank.
Speaker 5
You, Chair, members of the Budgetary Control Committee, colleagues, and ladies and gentlemen, good afternoon, and thank you for inviting me to discuss the main findings of our recently published opinions on the 2028, 2034 multi-annual financial framework proposals. As you know, the commission published these proposals last year, and negotiations are currently ongoing. Under the treaty, the European Court of Auditors is required to give opinions on these proposals. Following requests from the parliament, we had 11 requests and the council had eight requests. We have recently issued 12 opinions to inform the legislative debate.
Today, I will start by outlining the ECA's opinions on own resources, the European Fund, and the Common Agricultural Policy. The main part of my presentation will address thematic findings that are relevant across all the proposals. And as my time is limited, I am happy to take questions on any of them afterwards, if required. So if we start, I think, before going into greater detail with some of the main changes and features of these proposals that distinguish this MFF proposal from the current one. Firstly, the proposal increases the number of owned resources from four to nine by introducing three new resources while keeping two previously proposed ones, significant potential new ways for the EU to raise revenue.
We see a further move away from shared management to our direct and indirect management modes, with roughly a 20% decline in funding implemented on the shared management compared to the previous MFF. Order management modes would be 54%, and shared management at 46%. The major change is the new European fund of EUR 865,000,000,000, that is at current prices. That is in the main pools, cohesion, agriculture, fisheries, rural development, and maritime affairs into a single framework organized around one national and regional NRP plan per member state. Because cohesion and cap make up a large share of EU funding, the new national plans modeled on the recovery and resilience facility mean a significant portion of EU payments will now depend on predefined milestones and targets and on ex ante cost estimates, thus replacing the current reimbursement-based system with financing not linked to actual costs.
The European Fund allows member states to borrow up to 150000000000 from the EU to finance the implementation of these plans to be repaid then at a later stage, a significant novelty as one of the forced large scale non crisis EU lending instruments. 130,000,000,000 is allocated to Resilience and Security, the defense industry, and space. The proposed performance framework aims at streamlining commission reporting. The commission plans to reduce indicators from over 5,000 to about 900. So these are some of the headline significant changes.
I will now move on to our main messages and our opinion on own resources. In terms of own resources, firstly, we must consider the complexity. Although some individual own resource calculations are simplified, five new revenue streams make the overall own resources system more complex. In terms of national contributions, G and I based and most other own resources are national budget contributions and would rise by about 48% in the next MFF to finance new and existing priorities. In terms of the impact on revenue, the commission estimates the changes will add an average EUR 58,000,000,000 annually to the EU budget over the 2028-2034 period, 44,000,000,000 of which would come from these new owned resources.
If we move on to the proposed European fund. First, I'd like to acknowledge the strategic rationale for consolidating multiple programs, and the objective of providing flexibility so that EU support can be aligned to specific objectives and adapt to evolving policy priorities during the programming period. However, it's also important to consider the following risks. The integration of different funds combined policies with different objectives, time frames, and delivery rationales, which could make it more complex and require trade-offs between the different priorities. It's likely that member states may struggle to address all EU objectives satisfactorily in their one national plan, while also trying to tailor interventions to regional and national development needs.
While the proposal promises greater simplification, this may be mainly at commission level, and the administrative burden on member states, regions and beneficiaries may, in the end, actually be heavier. As we have seen with the Recovery and Resilience Fund, financing not linked to costs does not equal performance-based funding. The proposed delivery model relies on the achievement of output-based rather than result milestones and targets to trigger payments. Payments are based on cost estimates, and differences in how member states design, set, and interpret milestones and targets could undermine comparability and equal treatment. If we move now to the CAP, a key concern for the MFF in this area is uncertainty over whether the proposed overall amounts in the package will come to fruition.
Equally, the same concern exists for CAP as the overall funding from member states, which will only be confirmed after the NRPs are adopted, meaning beneficiaries face planning and investment uncertainty. And it will be difficult to compare allocations with the 2021-2027 period. Additionally, in general, complex planning and a more intricate CAP legal framework risk uncertainty for member states, lower predictability for beneficiaries, delays in payments, and could undermine simplification. Greater flexibility must not compromise the cap's common elements. Uneven rules could distort competition and the internal market.
The commission must use its stronger steering role effectively. A lack of clarity around which cap intervention should be based on outputs, and which on milestones and targets, also creates uncertainty. In summary, the proposal creates significant uncertainty, unclear funding envelopes, complex planning and legal frameworks, weak comparability of milestones and targets, and a risk of uneven playing field for farmers. If we look now at the thematic areas, which allow for cross-policy findings from all of our opinions, these are organized around eight themes that set out their position on the legislative package, a name to promote sound financial management, accountability and simplification in future programs. So, therefore, I will summarize the main conclusions for each of these themes in the following slides.
So EU added value. The proposals failed to define EU added value, weakening a common basis for measurement and assessment, which means, at the end of the day, it's unclear what we are actually getting for the money. Aligning spending with EU priorities. While the European Competitors Fund targets commission priorities, the main part of the budget still leans to alignment to member states' discretion. In our view, this risks fragmentation, weak targeting, overlaps with other instruments, and an uneven playing field across the single market.
Additionally, budget increases for specific programs are not adequately justified, which reduces transparency, and makes it harder to assess whether this is the best use of EU funds. If we look now at financing the EU budget, I think it's important to note that national contributions will rise by 81% to $235 billion at current prices. Any shortfall in the five new revenue streams, which member states have yet to approve and which represents about 18% of average annual own resources, 49,000,000,000 at current prices, would mean either higher G and A contributions, or reducing the overall budget accordingly, or rolling over existing debt. So what we need to consider in these circumstances is can member states' national budgets manage the strain of these proposed increased contributions? Additionally, given existing and proposed lending on top of this, we have the 90 billion currently on the table to support Ukraine.
We have the proposed CHF 100,000,000,000 loan support included in the MFF proposal, the CHF 150,000,000,000 borrowing envelope under the European fund, and an additional $395,000,000,000 crisis lending mechanism. Considering the significant headroom buffer, there is a risk that the commission could have to call for significantly higher contributions at a time when member states' finances are under serious pressure. Budget flexibility is also something that's often mentioned. So these proposals increase flexibility, we acknowledge that, but they reduce predictability and certainty over the use of EU funds. It remains unclear whether this flexibility will actually improve policy delivery or merely allow greater absorption of funds without better outcomes.
If we move on to the much-lauded simplification. Consolidation can simplify interactions between the commission and member states by grouping programs into one national recovery plan, but it will increase the coordination needs at the national and regional level. Real simplification hinges on the actual implementation. Standardized IT systems, stable procedures, and fewer rule changes are essential to avoid confusion for beneficiaries. Any simplification must preserve transparency, accountability, and sound financial management.
Streamlining cannot come at the cost of weaker safeguards. While wider use of simplified cost options and financing not linked to costs may cut the administrative burden, it's not universally suitable for all policy areas and can reduce traceability, accountability, and control if poorly designed. In terms of the performance framework, many intervention fields are overly broad or indeed overlap. Roughly 25 have no result indicators, and there are no impact indicators. That makes meaningful evaluation extremely difficult.
No established methodology exists for setting baselines, milestones, and targets, risking inconsistent ambition, gaming of targets, and unequal treatment across member states. Our findings from the RF are very much still applicable here across the proposals. Limited focus on results. No information on actual costs. Not clear what we got for the money, payment conditions not clearly defined, risk of overlap with other EU funds, and measures not always addressing key challenges and funding not always proportionate to progress.
In terms of something which is very close to our hearts, compliance, transparency, accountability, and traceability of spending. In our view, the assurance framework lacks clear payment conditions and does not define financial consequences for non-compliance with EU and national rules, leaving enforcement uncertain. It relies heavily on member states' control and audit systems, where we have repeatedly found persistent weaknesses and gaps. The proposal reduces the commission's role and relies more on the national control systems. Unlike the RF, the commission would not perform mandatory checks of milestones and targets before the payment.
The proposal must specify financial consequences for non-compliance with EU and national law. And as drafted, the financial governance and control arrangements pose a serious risk to the EU's financial interests. In terms of our own mandate, several of the proposals do not adequately safeguard our audit rights, risking restrictions on our oversight. So I think that comes to a conclusion in terms of the demotic areas, and I would like to thank you for your attention, and if you have any particular questions. Thank you, Chair.
Andreas Schwab
Okay. Thank you very much, Mr. President. Thank you very much, Tony, for that presentation, which was, again, very clear. I have in my role here as new chairman of the Cont Committee heard these criticisms of uncertainty and creating an unlevel playing field already several times.
Therefore, thanks again for outlining this. And as you have been addressing the European Commission, it's my pleasure now to give the floor to Beatriz Sansretrado from DG Badge to give us some insights about how these points might be considered a bit differently. Over to you, Beatriz.
Speaker 6
Thank you very much, dear chair, honorable members of the committee of budgetary control committee, and dear president and colleagues of the court of auditors. First things first, I would like to thank you for granting the discharge of the commission this morning. We take note of the priorities of the resolution, and we will work now on all your recommendations. So that I really wanted to thank you for your trust. And I would like you also to thank you for the invitation for this meeting where it's always interesting and important to hear the president of the European Court of Auditors, to give us the insights and an overall overview of the opinions that they have issued.
I would like to reassure all of you that the commission has listened very carefully to the court observations and that these observations, and we have said already, they have fed the preparations for the implementation of the next proposal. I am pleased to note that the Court of Auditors acknowledged the simplification of the overall MFF structure, a better alignment with EU strategic priorities, the shift to result-oriented budgeting, and harmonized performance reporting. In particular, if we look at the national and regional partnership plans, the commission welcomes the court's acknowledgment in the opinions that the single framework could improve coordination and align spending with broader EU strategic priorities. And also that the plans can help integrate EU policy objectives with national strategies, while at the same time strengthening the protection of the rule of law and fundamental rights. The court also acknowledged that the proposal include mechanisms to better respond to crisis or new priorities, such as the flexibility envelopes that Tony Murphy has mentioned and the reserve fund.
And there, I would like to say that every time that there is flexibility, yes, indeed, it is a bit more difficult to ensure predictability. So I think one goes with the other. But we have been hearing so far that we needed to have a budget that could react to tomorrow's crisis, and I think this proposal answers to that. I'm also happy to note that the court acknowledged the shift of EU spending towards result-oriented budgeting, and that this could incentivize member states to deliver reforms and investments. Of course, we are aware of the concerns raised by the court opinions, in particular those regarding the assurance models for the next MFF.
The proposed audit and control framework for the national and regional partnership plans is tailored to the new objective-based delivery model. Let me assure you that the proposed regulation includes robust safeguards for the protection of the financial interest of the union, the respect of sound financial management, and compliance with applicable law. The assurance framework is based on four pillars. The first one is the effective and efficient functioning of the management and control systems of the member states. A number, an important percentage of the ECA findings in the past are due to complexities of rules and ineligible costs, sorry.
And per se, this is not an effective control system, but more the result of an over-complex environment we are operating in. The next MFF intends to simplify this environment with the introduction of the single rule book, simplified cost options, financing not linked to cost whenever possible. The second pillar is a robust system for reasonable and plausible cost estimates. The third one, achievement of objectives, and being able to recall financing if there are reversals of milestones and targets, or if we identify exposed that some targets are not fulfilled. And for compliance, the fourth one is compliance with the applicable law.
The commission can take action if a member state is not complying with the relevant rules and regulations. The 15 key requirements for member state systems provide for a complete must that they ensure their proper functioning in accordance with the principle of sound financial management. In case of serious non-compliance with key requirements, the Commission can reduce the union support to the member state concerned in a proportionate manner. Concerning the instruments that will be implemented during direct and indirect management, the rule for payments and implementation modalities will be very similar to those under the current MFF. Finally, to conclude, and even if you heard my colleague on March 15, Mikael Lehardt, through the performance regulation, we are proposing an enhanced and single performance framework to steer and monitor how the budget is spent and what results it achieved, but with simpler reporting obligations.
And these are guaranteed by, as you said, indicators that are reduced from 5,000 to 900, harmonized indicators to reduce also the reporting requirements and indicators that will serve multiple purposes. They will be used by member states as targets for measures in the national and regional partnership plans to monitor implementing partners in indirect management, or to support program evaluations. If we look at today and what we are proposing for tomorrow, 30 portals and dashboards will be replaced by a single gateway portal, providing a single entry point to information on funding opportunities, beneficiaries, recipients and EU budget performance. As you can see, the Commission has taken into account the recommendations from this House and from the ECA in building the proposal for the next MFF. But like with every change, we need to acknowledge that change sometimes can be a bit difficult to implement.
But I think that if we put our heart on it, we can make of the next MFF a system that will work and bring real added value. Thank you for your attention, and I look forward to the discussion with you. Thank you.
Andreas Schwab
Thank you very much to the commission, Miss Santo Redrado, and for your explanations. And we have now the chance to discuss these presentations. And I don't know who would like to have the floor first. If no one is giving any sign, I would like to start. And then I would give the floor to Thomas Deutsch, who has been asking for the floor.
And my question would, first of all, go to the European Commission, Miss Sans Redrado, because you know that I'm new to this task here, and so I made up my mind very naturally. I have understood that European Commission wants to have a bit more flexibility for its cooperation with the member states, especially in the budget, but also especially in a time where Europe is under several threats and money will be even available in a less predictable manner. And therefore, for the commission, flexibility is key. I think that's an analysis which is not so difficult to be done. And under these considerations, you or everyone can come to the conclusion that something has to be done.
Now I don't really match this need with the criticisms that we have heard because, for sure, this flexibility needs, let's say, budgets or budget directions that can be more flexibly shifted from one side to another. I think that's logical. But to do this, we wouldn't need all the changes that are foreseen. So maybe you could give to me, as a newcomer, a shorter and more easily understandable explanation how this flexibility that I think no serious politician in European Parliament can put deeply into question is not implemented in a way that the European Court of Auditors would say, yes, we have now more flexibility, but we still keep a level playing field for our farmers. And the uncertainty that has been mentioned isn't that high.
My question to you, it's up to you if you want to answer directly. I can give you the floor now. If not, I would take my colleague, Mr. Deutsch. Next, please, over to you.
Speaker 8
Thank you, Chair, for the floor. Dear president of the ACA, dear guests, almost a year ago, the commission published its multi-annual framework. And since then, consultations are going on in the European Parliament, in committees and in plenary. So it is well known what the position of the Patriots is. We think it's a wrong set of proposals.
Speaker 7
I do not want to use very blunt words here, but, unfortunately, the discussions up to now show that these are only attempts to discuss something which is not worthwhile for discussion. No matter how we approach certain committees from certain angles and from political directions, we always arrive at the situation, which in the Hungarians say we are poking the fog when you only know that there is something hidden by the thick fog, there is something, but we don't know what it is. So no matter how valiantly we try to poke it or grasp it, it is impossible to really understand what is at stake and how could we discuss that. Three points, if you allow me. The members of the European Commission discussed their opinions in front of the committees, and also the Director General's statements seem to confirm that in the draft MFF, there is a tricking around, shuffling around of funds.
Speaker 9
First of all, the European funds whose overall volume is clear. But if we ask how much of this will be spent on agricultural policy, then they give us a number. Then we ask about cohesion funds, then they say another figure about fisheries, then they also come up with another figure. And then if you add up all the fields, and if you add up all these figures, this yields a figure much higher than the overall ceiling of the commission. Same thing comes up when there's a hot political issue, where there's not enough money to support the farmers, then they say, well, this amount is available, but then we come up with another demand that the regional cohesion or social cohesion has demands, and then they come up with another figure.
But it seems that there is this pot that has no ceiling, has no lid. So I think the commission should make it clear what figures are at hand. I really believe in the professional background of the European Court of Auditors, but it is impossible to define the actual figures we are talking about. Secondly, currently, in the council, there are not even initial discussions about the seven year budget to come up, whereas you need an anonymous decision to set it up. So it is to be very diplomatic, it is highly problematic that parliament is already discussing details, which may not be relevant at all.
Speaker 10
Question is if they will be part of the next MFF or not, because the call for the coal legislator, there should be a decision on fundamental political guidelines. There are not, it's a very beginning of the preliminary consultation, the heads of states and government. So the political will should be defined first. Then, again, the indebtedness is an issue. Even the figures for the next draft, there is a high figure for repayments of debts, which may capture the whole MFF, the repayment of debts, which increases uncertainty even further.
Andreas Schwab
Colleague Thomas Stoich, would you like to have the floor immediately so that the commission can answer to all of us, or shall we give the floor first to the commission? Get.
The floor.
Floor to the commission first.
Speaker 6
Okay. Thank you very much for the comments and questions. So on the flexibility, and again, I don't know how much you know because, as you said, you are new, but I'm sure that you have been following. But one of the ideas behind this proposal was to have a budget that will be more agile, so increase in flexibility, simpler, more streamlined, and more strategic. And it's true that we have had in the current MFF a lot of difficulties with the financial crisis, with the COVID, now with the aggression of war against Ukraine.
And if you have so many programs, it's very difficult to shift the funds from one program to another. So the idea was first to reduce to a smaller number of headings, and that's why we have now these four headings, which allows you then, if you have something that today we cannot foresee but could come, to shift already much easier all those moneys. At the same time, we need to have additional flexibility within these headings. And that's why, contrary to what we do today, where nearly 100% of the funds are already allocated for the seven years, here, there will be this flexibility instrument that allows you to allocate only a part for the next three years or two years, and then being able to pre-assess if we continue or we need to shift to other priorities. So it's oversimplifying, but it has to work like that, because otherwise, we are stuck.
And at each time, the only solution was to go to the markets or to have additional instruments, which, of course, is not the intention. On the budget and the amount of the budget, there is a presentation that has been given here and to the political advisers on a standard presentation on the proposal on the MFF that has for each heading. You have all the amount and also the flexibility amounts that you have in each of the headings for each of the programs. So that we can share it again, if you need to. And in terms of the repayment of NexGen EU for the NexMFF, it amounts to 1.1% of the NFF.
And we all knew that these loans, we had to start repaying. So this has been, of course, included in the MFF because we won an MFF that is transparent and that we know how we are using the funds. And yes, the debt has to start being repaid, and it amounts to 11%. I will leave it there. If there are additional questions or clarifications, I will come up.
Eero Heinäluoma
Thank you, mister chair, and congratulations for your election as the new chair. Thank you for the presentations. I have two questions for Mr. Murphy. And the first one is that you were criticizing quite much the performance framework of the MMF proposal, depending also on the experiences what we have got to do during recent years. You said that if the milestones are a little bit unclear, it also has the effect that it's difficult to compare the Member States in their positions and developments.
Could you give some examples of this? What does it mean in practice? And I would also, of course, be interested to hear the Commission's viewpoints because equal treatment between the Member States is one of the cornerstones of our activities, both here and, I suppose, also in the Commission. Then secondly, you said that you see a risk there when if we are taking new debt that the member states can be in a situation that they will be demanding more money already during this seven-year period. Could you also open this idea?
And then once more, I have to make a question for the commission when the criticism from the court of auditors is so hard concerning the possibilities to really do good audit work. And I have not seen any real changes in the commission proposal during these weeks and months. I'm interested to hear, does the commission really think that in the criticism of the court of auditors, there isn't anything where the commission could change its proposal to make sure that the auditing activities can be done in a proper way.
Andreas Schwab
Thank you so much, colleague. I would like to add, based on what the commissioner said, the question for you, mister president, because taking into consideration that need for further flexibility. From my understanding, this should not mean that countries or member states trust at the check because of the money that they get with that higher level of flexibility. I don't understand why they should not prove the use of this money as they did so far. So flexibility is for sure an argument, but it doesn't make the need smaller of justifying where this money has been spent. And if little money is spent in the first two years, little proof has to be given. And if a lot of money is spent in the two years after, lots of proof has been given.
But apart from the fact that the parliament is running out of policymaking in that sense anyhow, I mean, that's not nice for us, but we could maybe consider this. But the logic of proving where the money is spent, am I wrong understanding this as a difficulty, or am I right here?
Speaker 5
Okay. So maybe I can start by if I go back to the first intervention by Beatrice, the commission. I mean, I think she may think we were too critical. I mean, but I think her presentation was a very optimistic interpretation of our opinion. I think it was very favorable as if, basically, there are no issues, and I think that's not the case.
There are some positives. But I think, for instance, the management control systems, I mean, is one of your pillars. We have consistently said they don't work. You're explaining that away now by saying, oh, the projects will be made easier. There are still investments of the same nature that will happen.
You can make the rule book simpler, but this will take years to filter through into the different administrations. We know that. So I think we should be a bit more realistic at times about what the actual impact is and how long these things are gonna take. Another one was about the you get the impression that we're very happy with the performance framework. It goes back to your question.
I mean, you said, great, 5,000 indicators have gone down to 900, which is a positive development. But what we did say, which you didn't mention, is that 25% of the intervention fields have no result indicators. So how is that a performance instrument if there's no result indicators and no impact indicators? And the 15 key requirements sound great. There are all these requirements.
But honestly, I've said this before about the RFPs, are things that are in place, standard, you know, conditions for payment that you have a proper system that you have, you know, it's just nothing new. I mean, it sounds as if this 15 is something on top. It's nothing new. It's just what you would expect from anyone who is receiving funds. So I think, as I say, I just want to put on the record, I mean, that there are still some significant differences between how the commission is interpreting our opinions and what we mean by our opinions.
And some of them are raised, and I'll come back to the questions from Thomas, if I may. I mean, the European Fund, exactly what we have said in our opinions, is the uncertainty. We won't know what the amounts are except for the ring-fenced amounts until the national plans are finalized. So that's what we're talking about, uncertainty and predictability. That is the case.
I mean that's the way it is. The second question was about the seven-year budget. Yes, we have also raised the issue that this is a very tight schedule. I mean I think it's a very important time for Europe. It's very important that this budget is right, that we get the budget right.
And this leads back to your last question about indebtedness, and we have been raising this on numerous occasions in this committee, and we have said from the NGU that the indebtedness was a problem, and it was also linked to the lack of own resources linked to repay the debt. And now we see the impact of that in the new proposal. Point we have 1.26% GNI is the €2,000,000,000,000. And of that, 0.11% of GNI is just to repay the NGU debt, EUR 31,000,000,000 per year. So we're starting off with a minus EUR 31,000,000,000 before we start on any additional policies or new expectations we'd like to deliver on. And that comes back to what you said, the performance framework.
We still have the same issues there. I mean it's not for us still a performance instrument. It's still about implementing or doing things. I mean because if you don't have result indicators or impact indicators, that for us is to show what the real impact of a policy is. That, for us, is performance.
The new debt, it's again linked. If we have a headroom with the budget, which allows for the commission to use, like the Ukraine, billion, like the crisis debt that we talked about earlier, and that's a buffer that's there. So if the commission uses these funds, it could require additional, you know, contributions from the member states. But I think this comes back to the crux of the matter as well. I think for me, I'm an author.
We're very conservative. But for me, budgetary management is about setting the budget that you have the money to pay for. I mean, that's the starting point. And if we look at this budgetary proposal, we have new resources, which are 65,000,000,000 per year. So it's around 22% of the total budget that is supposed to come from new resources.
We already have a precinct with the NGU where we've seen the own resource proposal did not materialize, and the result of that is we have a 310,000,000.00 deficit in our budget every year for the next proposal. So my worry would be, I mean, is the budget fit for purpose, is one thing, and that split in the money and what goes where, but how are we going to fund it? Is the funding going to materialize in terms of the own resources? The own resources are a critical component of the funding of this budget. And if it doesn't materialize, either we're down the road of borrowing, extra G and I contributions, or cutting back on the scale of the ambition within the budget.
But I think you have to be realistic. So going back to your last question, sorry, I don't want to ignore flexibility indeed is important. And I think there already was flexibility in the existing structure. I mean there were always OPs which were there and were supposed to demonstrate what member states want to deliver for the money they were receiving. So that was there.
So it the ethos hasn't changed in that regard. What I think needs to change is the reporting on it, that we can see that that's actually been delivered, because that's what's missing on the ground. And we do many of our performance on The data is not there because it's an expense for the member states to go collecting this data. Their priority probably is to spend the money in the first instance.
Andreas Schwab
Thank you very much, Mr. President. I wonder if there are any other questions in respect to that presentation. I invite you to consider your questions. But it's true that also me, I could discuss that longer, but not met that much of new elements will come up. Therefore, I am very happy at that moment in time, Mr.
President Tietoni, to thank you for the time that you have spent with us, for the presentation that you have been delivering. We are grateful for the commitment of your authority, of the Court of Auditors as an institution. We are really grateful for your personal commitment, and we look forward to welcoming you here soon again in this committee. And on behalf of all my colleagues, I would just like to thank you. Thank you, sir.
Please.
Speaker 5
Thank you. Thank you very much. And as I say, we look forward to engaging on an ongoing basis and contributing to the debate. Thank you very much.
Andreas Schwab
So thank you, colleague, for adjourning again the meeting to discuss item 12, which is called Establishing Global Europe. I'm very happy that Marit Madge is here as rapporteur for opinion. That's the final item on today's agenda. It's about the draft opinion on the Affidavit Committee's approach to the Commission's proposal establishing the new Global Europe instrument. This proposal is part of the package on the next MFF, published by the Commission in July 2025.
We will kick off our debate here by giving the floor first to our rapporteur, Ms. Marit Maier, for five minutes, to present her opinion, followed then by comments by shared rapporteurs. Therefore, Marit, over.
to you.
Marit Maij
Thank you very much, chair. Let me start by thanking the Comms Secretariat for their excellent work and support, also my staff, my team and all colleagues that have been cooperative so far, and also the European Court of Auditors for their work. Global Europe is a key instrument for the union's external action, and it's also about how we uphold our values and commitments in external action. But in the end, it's not only about budgets or structures, it is about people. It is about whether our support really reaches those who need it most, and whether it contributes to stability, development, and opportunities on the ground.
Credibility matters most. Because if we want to be taken seriously as a union by our partners and by our citizens, we need the instruments to work, and we must be trustworthy, not only in what we promise, but also in how we spend our public money, and that is our role as our budget control committee. To make sure that what we decide here is also implemented properly, with transparency, accountability, democratic oversight, and sound financial management in line with the financial regulations. And because a strong instrument was not only about ambition, it requires responsibility and stronger accountability, does not weaken the instrument, it makes it stronger. In my draft opinion, I've tried to be very practical.
It starts with something basic. We need to know what happens with the money. And the European Court of Auditors has been very clear. Even when we simplify, we cannot weaken reporting and monitoring. So we ask for more reporting, clearer traceability, excuse me, better reporting, clearer traceability, and proper access to information, and that audit rights are clearly guaranteed.
We need to ensure that EPO, Olaf, and the court of auditors can access the documents and information necessary in order to fulfill their mandates and have proposed some amendments to facilitate their work in relation to the EU external spending in the future. Without that, trust simply isn't there. At the same time, we need to keep focus. Especially in a context of increasing global instability and changing geopolitical dynamics, the proposal gives more flexibility. And yes, we need that in a changing world.
But flexibility does not mean less clarity or predictability for our partners in the Global South and in other places globally. The court also warns that without clear priorities, funding risks becoming too broad and therefore less effective. So we need to stay focused, make sure spending is targeted and must deliver the results. And this means that we need proper safeguards. We need to be able to follow the money, and we need accountability at every step.
We need to have safeguards for the transparency and traceability of such forms of funding, and conditions that clearly set out the consequences of partial or nonfulfillment. Therefore, in the draft opinion, I have introduced requirements for performance-based plans, also building on Kant's work in recently established facilities such as the reform and growth facility for the Western Balkans. Because this is public money and people expect us to use it carefully and fairly, flexibility remains important, but it must go hand in hand with fairness. And at the same time, our partners, I'm sorry. This I said already.
Finally, the instrument becomes more complex. Governments become more important. For this reason, I also proposed some amendments concerning the implementation of the budgetary guarantee and financial instruments to increase the transparency and the proposed investment board, and to support the risk management of the EU budgetary guarantee and financial instruments by establishing a technical risk assessment group. We need clarity on how the decisions are taken and who is responsible. And we need to make sure, of course, that the parliament can properly exercise its role.
For me, this opinion is about strengthening the instrument, not competing with lead committees, but supporting them. Because if we get accountability and control right, we also strengthen the credibility of the whole instrument. Colleagues, this is just the start. I look forward to your feedback and our work ahead, and let's ensure that this instrument delivers what it's supposed to be. Thank you.
Andreas Schwab
Thank you very much, Marit, for your introduction and your work on this report. That is greatly appreciated. And I would like now to give the floor to the European Commission, who is represented by Mr. Nicolas Stolzer. He's the deputy head of unit and DG Impre and unit 3 coordination and oversight of financing instruments. And I see you at the rear, and I give you the floor.
Over to you.
Speaker 16
Yeah. Good afternoon, and thank you very much. I would like to thank the rapporteur on behalf of the commission for support to the constructive engagement with partner countries to promote the union's values and goals. And the commission fully agrees with the rapporteur that the union's external action objectives need to be achieved in an effective, efficient, and economical manner while respecting the principles of sound financial management. The Global Europe proposal has been prepared with these principles in mind.
And we have simplified the external financing architecture, improved coherence, and struck the right balance between flexibility and predictability. After having heard the rapporteur and seen her draft opinion, we would respectfully like to draw your attention to the following points. First, as part of our attempt to simplify the MFF, the Commission has prepared a horizontal performance regulation applicable to all policy areas, including external action spending. It constitutes a framework for clear, coherent, and streamlined expenditure and performance tracking, harmonizing reporting, monitoring, and evaluation of the entire MFF. With this in mind, our recommendation is that amendments regarding monitoring and reporting are addressed in the performance regulation, in order to keep the streamlined structure under one annual management and performance report and the single gateway portal.
Second, the Global Europe proposal is fully aligned with the financial regulation. Our recommendation is, therefore, to adhere to the provisions of the financial regulation and not to create overlapping or derogative provisions. A number of amendments relate to the financial regulation and are not specific to external action, such as a proposed definition of final recipient, simplified cost options, the internal control framework, as well as due diligence, and should therefore be addressed at a horizontal level, potentially in the next update of the financial regulation. In this context, we would also like to emphasize that external action DGs rely on the Commission's corporate IT systems. Derogations in Global Europe would necessitate distinct IT systems, which would not be cost-effective.
Third, with regard to the rapporteur's amendments concerning the Global Europe Investment Board, we would like to clarify that the detailed rules of procedure for the Board would be established at a later stage. The Board, which is expected to provide strategic and operational guidance only, should not be paralleled with the commission expert groups, as the roads are different. While the Board would be expected to provide guidance on the implementation of budgetary guarantees and financial instruments, the Commission remains the authorizing officer. Finally, we take note of the amendments regarding the threshold for the application of the examination cosmetology procedure for action plans and measures. Just to note, the commission has increased these thresholds, which have remained unnoticed since 2014, taking into account the proportionate impact of inflation and the increase in costs for external action over the past decade and the need to reduce administrative burden.
And then I would like to hand over to my colleague, Andre from DGNST, who will complement.
Thank you very much. Over to you.
Speaker 17
Thank you. To add to this, I will only mention one element related to the performance-based plans. Global Europe is a framework of regulation that covers all partner countries. But what the performance-based plans are only extended to a small subset of partners, in particular, those that are on the accession path towards EU membership. And this is important in the context of the commission's proposal for the future of internal funds in the form of performance-based NRP plans.
And in line with the approach to previous pre-accession instruments, the elements related to this preparation for management of internal funds, these performance-based plans, and the elements related to the performance-based plans will be set at the level of the implementing regulation. Why is this important? This is important so that we can ensure alignment with the final outcome of negotiations of the internal funds in order to credibly prepare our candidates for the management of EU internal funds in the future, in order to avoid creating parallel tracks that would then result in a cliff edge moment at the moment of accession. Thank you.
Andreas Schwab
Thank you very much. That is now giving us the opportunity as a committee to assess the report of mine and of Marit. I speak to you very well. And sorry for this. I will have to get used to all the last names that I haven't spoken out myself yet.
And so the speaker of the EPP group is our colleague, Andrei Kovacev.
Speaker 19
Thank you very much, chair, and thank you to the rapporteur, madam Merit May, for the comprehensive draft opinion on the Global Europe instrument. Thank you, also to the commission. In an increasingly unstable and competitive geopolitical environment, Global Europe provides the union with the means to project its value, strengthen partnerships, and deliver tangible impact in support of development and stability. At the same time, from our perspective of the EPP group, we note the flexibility of the instrument in the commission proposal, but it cannot come at the expense of the predictability of funding that our partners in third countries need. We must ensure clarity, accountability, and democratic oversight to guarantee EU external action legitimacy and credibility.
Speaker 20
Furthermore, it is essential to maintain a strong focus on simplification. The efficiency of EU external action depends not only on the safeguards, but also on the ability to deliver support swiftly and efficiently on the ground. We should therefore avoid introducing additional reporting obligations that increase the administrative burden without clear added value. In particular, duplicating provisions already set out in horizontal frameworks, such as the performance regulations and the financial regulations, appears unnecessary and risks creating additional complexity. We should also be mindful of the challenges linked to the implications implementations in third countries where administrative capacity can be limited.
Speaker 21
Audit and control requirements must remain proportional and practical so they do not delay implementations or reduce the impact of EU support. I'm looking forward to work with the rapporteur on all and other shadow rapporteurs on the reach of compromises that both protect EU financial interests and ensure the efficiency of our instruments. Thank you very much.
Speaker 8
Thank you. Dear commission, dear report rapporteur, dear colleagues, we welcome the work of the rapporteur. The situation is such that in regard to the global Europe instruments, there are much more question marks than answers available. So I would pose five such questions. First, the funding of Ukraine.
The commission's proposal poses an unsurmountable task after 2028. And beyond, another debt would be necessitated beyond the €100,000,000,000 for one particular third country, that is Ukraine. I don't think this is a feasible proposal or solution. Second, flexibility and the transparency of the functioning are important, but flexibility cannot be sustained at the expense of transparency. We need to keep track of the amounts, and disparate areas are put into one basket, which if reshuffle them, it would harm the point of transparency.
Speaker 9
Thirdly, we do not see in the commission's proposal what stood in the communique, the EUR 25,000,000,000 framework and the humanitarian aid. So the guarantees we would like to be back in the text. Number four, it is important that the Central, Eastern European countries should also be able to participate in the management structures of programs outside of Europe. These resources should not be only delivered through Western European structures. And last but not least, we share the question by the rapporteur, which may be even a concern that in terms of the uncertainties of the management structure, it seems that at least four commissioners would be responsible for all this plethora of areas, and it's very difficult to find out who is responsible for what in the post twenty-eight period in managing the global Europe instrument.
Speaker 22
We hope at the end of this joint exercise, answers will be more planted than questions.
Bert-Jan Ruissen
Thank you, chairman. Thank you, rapporteur, for the work. In her report, she's making very good suggestions on transparency and responsibility on this instrument, the Global Europe instrument. An important part of this instrument is development cooperation. And this instrument should contribute to the fact objectives, that is not 0.7% of our GDP, is to be spent on development corporation to actually achieve this level.
It's an important target, an important goal, and we're certainly behind this. It is a difficult task to help poverty and to alleviate poverty. And as a true Christian, I believe that we need to deal with putting an end to suffering both close to home and further away. Now we need to make use of the traditional ties that exist between the countries. Normally, that works a lot better than channeling money through large organizations such as the EU or the UN.
The policy of the union needs to be supportive and should be an additional aspect, not something that should replace the development cooperation of the individual member states. In this committee, the Budgetary Control Committee, we look at the purposefulness and the way in which the means have been put in place. So we need good responsibility, good structures, firm structures, and the rapporteur is tabling some very interesting proposals in this area. But it also calls for a thorough understanding to see how our instruments can be used in the best and most effective way. So I'd like to talk about organizations that work in society close to the local situation.
And because they're so close to the people, they can work very effectively. So we need to keep these organizations in mind. Let me also talk a little about the possibility of being able to forecast. The commission chooses flexibility. This means that it wants to be able to have room for maneuvering between the different areas of support.
But this is very difficult for our partner countries. What can they rely on? We need to be able to be a partner that is reliable. If member states are not reliable, if the EU is not reliable, I think African countries are going to end up in the arms of other partners. China, for instance, we can already see that this happens.
So the reliability is certainly something that we feel needs to be taken into account. So I hope that we can contribute and work with Robert and have a very good report. Thank you.
Speaker 27
Yes. Thank you very much for the floor, and thank you very much to Madam Rapporteur for the work you've done so far on the file. I would also like to thank the court of auditors, which issued and presented to us last week its opinion on the global Europe instrument. The opinion gives us a clear set of possible improvements as regards measurability, accountability, and targeting, which still lag behind. First of all, I would like to comment on the spending targets.
The proposal includes several political priorities, but the targets are either insufficiently quantified or not aligned with current EU ambition. The ECA highlights that indicators are largely output-based and do not allow us to assess real impact. There is still a need to set clear indicative spending targets similar to those in the NDICI instrument, especially in the context of the fight against climate change and social investment, and well align them with current EU policy objectives. By doing this, we can provide partner countries with positive incentives to enhance cooperation. On the sustainability guarantee, the proposal sets out important general principles, notably on human rights.
Embedding sustainability alongside human rights can provide stronger horizontal safeguards across all spending and ensure that Global Europe delivers not only visible but also responsible and future-proof investments. Overall, I consider the transition to a performance-based model important and to ensure ECA access to its auditing rights. In this regard, I will propose several amendments. Otherwise, I thank you very much.
Andreas Schwab
Thank you very much, Michal. For the Greens, we'd speak to Eric Markwald. He's not here at the moment. And for the left, Rudi Canis. I think he's not here at the moment.
Like that, I don't know if there is any other speaker available. If you allow me, Marit, I would like to ask you a question because it happens that my daughter at the moment is in Africa. And what I hear from the people on the ground is that less and less money is getting there anyhow, for budgetary reasons, not only in Europe but also in other parts of the world. Maybe you can also make a comment about the whole amount of money that we will be spending on Global Gateway and not only about how we control it. So what is your expectation, what is your guess?
Thank you very much. And I would like to give the floor back to you to conclude this.
Marit Maij
Yes. Thank you very much, and thanks to the commission representatives and the colleagues for their first reflections. I think what we feel here is that what is important is transparency. I hear that from all the colleagues, least from the side of the parliament, because that is our role also as a budgetary control committee to make sure that we see that what is happening is also traceable and that we can control it as a parliament. At the same time, maybe, chair, to answer your question, which was also, I think, reflected a little bit in the input from my colleague, Bertrand Rauchen, maybe for next time.
Rauchen. It's good to try. Is, of course, the aim of development cooperation as such and the funds of development cooperation as such, and that we see that less and less funds are actually trickling down to the areas where we feel it is necessary that we have the 0.7%. Of course, this is a goal that would also have to be pushed by the development committee, because they are the ones that are working on the content and also when it comes to making sure that the funds are indeed going to countries in the global side. But I think we see overall in the analysis, like mister Rauschen said, and I think, we all know that many member states are also reducing their funds for development cooperation.
The European Union has set this number for Global Europe at 200. Of course, a large chunk is not necessarily for development cooperation, but I think we have to make sure, and this is also something that we can do in other discussions, that some of these parts are ring fenced, and that they are also aimed, and continue to be aimed for the whole period for what they are, for what they are meant to be. Because I think one of the elements that many colleagues also highlighted is predictability. If we have a relationship with countries in the global South or with countries also around the European Union, and we want to have that relationship to be a predictable relationship. We need to be predictable also in the way that we are able to use our funds, and also in the aims of our funds.
So I think that there is actually a need also to have focus, and to see what we are spending those funds on. I understand the arguments from the commission on the performance regulation. At the same time, it's interesting to see that on the one hand, you would like to have these rules go up to the performance regulation, and then go down to the regulation when it comes to the relationship directly with, for example, the candidate member states. So I think here is maybe a little bit of a contradiction, but also an answer why it is important to have in Global Europe itself also some of these horizontal elements mentioned, because they are maybe not necessarily included in the performance regulation or in the performance-based partnerships that you would have with candidate member states. But I feel that there is quite a lot that we have in common here, and I think we can work on a good rapport together with colleagues.
So thank you very much.
Andreas Schwab
Thank you so much, Marit, and thanks a lot also to colleague Raisen for having accepted the wrong pronunciation of his name before. I will try to improve also this. If there are no further requests for the floor, I can tell you that we come to an end with our agenda. There is not any other business on my side. I don't know if you have anything else.
If not, I would like to announce to you the next meetings, which are in April in Brussels, May and June 2, all this year in Brussels. So thanks for having contributed to this meeting. Thanks to the commission for having been here with us, and see you soon again. The meeting is closed.
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