1. « Reforming the budget, Changing Europe  » Stefan Lehner Director, European Commission, Directorate-General for Budget Office of the Committee for European Integration Warsaw, 8 April 2008

2. Commission undertakes a review of the EU budget
„In accordance with the conclusions of the European Council, the Commission has been invited to undertake a full, wide-ranging review covering all aspects of EU spending, including the Common Agricultural Policy, and of resources, including the United Kingdom rebate, and to report in 2008/2009.“
(Inter-Institutional Agreement between the European Parliament, the Council and the Commission, )

3. Payments ceiling: Own resources and EU Financial framework (in % of Gross national income (GNI); till 2002: GDP)
Enlargement -> EU15
Enlargement -> EU25
Enlargement -> EU27
Own resources ceiling
(Change from GDP to GNI)
Multiannual financial framework: ceiling for overall payments

4. Structure of the EU financial framework 2007 - 2013
Total: € 975 billion (in current prices)

5. EU Budget trends
The profile of EU spending has changed considerably over 25 years. But has it changed enough?
For example: The Common Agricultural Policy absorbed 61% of the budget in By 2013, the share of CAP spending could almost halve (32%), though CAP will stay a major part of EU spending.

6. Key objectives of the reform
Analyse longer-term challenges and issues facing the EU
See how European budget can be shaped to serve EU policies better and to meet challenges of the decades ahead
Seek a new consensus on EU spending priorities, how the budget is managed and how to fund it.
The review will NOT make a proposal for the next financial framework

7. Preparing for Tomorrow’s Challenges
New policy challenges have emerged:
Globalisation: Europe has to improve its capacity to adjust to structural change: Scientific and technological progress, innovation and mobility are getting more important.
Energy supply, protection of the environment und of the climate : global demand for energy is growing, so is Europe’s import dependency. Europe is a leader in environmental protection, but the mitigation of climate change and of its consequences are main challenges in the future.
Security and safety: E.g. increased demographic and income disparities and the instability of neighbouring regions increase migratory pressures.
Solidarity: The pressure on the European way of life and its economic and social cohesion will increase.
Globalisation has brought home the need for Europe to have an effective presence worldwide if it is to project its interests and values successfully.

8. EU facing stiff competition
Asia leads the world in growth
Source: International Monetary Fund, «Finance and Development», June 2006

9. Challenge: Boosting knowledge and innovation
Gross domestic expenditure on R&D
Lisbon-target
The EU is still far below the Lisbon target for research expenditure.

10. Challenge: Facing the consequences of climate change
Changes by the end of this century compared to end of last century
Changes in precipitation
Changes in crop yields

11. Challenges for rural and maritime areas
Climate changes:
Significant consequences for rural and maritime areas
Source: International conference « Climate changes »

12. Challenge: Securing a sustainable energy supply
EU IMPORT DEPENDENCY (%)
The EU’s dependency on foreign energy is increasing constantly

13. Challenge: Guaranteeing security to EU citizens
New security threats are more diverse, less visible and less predictable
Environmental disasters
Fighting crime
Food safety
Consumer protection
Disease prevention

14. Challenge: Promoting Solidarity & Cohesion
In 2004, the top regions (with 10% of the EU population) had a GDP per head that was almost 5 times higher than that in the bottom regions (with 10% of the EU population).
4th Cohesion report, May 2007

15. Challenge: Engaging an interdependent world
In an interdependent world, an effective presence and strong efforts to provide support are a vital necessity.
Education
Access to water
Peace and Democracy
Poverty

16. How to respond to the challenges: Which role for the EU budget ?
Re-applying the principle
of European value added/subsidiarity
Discussing anew the level at which the objectives of the proposed action can best be achieved (EU, national, regional, local)
Choosing the appropriate tool
(the principle of proportionality)
Coordination
Legislation
Public spending: National and/or EU
The reform of the EU budget expenditure will emerge from a critical review of the new challenges and the existing obligations, in the light of the principles of European value added and proportionality

17. Significant shift in EU budget funding
The EU budget is increasingly based on the GNI contribution, from 11% of the total in 1988 to 74% in 2013.

18. Financing EU policies - principles
The current financing system has provided sufficient resources to finance the EU budget
BUT
Member States tend to judge policies primarily in terms of "national returns" and not so much in terms of the added value of policies for EU citizens.

19. Debates on net contributions led to a rise in budgetary «corrections»
UK correction – 66% of the difference between contributions and its receipts
Lump sum payments to the Netherlands and Sweden
Reduced VAT rates and reduced UK correction payments for the Netherlands, Sweden, Germany, Austria
Retention of 25% of traditional own resources for all Member States collecting them
The financing of the EU budget has become incomprehensible

20. The challenge of reforming the financing system
A consensus on spending priorities could facilitate a reform of the EU own resources.
Should alternative sources be envisaged taking in to account the national sovereignty on fiscal policy?
Could a new system better contribute to and support related EU policies?
Should corrections disappear or be generalized ?
The overall composition of the Union's own resources system will be an important element in the review

21. The Timetable
Consultation Paper setting out the challenges and issues at stake
Launch of public consultation phase
Deadline for submission of contributions
Political Conference
Commission presents the Review
12th September 2007
15th April 2008
Autumn 2008
[2008]/2009

22. Consequences of the Review of the Financial Framework ?
The European Council can take decisions on all the subjects covered by the Review, in full respect of the established rights of the European Parliament.
The Review will also be taken into account in the preparatory work on the following Financial Framework (starting in 2014).
The mandate was agreed by the European Parliament, the Council and the Commission, in the context of the May 2006 Interinstitutional Agreement defining the financial framework

23. The Commission consultation
A Commission website presents the issues and collects contributions:
Contributions can be sent until 15 April 2008 to

24. « Reforming the budget, Changing Europe  » Stefan Lehner Director, European Commission, Directorate-General for Budget Office of the Committee for European Integration Warsaw, 8 April 2008