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21 July 2020

Agreement reached on multiannual financial framework and EU recovery fund

In the early morning of 21 July 2020, EU leaders succeeded in reaching an agreement on the EU multiannual financial framework for 2021-2027 together with the Next Generation EU recovery package. The deal was sealed on the fifth day of negotiations in Brussels, which were chaired by European Council President Charles Michel.

The negotiations focused on a package of 40 pieces of legislation dealing with EU programmes and their fiscal impact. The agreement covers the entire bandwidth of EU policy priorities, including digital technology, the green transition, education, research, defence and migration.

“Today‘s decision marks a turning point towards a stronger Europe, towards a more perfect Union. Now, I am looking forward to put this plan into practice together with my fellow finance ministers.” Olaf Scholz, former German Finance Minister

Multiannual Financial Framework

To carry out its tasks, the EU needs its own budget. The Multiannual Financial Framework (MFF) sets the limits for the EU’s overall expenditure for a period of several years. It also defines the EU’s political priorities and areas where action needs to be taken. The annual budgets must stay within the limits of this framework.

The new package of measures will now make it possible to disburse financial assistance to facilitate EU-wide economic recovery in the aftermath of the severe economic downturn caused by the Covid-19 pandemic. In addition, the package will lay the groundwork for green and digital transitions that will boost the growth and competitiveness of European economies. Achieving these objectives will also require support for urgently needed reforms in the member states – not least in order to make them better equipped to cope with future crises. EU leaders also succeeded in agreeing on stable and sustainable financing for the future EU budget, with fair burden-sharing.

Now the crucial work of finalising the necessary legislation begins. The German Presidency will drive this process forward so that the agreed policy objectives can be put into action. The ECOFIN Council (made up of EU finance and economic affairs ministers), which is chaired by former Federal Minister of Finance Olaf Scholz during the German Presidency, will play the decisive role here.