Prime Minister’s announcement on the multiannual financial framework and the recovery package
Government Communications Department 9.9.2020 14.16 | Published in English on 9.9.2020
PRIME MINISTER’S ANNOUNCEMENT
On Wednesday 9 September, Prime Minister Sanna Marin made an announcement to Parliament on the new EU multiannual financial framework and the COVID-19 recovery package. At its special meeting in July, the European Council agreed on the next multiannual financial framework, which is the EU’s long-term budget for 2021–2027, and on a recovery package to help the Member States deal with the effects of the COVID-19 pandemic.
Prime Minister’s announcement on the multiannual financial framework in Parliament on 9 September 2020. Check against delivery:
Honourable Members of Parliament,
This past July, we reached an agreement on the EU’s multiannual financial framework after more than two years of intensive negotiations. The negotiations on the package began during Prime Minister Juha Sipilä’s Government and were concluded six months before the start of the new financial framework period. It has been a long, multi-stage process. Finland has played an important role in achieving the outcome of the negotiations, as we presented a negotiation box with figures to the Member States during our Presidency. The final outcome of the negotiations on the financial framework is close to the specifications in the negotiating box presented by Finland in December.
Over the course of the negotiations, Finland has promoted its national objectives as a Member State while also playing a uniting and neutral role as the Presidency. Our objective has been to achieve a modern financial framework that responds to the new challenges of the future while, at the same time, enabling the renewal of the Union’s traditional policy areas. We have not sought to overhaul or revolutionise the financial framework, aiming instead for a stable transition that will help us meet the challenges of the future.
Alongside the financial framework, the current pandemic and the discussion surrounding the recovery instrument have brought their own significant challenges to the negotiations. The negotiations had to be held in the spring before the July European Council, largely via videoconferencing. In addition, bilateral discussions between the Heads of State or Government played an important role in reaching an agreement. For my part, too, I have engaged in intensive discussions with my fellow Prime Ministers in order to find a solution.
It is clear that in the current global crisis, the actions of individual Member States alone are not enough—we also need to find common answers to the economic problems caused by the pandemic. We are still facing a deep, serious crisis. According to the Commission’s forecast, the economy of the entire EU area will shrink by 8.7 per cent this year. In many Member States, the drop will be even steeper than that. For Finland, as an export-dependent country, the recovery of the entire European Economic Area is absolutely critical. Robust measures, such as the recovery instrument, are very much needed.
The negotiations on the recovery instrument were linked to the negotiations on the financial framework, with the two forming a single entity. The financial framework will play its own strategic role in the implementation of EU policy over the next seven years. The recovery instrument, on the other hand, is a one-time, short-term crisis response measure. It is important that the EU demonstrated its ability to act and make decisions in the face of an exceptional crisis and that the Member States were able to reach an agreement on the package at the July European Council.
The agreement on the recovery package was also reflected in the financial market in the form of positive interest rate, stock market and exchange rate reactions. If we had not reached an agreement, the consequences could have been drastic.
The importance of reaching an agreement must not be underestimated. Our interdependencies run deep, whether we like it or not.
The formation of Finland’s position on the financial framework and the recovery instrument took place in several parliamentary letters to the Government, in which the Grand Committee of Parliament formulated Parliament’s position after consulting with the other Committees. This provided a starting point for Finland’s conduct in the negotiations. In line with Parliament’s guidelines, we promoted the objectives and conditions set by Finland, within which we were able to accept the compromise that required unanimity from all Member States.
Our key objective was to limit the amount of grants in the recovery instrument and to improve the balance between grants and loans in relation to the Commission’s proposal. We also aimed to restrict the direct or indirect liability of each Member State so that the total liability would be known in advance and remain at a manageable size. The focus was on ensuring the budgetary sovereignty of Parliament. From a constitutional point of view, it was essential to limit the State’s liability for borrowing from the Union and to specify the nature and the grounds for allocation of the secondary and outgoing liability of a Member State on a legal basis and within a precise time frame.
We succeeded in achieving these goals.
In our negotiations on the recovery instrument, we were able to reduce the total amount of grants by EUR 110 billion. The ratio of loans to grants is now considerably more balanced than in the Commission’s proposal, where grants would have made up two thirds of the support. We managed to reduce the amount of grants from EUR 500 billion to 390 billion and, at the same time, reduce Finland’s contribution by almost EUR two billion compared to the Commission’s original proposal.
Finland also worked actively to ensure that the recovery instrument was in line with the EU Treaties. At Finland’s request, the legal service of the Council, i.e. of the Member States, carefully assessed the package and found it to be compatible with the Treaties. The final position on the matter will be formulated by the European Court of Justice.
When assessing our national budgetary sovereignty, the most important issue was the amount and specificity of the liabilities. Throughout the negotiation process, the Government also paid particular attention to this issue, acting with initiative and determination to ensure a favourable outcome.
When it comes to the amount and specificity of the liabilities, the outcome of the negotiations was good. In line with Finland’s objectives, the maximum liabilities of each Member State were limited significantly. The maximum annual liabilities per Member State could be no more than twice the Member State’s GNI-based contribution. This is a new, clear entry limiting the maximum annual liabilities.
We are not creating new competencies for the Union; instead, the recovery instrument is an exceptional one-off measure implemented within the EU’s treaty, legislation and institutional framework without undermining the institutional balance. When funds are distributed through EU programmes, their use is subject to both conditionality and ex-post supervision.
As part of the final outcome of the negotiations, a stronger role was given to national recovery plans defining the use of funds, and the responsibility for deciding on their adoption was transferred to the Council. This also effectively strengthened the role of Parliament. We also agreed on an emergency brake mechanism in the negotiations, which means that the payment of recovery funds to a Member State can be suspended if that Member State fails to comply with its national recovery plan. The matter can be brought to the European Council at even one Member
Finland will receive an estimated EUR 3.2 billion from the recovery instrument. We will draw up our own recovery plan to stimulate our economy in the midst of this serious crisis. With funding from the recovery instrument, we can support and accelerate the renewal of our industry, the digitalisation of our society and our transition to a low-carbon economy. At the same time, we can respond to the extensive social impact of the crisis.
Our recovery plan is based on the country-specific recommendations issued within the framework of the European semester, and the aim is to engage in open dialogue with various actors in society, including businesses, regions, civil society and labour market organisations. The Government will submit its report on the national recovery plan to Parliament during the autumn session.
The size of the multiannual financial framework remained moderate, at EUR 1099 billion. An overall moderate level was one of Finland’s key objectives. However, the focus of the financial framework has shifted and, in the next period, most of the funding will be allocated to new priorities.
One of our national objectives in the negotiations was to secure the level of support Finland receives within the financial framework, for example with regard to rural development funding. As part of the package, we were able to negotiate a “national envelope” of EUR 400 million for rural development, which means we managed to increase the amount of funding Finland receives in a situation where funding was otherwise being cut. This can be considered a major success.
For the first time, we also negotiated a national envelope of EUR 100 million in special support for sparsely populated areas in Northern and Eastern Finland.
Other programmes important to Finland, such as Horizon Europe, Erasmus and the various home affairs funds, will also see significant increases in the coming period compared to the current one.
In the negotiations in July, the rule of law was incorporated into the conditions for the use of EU funds. This was an important priority for Finland, and now we are working to create a mechanism that will be as strong as possible in practice.
Climate conditionality was also given a strong role, as around one third of all funding must be spent on climate action. This sends a strong message about the EU as a responsible climate actor, both to our citizens and more broadly outside the EU. It is also in Finland’s interest that all EU Member States allocate at least one third of their recovery funding to climate action. This will accelerate the transition to a carbon neutral Europe and will also support the EU in increasing its 2030 climate target.
In the public debate, some have wondered whether we could have achieved a more favourable outcome for Finland using some other negotiating tactic. Throughout the negotiation process, even before my term as Prime Minister, we have been a constructive negotiating partner while also placing a strong emphasis on our priorities. At the final stages of the negotiations, we were actively involved and made concrete proposals in order to make progress.
In these negotiations, we worked closely with countries such as Sweden, Denmark, the Netherlands and Austria and were able to significantly reduce the share of grants in the recovery instrument and to make the ratio of loans to grants more balanced than in the Commission’s initial proposal.
However, not all of our interests were consistent with theirs. In this case, as in earlier negotiations, Finland has not applied for a rebate on its membership fee because we have benefited more from the national allocation. Now, too, we have negotiated a significant allocation of EUR 500 million. We could not have reached the same level through rebates. During the next financial framework period, Finland will also be one of the lowest net contributors and will contribute much less than any of the countries receiving rebates. From this point of view, too, the outcome of the negotiations can be considered in line with our objectives.
The Council and the European Parliament still have to finalise the legislative proposals for the recovery instrument. Parliament has discussed and will continue to discuss the multiannual financial framework and the recovery instrument. We will bring the sector-specific regulations included in the package to Parliament in the form of follow-up Union communications during the autumn if necessary. The main proceedings will take place through the ratification of the “own resources” decision, on which the Government will submit a proposal to Parliament at the end of the autumn. The regulation will be brought before Parliament immediately and without delay, once the detailed negotiations in Brussels have come to a close. The timetable is therefore due to the negotiations at the EU level, not due to the Government. The “own resources” decision will be discussed in Parliament’s Plenary Hall, and every Member of Parliament will have the opportunity to formulate their position and vote on the matter.
In negotiations between 27 Member States, it is clear that no single country can dictate the outcome or get everything it wants. The final package is always a compromise. Yet Finland was successful, and we achieved a significant portion of our objectives in line with the guidance received from Parliament. We supported the agreement because the Finnish economy is closely linked to the recovery of the European economy. Work on our national recovery plan has already begun, and it is important that we find genuinely effective measures to strengthen Finland’s economy, competitiveness and resilience in the midst of this crisis.