The President of the European Council, Herman Van Rompuy, in his concluding remarks, defined the meeting as the single longest one so far in his mandate, but he said to be satisfied that all along this negotiation the bigger picture was kept in mind and, even in such difficult economic conditions, essential factors of continuity and of growth were kept. "The European Council has just agreed not on just any budget but a balanced and growth-oriented budget for Europe for the rest of the decade. This compromise found shows a sense of collective responsibility from Europe’s leaders, even if we must remember that a final agreement must still be reached with the European Parliament." he commented. From the overall European perspective, Mr Van Rompuy emphasized that this budget is: future oriented, realistic, and it is driven by pressing concerns. 

Summary of the European Council agreement
The deal reached at the European Council limits the maximum possible expenditure for a European Union of 28 Member States Croatia is expected to joun EU in 2013) to EUR 959.99 bn  in commitments, corresponding to 1.0% of the EU's Gross National Income (GNI). This means that the overall expenditure ceiling has been reduced by 3.4% in real terms, compared to the current MFF (2007-2013). This is to reflect the consolidation of public finances at national level. This is the first time that the overall expenditure limit of a MFF has been reduced compared to the previous MFF. The ceiling for overall payments has been set at EUR 908.40 bn, compared to EUR 942.78 bn in the MFF 2007-2013.

Preparing for the future
Despite the cut in the overall expenditure ceiling of around EUR 34 bn in both, commitments and payments, EU leaders agreed on a substantial increase of the financial means for future geared expenditure such as research, innovation and education, in order to promote growth and create jobs. In fact, the expenditure ceiling for sub-heading 1a ("competitiveness") amounts to EUR 125.61 bn, which is an increase of more than 37% compared to the MFF 2007-2013.
In addition, they committed to increase the funding for the EU research programme "Horizon 2020" and the "Erasmus for all" programme in real terms. Heads of state and government also agreed to create a "Connecting Europe" Facility, a new instrument to bridge the missing links in Europe's energy, transport and digital infrastructure, for which EUR 29.30 bn have been earmarked - an increase of more than 50% compared to the current MFF.

Showing solidarity
The European Council confirmed its commitment to reduce disparities between the levels of development of the EU's various regions by setting the expenditure limit under sub-heading 1b ("cohesion") at EUR 325.15 bn. As a concrete example of the European Council's solidarity, the poorer Member States will receive a larger share of the total Cohesion policy envelope than in the current MFF. Under the same sub-heading a youth unemployment initiative has been created with an envelope of EUR 6 bn half of which will be financed out of the European Social Fund and the other half from a new budget line. The food aid scheme for most deprived people has been put on a sustainable basis and will be allocated EUR 2.5 bn.

Ensuring sustainability
As regards heading 2 ("sustainable growth: natural resources"), the European Council set the expenditure ceiling at EUR 373.18 bn. It also agreed on some guiding elements for the next reform of the Common Agricultural Policy(CAP) which should become greener and fairer:

• 30% of direct payments will be made conditional on "greening" to ensure that the CAP helps the EU to deliver on its environmental and climate action objectives.
• Direct aids will be more equitably distributed between Member States. All EU countries whose level of direct payments is currently below 90% of the EU average will see one third of this gap closed by 2020.

Providing added value
Concerning heading 3 ("security and citizenship"), the European Council agreed on an expenditure limit of EUR 15.69 bn. The measures under this heading include in particular actions in relation to asylum and migration and initiatives in the areas of external borders and internal security.

As regards heading 4 ("global Europe"), the European Council underpinned its determination to develop the role of the EU as an active player on the international scene. The expenditure ceiling under this heading has been set atEUR 58.70 bn.

Under heading 5 ("administration"), the agreement reflects Member States' efforts to consolidate their public finances. The expenditure limit has been set at EUR 61.63 bn.

Furthermore, EU leaders agreed on an expenditure limit of EUR 27.00 bn under heading 6 ("compensation") with the aim of ensuring that Croatia will not be a net contributor in the first years following its accession to the EU.

Ensuring flexibility
In addition, the European Council agreed to extend the following five existing instruments outside the MFF.

• The European Development Fund (EDF): It finances development assistance for African, Caribbean and Pacific countries (ACP countries), overseas countries and territories. The European Council agreed to allocate EUR 26.98 bn to the EDF for 2014-2020.
• Four instruments which are mobilised only in case of need. These are:

1.  The Emergency Aid Reserve: It is used to finance humanitarian, civilian crisis management and protection operations in non-EU states in unforeseen events. EUR 1.96 bn have been agreed for the next MFF.

2.  The Flexibility Instrument: It is mobilised for clearly identified needs that can not be financed within the limits of the MFF ceilings. Its maximum amount has been set at EUR 3.297 bn.

3.  The Solidarity Fund: It is designed to provide rapid financial assistance in the event of a major disaster occurring in a Member State or candidate State. The amount to be budgeted to the fund in the next MFF may not exceed EUR 3.5 bn.

4.  The European Globalisation Adjustment Fund: It is intended to help workers made redundant as a result of major structural changes in world trade patterns in their efforts to find new employment. It will be possible to mobilise up to an amount of EUR 1.05 bn in the new MFF.

Comparative table (in 2011 prices)

The agreement includes a so-called contingency margin aimed at allowing flexibility within the multiannual financial framework for 2014-2020 to cope with unforeseen circumstances. The possibility for a review clause forms also part of the deal.

Opening new perspective
On the revenue side, the European Council opened the way for a simpler and more transparent own resources system. More concretely, work will continue to replace the current VAT based own resource by a new one, which should be made as simple and transparent as possible, and which should provide a stronger link with the EU VAT policy and the actual VAT receipts. The participants of the enhanced cooperation in the area of the new Financial Transaction Tax will examine whether the tax could become the basis for a new own resource.

Correcting budgetary imbalances
As regards corrections, the UK rebate and the rebates on the UK rebate are maintained. A reduced VAT call rate of 0.15% (rather than 0.30%) will apply, for 2014-2020 only, to Germany, the Netherlands and Sweden. Denmark, the Netherlands and Sweden will benefit from reductions of their national GNI payments for the period 2014-2020 of EUR 130 million, EUR 695 million and EUR 185 million respectively. The Austrian annual GNI contribution will be reduced by EUR 30 million in 2014, EUR 20 million in 2015 and EUR 10 million in 2016. Last but not least, the member states will be allowed to retain only 20% (instead of 25%) of the traditional own resources to cover their collection costs.

The way ahead
Now negotiations with the European Parliament will be launched in order to allow the adoption of the around 75 legislative acts covered by the MFF package. Within this framework the content of the agreement reached at the European Council feeds into the legislative work:

• the part of the agreement relating to the MFF Regulation and the rules on own resources is translated into legislative acts. These are adopted by the Council after having obtained the consent or the opinion of the European Parliament, depending on the act;
• the part of the agreement relating to the financial aspects of the sector-specific acts provides the Council guidance for finalising the legislative work in co-decision with the European Parliament. 

SOURCES and further Information: 

European Council Meetings ,

EU MMF negotiations

Multiannual Financial Framework 2014-2020 for Dummies - A quick glossary

EU MMF 2014 - 2020

10 things to know to follow MFF negotiations

The negotiating box