At the second attempt, the heads of government of EU member states have agreed on the European Union’s multiannual financial framework, or budget,  for the period 2014 to 2020. The deal provides for a new budget ceiling of 960 billion euros.  In view of the difficult prevailing financial situation, the heads of state and government also agreed on a review clause; this means that spending allocations will be reviewed after a period of two years.

Chancellor Angela Merkel saw the agreement reached by the 27 member states as an important precondition for further negotiations with the European Parliament, which must still approve the decision of the Council.

Agreement is a sign of solidarity

All member states demonstrated their willingness to compromise, reported the Chancellor. It should now be clear to countries outside Europe that Europe is able to achieve results. "This is a good agreement and an important agreement," declared Angela Merkel after a marathon 26 hours of negotiations. Germany was able to achieve its objectives:

• Stronger growth, greater competition and thus more jobs and investment in the future
• The ceiling on the financial framework reflects the consolidation efforts of member states
• Fairness between net contributors.

In future the member states of the European Union will pay in one per cent of their gross national income to the multiannual financial framework. This was the goal of the German government at the outset. Germany will retain all its rebates on payments to the EU. In 2011 these amounted to 1.98 billion euros.

EU budget for investment in the future

The Chancellor stressed that more funding will now be available for research. The European Union’s Horizon 2020 research programme, for instance will see funding rise by four billion euros.

The funding of the ERASMUS student exchange programme too will increase by 31 per cent, encouraging mobility among German students.

Spending on infrastructure, traffic and transport will double.

Few cuts for German farmers and eastern states

Farming subsidies will be reduced degressively, i.e. very gradually, and will in future be linked to environmental requirements. "We have been careful to ensure that there will be no sudden cuts here," said Angela Merkel.

Structural funds will be used to assist needy regions first and foremost. The regions in eastern states that will now no longer be covered will be protected by a safety net. Structural aid will amount to 64 per cent of the funding hitherto available. 

Budget law to be made more flexible 

The multiannual financial framework provides for a ceiling of 960 billion euros on financial commitments entered into by the European Union over the next seven years. It limits actual payments to 908.4 billion euros.

In the field of structural policy in particular there will inevitably be a time lag in the disbursement of funds because of the time required for planning procedures. The European Council has thus proposed greater flexibility. Payments will not longer be forfeited if not disbursed by the end of the budget year.

After a period of two years, funding appropriations are also to be reviewed in future. This review clause is designed to ensure that funding is used properly and that it helps generate growth within the EU. The Chancellor deems this too a breakthrough. 

Programme to tackle youth unemployment 

One special concern of the European Council was the need to reduce youth unemployment in Europe. A sum of six billion euros will be available over the next six years to tackle the problem. 

Half of the sum is to come from the European Social Fund and half from the European Cohesion Fund for disadvantaged regions. Funding is to target regions suffering youth unemployment of over 25 per cent. 

Chancellor Angela Merkel stressed that, "This initiative has the full support of Germany". In-company vocational training and measures to promote self-employment will be focuses of new steps to resolve the problem. 

Impetus for trade 

The summit meeting spoke out in favour of bilateral trade agreements between the European Union and strategically important partners including the USA. An ambitious trade agenda is to generate robust growth of two per cent and should create two million jobs in the medium term.

Chancellor Angela Merkel had already called for a free trade agreement with the USA.

The multiannual financial framework of the European Union (MFF) is the central planning instrument for the use of EU funds. This makes it the foundation for realising the medium-term goals of the European Union. Since 1992 it has been drawn up for a seven-year period, and is the basis on which the EU’s annual budget is produced. The MFF places a ceiling on spending over the period covered and puts a cap on spending in each major expenditure category. It thus provides the political and budgetary framework within which resources and investments can be targeted and used as required. The current multiannual financial framework for the period 2007 to 2013 is worth almost 1,000 billion euros, of which Germany pays about 20 per cent.