Proposal for a Regulation of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union (recast) | Legislative Train Schedule (2024)

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The Financial Regulation (FR) (Regulation (EU, Euratom)2018/1046) lays down the principles and procedures governing the establishment, implementation and scrutiny of the EU budget. The most recent rules came into force on 2 August 2018. Article 280 of the Financial Regulation provides for regular review of the rules whenever necessary, and in any case at the latest two years before the end of each multiannual financial framework (MFF). A review is needed following the entry into force of the 2021-2027 MFF on 17 December 2020.

The European Parliament, in anticipation of Commission’s proposal for a revision of the FR, presented in an own-initiative report adopted on 24 November 2021, its expectations from the forthcoming revision of the FR. It highlighted that the revision should build around increased democratic accountability, transparency and efficiency of EU spending, as well as the respect of EU values. It called for the FR to reflect an appropriate role for Parliament in budgetary scrutiny and discharge functions, including for the NGEU operations and insisted that external assigned revenue forms an integral part of the budget.

On 16 May 2022, the European Commission tabled a proposal to amend EU’s financial rules. The main objective of the proposal was to align the financial rules to the provisions of the multiannual financial framework (MFF) for the years 2021 to 2027 and the EU’s recovery instrument, the Next Generation EU (NGEU). The proposal also included targeted improvements and simplifications with the aim to better protect the EU budget and enhance its transparency and agility.

On 9 February 2023, Parliament's co-rapporteurs presented a draft report. The joint committee (Rule 58) voted on the draft report on 27 April and adopted the decision to enter into interinstitutional negotiations. This decision was announced in plenary on 8 May.

The committee's report aimed to:

1. Ensure the respect of the Union's values (Article 2 of the TEU), the Charter of Fundamental Rights of the EU, and compliance with the Rule of Law Conditionality Regulation when implementing EU programmes and activities. The report further proposes that compliance with the principle of social conditionality applies to EU funding, and clarifies the application of the do no significant harm principle.
2. The establishment of a single, integrated and interoperable information and monitoring system, as of 1 January 2026, allowing for a clear overview of the distribution of Union funds disbursed.
3. Enhance information by the Commission on its borrowing and lending operations.
4. Integrate assigned revenue in the EU budget and provide information by category of assigned revenue. Also make explicit that this revenue is subject to Parliament’s discharge decision.
5. Extend the possibility to re-use decommitted appropriations to all appropriations and allow for the budgetary authority to revise their allocation.
6. Ensure an appropriate role for the Parliament in the setting up, supervision and scrutiny of trust funds.

Council adopted its position on the mandate for negotiations with the Parliament on 14 June. A first political trilogue took place on 28 June and was agreed to mandate discussions at technical level.

On 7 December 2023, after several trilogues, a political agreement was reached on the file. The main changes are:

• Enhanced transparency and tracking of EU funds: the internal control system is reinforced and a new interoperable database will be set for tracking fund beneficiaries. Essential information on the recipients of EU funds will be published in a centralised database on the Commission's website as from June 30, in the financial year following the allocation of the funds. Furthermore, the Early Detection and Exclusion System(EDES), which protects the EU budget from risks like fraud and irregularities, will be extended to funds implemented under shared management, as from January 2028 and will cover the most serious offences.
• Enhanced simplification: in view of reducing bureaucracy for small and medium-sized enterprises and individual applicants, a new category for very law grants, capped at EUR 15.000, has been established.
• Respect of EU values and social conditionality: the text highlights the commitment to the Union's values and introduces social conditionality (compliance with essential employment and occupational safety standards) as a prerequisite for the disbursem*nt of EU funds. Financial rules incorporate more effectively the "Do No Significant Harm" principle and measures to ensure gender equality and climate change in EU funding.
• Further improvements: the introduction of a legal framework for the EU's participation in global initiatives, the possibility to finance structural renovations through loans, clarifications such as for the definition of 'crisis' and the rules applicable for crisis management, transparency and accountability concerning the publication of borrowing and lending operations, as well as precisions in relation to the assessment of conflict of interest.

References:

• EP Legislative Observatory, Financial rules applicable to the general budget of the Union (recast), 2022/0162(COD)
• European Commission,Proposal for a Regulationof the European Parliament and of the Council amending Regulation (EU, Euratom) 2018/1046 on the financial rules applicable to the general budget of the Union (recast), COM(2022) 223 final
• Opinion06/2022of the European Court of Auditors concerning the Commission proposal for a Regulation of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union (recast)
• European Parliament resolution of 24 November 2021 on the revision of the Financial Regulation in view of the entry into force of the 2021-2027 multiannual financial framework (2021/2162(INI)), P9_TA(2021)0469
• Joint declaration (2020/C 444 I/06) of the European Parliament, the Council and the Commission on reassessing the external assigned revenue and borrowing and lending provisions in the Financial Regulation
• Joint statement by Parliament, the Council and the Commission Annexed to the legislative resolution of 16 December 2020 on the Council position at first reading with a view to the adoption of a regulation of the European Parliament and of the Council on a general regime of conditionality for the protection of the Union budget (09980/1/2020 – C9-0407/2020 – 2018/0136(COD)), P9_TA(2020)0356
• Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union
• European Parliament, draft report on the proposal for a regulation of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union (recast), 2022/0162 (COD)
• European Parliament, report on the proposal for a regulation of the European Parliament and of the Council on the financial rules applicable to the general budget of the Union (recast), 2022/0162(COD)
• Council, Regulation of the European Parliament and of the Council on the financial
  rules applicable to the general budget of the Union (recast) (first reading)
  − Mandate for negotiations with the European Parliament, Adopted by the Council on 14 June 2023, 10361/23
• European Parliament, Deal on revised EU financial rules, Press release, 8 December 2023

Further reading:

• European Parliament, EPRS,Revision of the Financial Regulation,At a Glance, November 2021.

Author:Marianna Olympia Pari, Members' Research Service,legislative-train@europarl.europa.eu

As of 15 December 2023.