The Six Spending Categories of the Multiannual Financial Framework

Lesson Transcript
Instructor: Amy Troolin

Amy has MA degrees in History, English, and Theology. She has taught college English and religious education classes and currently works as a freelance writer.

In this lesson, we will study the European Union's Multiannual Financial Framework, paying special attention to its six spending categories and some of the programs supported by each of them.

The Multiannual Financial Framework

Do you ever sit down and plan your financial future? Do you try to set priorities for yourself and control what you spend? Do you deliberately decide to spend more money on one activity or area of your life than on others? Do you set a firm limit for your overall spending? If you do, then you are in good company, for the European Union does the very same thing with its Multiannual Financial Framework.

The Multiannual Financial Framework is the European Union's tool for long-term financial planning and spending control. The Framework sets ceilings for overall and annual spending, lays out spending categories that reflect the Union's priorities, sets spending limits for each of those categories, and provides financial discipline and order to help the Union meet its goals. Every few years, the European Commission proposes a new Multiannual Financial Framework, which then must receive the European Parliament's consent and the unanimous approval of the Council of the European Union.

The Multiannual Financial Framework covering the period from 2014-2020 sets a commitment ceiling of 960 billion Euros for that period. These funds come from the European Union's traditional own resources (TOR), like customs duties, taxes on the Union's member states, and standard contributions from member states. The Framework divides these 960 billion Euros into six spending categories, trying to make sure that everyone gets a fair slice of the Union's financial pie. We'll spend the rest of this lesson looking briefly at each of these categories.

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  • 1:50 Smart & Inclusive Growth
  • 2:41 Sustainable Growth
  • 3:12 Security & Citizenship
  • 3:45 Global Europe
  • 4:29 Administration & Compensations
  • 5:15 Flexibility
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Smart and Inclusive Growth

The Framework's first category is 'Smart and Inclusive Growth.' It gobbles up 47% of the Union's allocated funds. This category focuses on developing Europe's potential in science, education, business enterprises, and communication and transportation networks. For instance, the Horizon 2020 program for research and innovation receives its funding through this category. Horizon 2020 encourages science and industry to work together for positive social change. Erasmus+ (a program that offers young people opportunities in education, training, and sports), the Youth Employment Initiative, and the Cohesion Fund (which supports development in struggling countries) also fall under this category.

Sustainable Growth: Natural Resources

Another large chunk of the Framework's financial pie, 38.9% of it, goes to its second category: 'Sustainable Growth: Natural Resources.' This category encourages the proper use and conservation of Europe's vast natural resources. It helps fund rural development initiatives, like the European Agricultural Fund for Rural Development, offers income assistance to farmers, and manages environmental programs.

Security and Citizenship

A third, smaller chunk of the European Union's financial pie, only 1.6%, goes to the Framework's third category: 'Security and Citizenship.' Money allocated here goes to food safety and public health initiatives, like the Health for Growth program, consumer protection efforts, the Asylum and Migration Fund to assist immigrants and refugees, and the Internal Security Fund to aid law enforcement and border management.

Global Europe

The Multiannual Financial Framework's fourth category, 'Global Europe,' slurps up 6.1% of the European Union's allocated funds. Through this category, the Union interacts with nations outside its membership, providing humanitarian aid and development assistance throughout the world. This category pays for such programs as the European Neighbourhood Instrument, which strengthens relationships between the Union and other countries; the Instrument for Pre-Accession Assistance, which helps nations that are getting ready to join the Union; and the Common Foreign and Security Policy, which handles peace-keeping and self-defense issues.

Administration and Compensations

The last two categories of the Multiannual Financial Framework are 'Administration' and 'Compensations.'

The former, which consumes 6.4% of the European Union's financial pie, handles operating costs for the Union and its institutions. Basically, it takes care of everyday business.

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