The EU’s next multiannual financial framework (MFF) will have to address a multitude of crises – from climate change and biodiversity loss to the cost of living, industrial transformation and energy independence. At the same time, the national fiscal space to address these challenges is severely constrained by the EU fiscal rules. Public resources will therefore have to be used in an ever more targeted and effective manner. In that spirit, European Commission President Ursula von der Leyen promised a new long-term budget that will be more focused, simpler and more impactful.
A key lever for creating a simpler and more effective budget is the “[harmonisation of] rules and horizontal requirements (e.g. environmental requirements) across funding programmes and EU financial instruments”, as pointed out in the report on the future of European competitiveness by Mario Draghi. One eligibility requirement that would significantly benefit from further harmonisation is the operationalisation of the “do no significant harm” (DNSH) principle. While the application of the DNSH principle in itself represents an important step towards safeguarding the use of scarce EU funds from wasteful and unsustainable activities, its implementation so far has been both inconsistent and insufficient to filter out investments beyond the most obviously harmful ones.
The current review of the DNSH principle in light of the revised Financial Regulation and the preparation of the next MFF provides a crucial opportunity for reform. As part of the agreement on the next MFF, co-legislators should empower the European Commission to adopt this new DNSH guidance including a horizontal exclusion list as well as common rules and principles. Specific empowerments would be needed in the MFF regulation and potentially in the regulations establishing the relevant programmes that will make up the next MFF.
