The European Court of Auditors (ECA) has released a report stating that the current system for providing the European Union with budget flexibility in emergencies is too complicated. The auditors say there are multiple tools that sometimes overlap and lack clear prioritisation.
The EU operates on multiannual financial frameworks (MFFs), which are seven-year budgets. Flexibility within these budgets is achieved by reallocating resources between priorities or years, and by increasing initial budget allocations when needed.
“We have seen that the EU was able to respond to several challenges using the flexibility tools at its disposal. However, we found that these tools sometimes overlap and the sequence for their use is not always clear,” said Jorg Kristijan Petrovič, the ECA Member responsible for the audit. “The financial flexibility toolbox should be as simple and as effective as possible so that the EU is ready to face crises.”
The European Commission had proposed greater budget flexibility for 2021-2027 after facing unprecedented challenges in previous years, such as instability near EU borders and mass migration. The auditors note, however, that this proposal lacked sufficient analysis of needs and risks. They suggest that better foresight or trend analysis could have been used, especially regarding natural disasters.
The ECA recommends designing future flexibility tools based on information about how likely certain events are and what impact they might have. A thorough assessment of existing mechanisms should also support any new proposals.
According to the report, existing budgetary flexibility tools were used extensively from 2021 to 2024. Funds supported emergency responses like humanitarian aid and natural disasters, but were also used for ongoing issues such as energy market disruptions caused by Russia’s war against Ukraine and rising inflation. In some cases, funds were allocated even without an unforeseen event triggering them.
The auditors point out there are no specific mechanisms to trigger crisis budgeting or address higher-than-expected interest costs or inflation impacts on planned spending. Since rules do not always specify when these flexible funds can be used, money may be spent on a wide range of needs—potentially reducing what is available during actual emergencies. Some tools were depleted early in the budget period, leaving less funding for later years.
In public finance management more broadly, contingency funds typically account for 2% to 3% of national spending. The ECA found that EU budget flexibilities were similar: initial margins and special instruments allowed an increase in expenditure up to 2.4% (€26 billion) for 2021-2027; this later rose to 2.6% (about €28 billion). Two new special instruments were introduced—one covering unplanned increases in interest costs related to NextGenerationEU pandemic recovery borrowing, another funding the Ukraine Facility—but these were not part of this audit’s scope.