Inflation devalues the €12.8 billion EU research budget to Horizon Europe

The European Commission has allocated €13.6 billion to the EU research budget, with €12.8 billion going to Horizon Europe – but inflation has cut latest budget forecasts

Sky-high inflation across Europe has seen the continent go into a cost-of-living crisis. Not only affecting standard of living for European citizens, but inflation has also now begun to devalue the EU research budget set out for 2024.

Inflation – arising from challenges with the net-zero transition and Russia’s war in Ukraine – has left MEPs unable to sustain the European Union’s ambitions for budget commissioner Johannes Hahn’s €189.3 billion overall budget.

€189.3 billion is being allocated to the overall budget

As increasing interest payments have left little room for the mid-term EU budget manoeuvre, extracting extra funds for Horizon Europe is looking unlikely, meaning the research programme could see a reduction in project investment.

Each year, the European Parliament and EU member states fight over the size of the EU budget with research and innovation always a contentious point. MEPs usually want a higher budget than the Commission’s proposal, member states want to cut it.

How much funding are Horizon Europe projects to receive under new budgets?

Of the total €13.6 billion on research and innovation for 2024, €12.8 billion is being allocated to Horizon Europe.

While this is a €400M increase in the EU research budget to horizon Europe from 2023, this has not been considered an increase by European Parliament.

Under the Commission’s proposal for the 2024 EU budget, in addition to €12.8 billion for Horizon Europe, a further €800 million for research would come from other programmes, such as €281 million for the Euratom nuclear research programme.

The biggest portion of the EU research budget to Horizon Europe is €6.4 billion, which will go to collaborative projects under pillar II.

Funding for fundamental research amounts to €3.4 billion. €2.1 billion of this is to be distributed through European Research Council grants.

The innovation pillar gets €1.66 billion, with €1.1 billion going to the European Innovation Council.

A rise in interest rates have also increased EU borrowing

With an increase in interest rates, the EU research budget has increased the cost of borrowing, as Johannes Hahn noted that it has “almost doubled from the amount initially forecast for 2024.”

The EU only began borrowing in its own right two years ago, before rising inflation led the European Central Bank to increase interest rates.

Based on 2020 numbers, financing costs for 2024 were expected to be €2.1 billion. The latest forecast is €4 billion.

Just presented the #DraftBudget24 in the #EP.

The #DraftBudget24 touches the limits of our availabilities – yet all programmes can be implemented as planned.

It is nonetheless necessary to address further challenges. To that end the #EC will present the #MFFreview in 2 weeks. pic.twitter.com/2Vp9KCXMuV

— Johannes Hahn (@JHahnEU) June 7, 2023

Centre-left MEP Victor Negrescu in a discussion at the Parliament’s budget committee, said: “For us, this is a decoy budget for next year, because the actual budget is going to come later on, in a couple of weeks.

“We want to see not only a review but an actual improvement that would allow us to meet people’s expectations.”

However, budget commissioner Johannes Hahn says the Commission does not agree, insisting the review and the 2024 proposal are separate matters.

The member states, and the Parliament will now start working on their respective positions on the budget before they convene to negotiate the final numbers in late October.

An estimated €113 billion of the EU’s budget will come from NextGenerationEU

In another spending – despite the increase not ‘being big enough’ for MEPs – the education mobility programme Erasmus+ will get a 2% increase to €3.7 billion to fund scholarships for students across Europe.

Another €2.7 billion is going toward the Connecting Europe Facility to improve cross-border infrastructure; with €1.3 billion for Digital Europe to continue the bloc’s digital transition; and €348 million for InvestEU funding for research and innovation, and green, digital and health sector technologies.

Sector-specific programmes also continue to get millions in funding, such as the EU space programme receiving €2.1 billion under the Commission proposal.

EU4Health will receive €754 million, as well as the defence R&D programme, the European Defence Fund (EDF), amounting to €1.6 billion under the Commission’s proposal.

All parts of the EU’s research and innovation landscape would get more money apart from ITER

All parts of the EU’s research and innovation landscape would get more money apart from ITER, the magnetic fusion device under construction in France.

The ITER project will see a €250 million cut to €556 million “due to a slowdown of the budget implementation.” Of this, €50 million will be transferred to energy initiatives in the EU infrastructure programme, the Connecting Europe Facility.