Thursday

28th Mar 2024

Merkel deals blow to EU tax idea

  • Ms Merkel has been a key decision maker in Europe's recent efforts to stave off crisis (Photo: consilium.eu)

German Chancellor Angela Merkel has said she is opposed to the concept of EU tax-raising powers, dealing a major blow to such ideas, proposed only last month by the European Commission.

Ms Merkel's comments, delivered during a one-day working visit to Belgium on Tuesday (2 November), carry particular weight as Berlin is the largest net contributor to the EU budget.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"I am against the introduction of an EU tax," she told journalists, laying down a marker for the imminent debate on the EU's next multi-annual budget when the current spending period expires in 2013.

In October, the commission proposed a list of potential EU fund-raising mechanisms in an attempt to reduce the acrimony of the impending squabble, traditionally characterised by member-state insistence on receiving a 'juste retour' for their contributions to the Brussels coffers. "We need to find a way out of this," EU budget commissioner Janusz Lewandowski told MEPs when presenting the package in Strasbourg.

For their part, the euro-deputies have made agreement on next year's annual EU budget dependent on member state willingness to discuss the 'own resources' issue.

An EU-wide sales tax, a financial sector tax and an EU energy tax were among the ideas in the commission's recent budget review, but member states have traditionally considered tax-raising powers as the preserve of national governments.

Two decades ago, national contributions to the EU budget, based on gross national income (GNI), represented roughly 10 percent. Now they amount to roughly 70 percent as takings from EU customs duties and farm levies have declined.

Eurozone crisis mechanism

During her visit, Ms Merkel also defended Berlin's push to make investors bear some of the losses under a permanent crisis fund being set up for debt-stricken eurozone members that run into difficulties in the future. The current €750 billion back-stop mechanism agreed in May expires in 2013.

European Central Bank President Jean-Claude Trichet had voiced his criticism of the idea during a summit of European leaders in Brussels last week, warning that a debt-restructuring component could lead banks to raise the rate of interest they demand when buying sovereign bonds from weak governments, potentially leading to a fresh wave of turmoil.

"I don't believe so," said Ms Merkel when asked if the debate itself would increase the likelihood of a government calling for aid. "We're talking here, in an explicit manner, of a mechanism we want to introduce after 2013."

"Nothing is changing for the current umbrella, which covers the entire eurozone and Greece. Everyone knows it is in place until 2013," she added. "What we are doing now is speaking about the future, and this must be possible."

As the main guarantor of bonds issued under the current rescue mechanism (the €440-billion 'special purpose vehicle' component), Berlin is keen to reduce its role in any permanent crisis fund, arguing that the taxpayer should not be forced to shoulder all of the costs.

But Germany's dominant role in determining how the EU tackled the Greek and eurozone crises has led to growing questions over the country's ambitions inside the bloc.

On Tuesday, German finance minister Wolfgang Schauble said Berlin had no intentions of leading the EU, but added that the German government was anxious to renew its "pacemaker" role with France.

"I have a sceptical view of a kind of general German leadership because the term 'hegemony' has bad associations in the light of our history," he wrote in the Frankfurter Allgemeine daily.

Commission breaks taboo on 'own resources'

The European Commission has proposed a list of potential methods to enable the EU to raise its 'own resources' in future, citing the need to end current wrangling over member state contributions to the Brussels budget.

'Swiftly dial back' interest rates, ECB told

Italian central banker Piero Cipollone in his first monetary policy speech since joining the ECB's board in November, said that the bank should be ready to "swiftly dial back our restrictive monetary policy stance."

Opinion

EU Modernisation Fund: an open door for fossil gas in Romania

Among the largest sources of financing for energy transition of central and eastern European countries, the €60bn Modernisation Fund remains far from the public eye. And perhaps that's one reason it is often used for financing fossil gas projects.

Latest News

  1. Kenyan traders react angrily to proposed EU clothes ban
  2. Lawyer suing Frontex takes aim at 'antagonistic' judges
  3. Orban's Fidesz faces low-polling jitters ahead of EU election
  4. German bank freezes account of Jewish peace group
  5. EU Modernisation Fund: an open door for fossil gas in Romania
  6. 'Swiftly dial back' interest rates, ECB told
  7. Moscow's terror attack, security and Gaza
  8. Why UK-EU defence and security deal may be difficult

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

EU news that matters

Join us