Saturday

23rd Sep 2023

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

Become an expert on Europe

Get 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.

Latest News

  1. Europe's energy strategy: A tale of competing priorities
  2. Why Greek state workers are protesting new labour law
  3. Gloves off, as Polish ruling party fights for power
  4. Here's the headline of every op-ed imploring something to stop
  5. Report: Tax richest 0.5%, raise €213bn for EU coffers
  6. EU aid for Africa risks violating spending rules, Oxfam says
  7. Activists push €40bn fossil subsidies into Dutch-election spotlight
  8. Europe must Trump-proof its Ukraine arms supplies

Stakeholders' Highlights

  1. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  2. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  3. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  4. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Stakeholders' Highlights

  1. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  2. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  3. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  4. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  5. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics
  6. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains

Join EUobserver

Support quality EU news

Join us