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17th Oct 2021

Commission urges EU countries to pay more into budget

  • Commissioner Oettinger said he was not a magician who could fill in the EU budget gaps (Photo: European Commission)

The European Commission is proposing a larger long-term EU budget for the post-Brexit era than the current one, to be agreed before the European elections in May 2019, budget commissioner Guenther Oettinger revealed on Wednesday (14 February).

The EU executive outlined options for the budget that will be discussed for the first time by EU leaders next Friday (23 February) at an informal summit.

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  • The ever shrinking EU budget (Photo: European Commission)

Oettinger told reporters that the next seven-year budget for the period of 2021 to 2027 should be between 1.1 and 1.2 percent of the EU's gross national income, compared to the 1.0 percent now.

Oettinger said the overall figure should be "1.1x" percent, with the final decision being taken by member states' governments.

"With Brexit and other changes upcoming, 1.0 will not be enough," Oettinger said.

The German commissioner added that on average, out of €100 earned by EU citizens, €50 go to taxes, and out of that only one euro goes to the EU. Oettinger argued that the commission is asking for 10 or 20 more euro cents.

The EU executive plans to present its final proposal on 2 May.

The commission wants an agreement on the seven-year budget - usually the result of a gruelling haggling exercise among governments - by the European elections in May 2019, arguing that a delay would risk EU-funded programmes across the continent.

The commission will argue to EU leaders next week that if they want the budget to focus on new priorities - such as border protection, migration, defence, and maintaining a meaningful agriculture and cohesion policy that helps poorer regions to converge - they will have to put up the money.

"I'm not a magician, we will only be able to square the circle with more, we won't be able to with what we currently have," Oettinger argued.

"No matter what the starting position, the end position of a given government can be different," he said when asked how he will convince countries such as Austria, which advocates for a smaller EU budget.

For instance, on the European border and coastguard, set up in 2016 in the wake of the migration crisis, the commission draws up several options to reinforce the guard, ranging from €8 billion to €150 billion over a seven year period.

The commission admits that cuts will have to be made on the common agriculture and cohesion policies, which add up to 70 percent of the current budget.

Here, the commission wants EU leaders to decide if they want to focus on less developed or only poorer countries to save money for other priorities. These options could mean saving €95-124 billion to the current €370 billion programme.

This might be a difficult sell for the more developed net contributors, whose richer regions also benefit from the fund.

Plugging the hole

The EU also needs to deal with the €12 to €15 billion annual hole in the the future multi-annual financial framework (MFF), left behind by Britain's exit from the bloc.

The commission proposed to transfer a share of the proceedings from the Emission Trading Scheme (ETS), from national level to European level. But this idea is certain to meet resistance in Central European countries, such as Poland.

The EU executive plans to simplify the VAT-based resources of the EU budget. The commission proposed a "common consolidated tax base", an idea that first emerged in 2011. These are EU-wide rules for calculating the tax base of large companies.

EU countries would retain the the possibility to tax its share of the profits at a national tax rate, but a share of those tax receipts could mean new resources of between €21 and €140 billion over seven years.

The EU executive also wants member state governments to contribute to the budget by allowing the revenue central banks get from issuing money to flow into the EU budget. A similar logic would apply to the European Central Bank's profits.

Oettinger ruled out cutting the commission's own budget, reminding listeners that, over the last seven years, the EU administration was cut by 5 percent. He added that further cuts would "jeopardise" the functioning of the institution.

Mini eurobudget

The commission proposed at least €25 billion in the next budget for euro zone countries, only to help with structural reforms.

The euro zone budget line would finance structural reforms at national level and help countries still outside the euro area to join the common currency.

The commission argues that such a budget line would "help avoid a concentration of funding on a few member states only".

Looking for a fine line between the German and French positions, the commission also plans a separate "stabilisation function" to help protect euro area members from crises.

French president Emmanuel Macron called last year for a separate euro zone budget, whereas Germany did not want any separate budget at all.

Rule of law

The commission is also looking into how it could make EU money conditional on member states observing the rule of law.

With increasing concerns over backsliding on the rule of law in Hungary, Poland, Romania and Malta, the idea of linking EU funds to respecting the rule of law has gained traction among some of the member states.

The issue is politically highly sensitive, and with unanimity required for adopting the budget, it is questionable whether member states can agree on a common procedure.

"Any such mechanism would, however, need to be transparent, proportionate and legally watertight," the commission said in a statement.

The commission wants to test the ground next week at the leaders' summit, to check whether there is enough support for what has been dubbed "conditionality".

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Agenda

ECB, Budget, EU elections This WEEK

EU leaders will gather to begin talking about the 2019 election process and the post-2020 budget, while eurozone finance ministers will ponder choosing the next European Central Bank deputy chief.

Baltic states demand bigger EU budget

The leaders of Estonia, Latvia, and Lithuania say in a joint letter that they are open to talks on creating "new own resources" for a bigger EU budget after the UK leaves the EU.

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