Thursday

6th Aug 2020

Opinion

EU recovery fund and budget negotiations aren't over yet

  • MEP Guy Verhofstadt wants the European Parliament to now deal with the shortcomings of the EU recovery deal (Photo: European Parliament)

The economic impact of the deal agreed in the European Council should not be underestimated: the European Union launching bonds to the tune of €750bn is no less than historic. We needed to make common cause against the economic fallout from Covid-19, and we have.

It is the politics behind it I'm worried about: the national logic has been pushed through both in revenues and disbursement, which could open the door to years of acrimonious discussions on the costs and benefits of the European Union, as seen from a purely financial, short-term and national angle.

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The EU can live with a bit of frugality, but not with the further risk of growing fragmentation.

Hence the now broadly-shared aversion to rebates: they imply a reductionist view of the EU, where every euro received is a bonus and any euro spent is a net loss.

This not only goes against the rationale of investment but against the very idea of European integration. It is precisely the countries that pay most into the EU budget that get the most out of the single market. So consolidating and even strengthening the rebate system is wrong.

For eurosceptics, a rebate is the gift that keeps on giving.

Therefore the only way forward is to deeply reform the financing of the EU and this in such a way that Europe becomes fit for the twenty-first century.

Instead of increased rebates on national contributions we need new own resources, owned and collected by the European Union, to avoid an endlessly divisive discussion on which European country the money comes from and focus on the effectiveness of policies instead.

Remember that, before Margaret Thatcher demanded her rebate, Europe used to be financed by its own tariffs.

A modern version, whether based on untaxed corporate profits, digital giants using our data for free, or pollution imported from outside the EU, makes eminent sense both economically and politically. We need it to start now, from next year on, and not in some distant future.

Rule-of-law on ice

One of the most important and logical conditions for countries to benefit from the EU's recovery funding, the rule of law mechanism, was put on ice.

A rule of law clause is not just some political stick to brandish at leaders flirting with authoritarianism.

The economic case for legal certainty is just as strong. It makes no sense to invest funds if there is no guarantee they will be put to proper use. We cannot ask tax payers across Europe to pay their share, if we allow some member states to be run for their leaders' own private interests.

What we saw over the weekend was national leaders applying their national logic to a debate that should be wholly European.

It leads to cuts in future-oriented European programs like the Just Transition Fund or Horizon 2020, while preserving the huge amounts of money that will be transferred directly to the member states.

Voicing the European public interest is more than ever the role of the European parliament, which unsurprisingly was also cut back by the European Council.

Instead, we need to add to parliament's weight throughout the budget process, for the normal multi-annual budget as well as for the recovery fund, so that programmes are judged by European conditions and outcomes are held to European standards.

Rebalancing this lopsided deal now depends on the house of European democracy that represents all European citizens, the European parliament.

These negotiations aren't over yet.

Author bio

Guy Verhofstadt is a Belgian MEP, former leader of the ALDE group and was prime minister of Belgium from 1999 to 2008.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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