Wednesday

28th Feb 2024

Opinion

Why this week's EU summit must agree a new budget deal

  • With all the focus on horse-trading among leaders, let's not forget that the parliament must approve any agreement. We will not accept leaders taking an axe to programmes or investment instruments that make a difference to people across Europe (Photo: Unsplash)
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It's no secret that EU capitals can more readily agree on common policy goals than on how to finance them.

The European Commission proposed adjustments to the EU's 2021-2027 budget back in June to cover both new and existing needs, in response to the European Parliament's call for urgent action. We set out our position on the budget package in mid-October, ready for talks.

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The week's EU leaders' summit must be the moment to put money behind our agreed policy objectives. Failure to act will only cost us more in the end.

The long-term budget, agreed in late 2020, had never been designed to cope with war on Europe's doorstep nor the economic and social knock-on effects it has triggered. What the commission proposed in June targeted only the most pressing funding gaps and structural flaws in the budget.

These changes and top-ups are needed to ensure stable support to Ukraine, to member states for migration management and to neighbouring countries in a highly challenging geopolitical context, and to boost financing for industrial policy. And they are also required to enable the budget to pay higher borrowing costs driven by higher interest rates and ensure the EU has money tucked away for a rainy day or to respond to a crisis.

There has been much talk of 'savings' to finance these new needs, with claims by some countries that there are pots of unused cash sloshing around in the EU's coffers.

This is simply untrue. The 'hidden pots of cash' are money programmed to support real people, businesses and organisations around the EU.

'Patent nonsense'

And some of the proposals for cuts are patently nonsensical. There are suggestions to cut back on support for certain policies and objectives... so that we have more money for the very same policies and objectives. Not even robbing Peter to pay Paul, but robbing Paul to pay himself. It's time to get serious.

Other suggestions by member states include savage across-the-board cuts to funding for programmes like the Horizon Europe research and innovation programme or the Erasmus+ student exchange programme in order to cover higher borrowing costs caused by increased interest rates.

This money would be 'saved' on the backs of researchers and students already grappling with soaring living costs. When interest rates go up, so the argument goes, national budgets squeeze spending.

Yes, but national budgets can also raise taxes or run a deficit. Neither lever is available to the EU budget. We need to manage borrowing costs in a way that guarantees our credibility on the financial markets and safeguards investment.

In reality, billions of euros have been repurposed in the EU budget since Russia launched its war of aggression against Ukraine — to help countries welcoming refugees, to enhance energy security and lower costs for households, to boost defence cooperation, to bolster industrial policy and, yes, to service debt costs driven up by interest rate hikes. As the commission makes clear, we have reached the end of the road for this kind of large-scale repurposing.

There is also much talk of the squeeze on national budgets.

But, in reality, national contributions to the EU budget in 2023 and 2024 are at historically-low levels. The commission's proposal for the budget would mean payment levels at around 1.02 percent of GNI (circa €172bn in 2023), way below the 1.1 percent (€186bn in 2023) the commission considered necessary back in 2018. And inflation will wipe €74bn off the real-terms value of the seven-year budget, meaning the €66bn on the table does not even make up the shortfall.

Budget talks are always fraught.

Yet the EU has an obligation not just to agree on policy objectives, but also to fund them. This week's European Council must reach a position so that talks can begin with the parliament and the necessary legislation and changes to the budget can be in place in early 2024.

With all the focus on horse-trading among leaders, let's not forget that the parliament must approve any agreement. We will not accept leaders taking an axe to programmes or investment instruments that make a difference to people across Europe by supporting economic and social recovery, fostering research and innovation, giving young people vital opportunities, enhancing business competitiveness, driving forward the green and digital transitions or boosting social spending.

The budget needs targeted reinforcement and it needs it quickly. We would only be able to say yes to a revision that provides for EU citizens' needs and delivers on the EU's agreed political commitments.

It is time for us collectively to put our money where our mouth is. Parliament is ready to do just that. Common challenges requires common solutions. Only a truly joint European joint effort can make a real difference to the people of Europe.

Author bio

Jan Olbyrcht (EPP) and Magarida Marques (S&D) are MEPs on the European Parliament budget committee and rapportuers for the Multi-Annual Financial Framework (MFF).

Disclaimer

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

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