Parliament defies EU countries over long-term budget

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A freeze on the 2014-2020 budget will not be possible unless agreed policies are slashed, the European Parliament said in a vote yesterday (8 June), challenging countries that want to freeze the EU's long-term spending to reflect austerity at home.

A minimum increase of 5% in the EU budget is needed if the bloc is to complete all its agreed objectives, such as putting in place a common diplomatic service and boosting its economy, the Parliament said.

Otherwise, EU countries will need to state clearly which policies they are ready to drop, MEPs said, citing possible cuts in regional and farm spending which together make up the bulk of the EU's budget.

"We need to put an end to the bad habit of accepting political commitments at European level and then denying their financing," said Salvador Garriga Polledo (European People's Party), the Spanish MEP steering the report on the seven-year budget through the EU assembly.

"When we are asking for increases, it is not because we are inventing things," added German member Jutta Haug (Socialists & Democrats), chair of the Parliament's special committee on policy challenges, which has worked for a year to produce the report. "We just want a realistic and implementable budget," she said.

The resolution backing the committee's conclusions was adopted on Wednesday (8 June) by 468 votes to 134, amid 54 abstentions.

Budget proposals due at end of June

The European Commission is set to table proposals on 29 June regarding the EU's long-term budget for the period 2014-2020.

But EU paymasters, including the UK, France, the Netherlands, Finland and Germany, signalled their intention to freeze EU spending at a summit last December.

The budget freeze, a hobby horse of UK Prime Minister David Cameron, was justified to match the austerity drives currently being implemented in EU countries to fend off the public debt crisis.

But for the Parliament, budget cuts cannot be agreed unless some key spending programmes are slashed.

"MEPs urge the member states who advocate a frozen or reduced long-term budget to state exactly which policy priorities they want to drop in order to make room for a budget cut," the Parliament said in a statement.

New sources of funding

To fuel the 5% budget increase, the Parliament resolution calls for additional sources of funding, which for the first time would not rely on national contributions but also on a new system of "own resources".

These could for example draw revenue from a financial transaction tax. Moreover, MEPs called for an end to the UK and Danish rebates, as well as other "exceptions and correction mechanisms that have accumulated within the current system". And unspent EU money would not be returned to national governments like is currently the case.

Although unanimity will be required on the budget, giving every member country a right of veto, the Parliament recalls that its assent will also be needed to take the final decision. And it says it will make its approval conditional on the new system of own resources, to be tabled by the Commission on 29 June.

Options to fuel the EU's future budget include an EU tax which could take several forms: a tax on air transport or a share of new financial, corporate or energy taxes, as well as an EU VAT.

Positions: 

European Parliament President Jerzy Buzek hailed the EU assembly's vote and backed calls for new, own resources for the EU budget. "The strong majority which supported today's resolution in the European Parliament cannot and should not be ignored," said Buzek in a statement. 

"We call for an increase in the budget from 2014 which will allow the EU to achieve the agreed objectives of the Europe 2020 strategy" for growth and jobs, Buzek added, saying the EU budget "allows every EU member state to save money at the national level".

"The EU budget allows for pooling resources, provides leverage for investment from other sources and creates synergies and economies of scale. Many areas, such as transport, energy and environmental protection are better financed at the European level," Buzek said.

"We consider that freezing EU resources after 2013, as has been proposed by five heads of government […], is not a good option," said Salvador Garriga Polledo MEP (Portugal), author of the Parliament's position on the next long-term budget and a member of the European People's Party (EPP), the largest group in the EU assembly.

"Should the European Council not share our view, the Parliament asks the heads of government to clearly identify which of its political priorities or projects should be dropped," he warned.

The Alliance of Liberals and Democrats for Europe (ALDE), a federalist grouping which is the third largest in Parliament, could not agree more. "I fully understand the need for budgetary rigour," said ALDE leader Guy Verhofstadt MEP (Belgium). But he said this could be addressed in other ways, for example "by making use of the economies of scale offered by the EU in certain areas from banking supervision to diplomatic missions abroad".

"National capitals should recognise that pooling efforts at EU level can result in savings back home," Verhofstadt said. "For example our monetary policy is supported by 44,000 officials from national central banks in addition to those based in Frankfurt at the European Central Bank."

The European Conservatives and Reformists Group (ECR), spearheaded by the UK Tories, warned the Parliament that it was setting itself on a collision course with national governments.

The Parliament's budget stance is "totally unacceptable," said Richard Ashworth MEP (UK), spokesman for the ECR. "We need smarter spending, not more spending. Unfortunately for most MEPs the answer to every question is 'More Europe', which means more money. This kind of ostrich mentality just goes to increase disaffection with the European Parliament."

"The EU should never gain the power to raise its own taxes. Apart from the fundamental issue of loss of national sovereignty, we cannot allow MEPs to have any powers to raise taxation given their record of inexorably increasing the EU budget," Ashworth said.

The Greens/European Free Alliance group in Parliament backed the EU budget increase as well as the new system of 'own resources', which it says has been "a long-standing Green priority".

"Freezing or decreasing the EU's budget post-2013 is not a credible approach if the EU and its member states are serious about achieving the policy priorities they have set for themselves, notably in the Europe 2020 strategy," said Bas Eickhout MEP (Netherlands), who follows budget issues.

"The EU needs a proper and predictable system for financing its own budget in order to end the perpetual, damaging squabbling over national contributions to the EU budget," he said.

Timeline: 
  • 29 June: European Commission to table proposals for EU's long-term budget.
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