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28/09/2016

Parliament asks for EU budget hike, renews call for ‘own resources’

Euro & Finance

Parliament asks for EU budget hike, renews call for ‘own resources’

The Libyan coastguard will be trained to help stem the flow of refugees towards the EU.

[Freedom House/Flickr]

The European Parliament will call for an increase to the EU budget today (6 July), for 2014-2020. With the refugee crisis, faltering investment and high youth unemployment, they have no shortage of convincing arguments. EurActiv France reports.

‘Do you support the European project?” Under the guise of a complex budgetary issue, this is the question Members of the European Parliament will be answering when they vote on a report on the Multiannual Financial Framework (MFF) 2014-2020 on Wednesday.

A large majority of MEPs are expected to vote in favour of the report, following its adoption last week by the Parliament’s Budgets Committee.

“This is no ordinary context, we have to take measures now!” said the S&D’s Isabelle Thomas, a French Parti Socialist MEP, and co-rapporteur on the file with Jan Olbrycht, a Polish MEP from the centre-right European People’s Party (Civic Platform).

For these politicians, the challenges of the refugee crisis, climate change and Europe’s economic situation are all solid reasons for the EU to ramp up its financial commitments.

They are even prepared to do battle with the Council and the Commission on the subject. If the current budget limits are not increased, the Parliament will refuse to adopt the 2017 budget.

Kristalina Georgieva, the Commission Vice-President in charge of budgetary matters, sided with MEPs on the subject yesterday (5 July). She told the hemicycle in Strasbourg that the current budget framework was not adequate, and needed to be adapted to respond to current circumstances.

Under the Lisbon Treaty, the EU must ensure that it has an adequate budget to cover its objectives, with the MFF being periodically reviewed to take into account unforeseen events.

And there is currently no shortage of unforeseen events.

“For the first time, the EU is dealing with refugees, investment and security, and our budget is being cut. The EU is being asked to do more with less money,” Thomas commented.

Refugee crisis spending

The most critical issue, and the most important in terms of spending, is the refugee crisis. The Commission’s response has already exhausted its emergency reserves, and now the executive needs to find an extra €2 billion to launch a European border guard service and fund its new border control policy.

New ‘European Border Guard’ system to be agreed by 30 June

EU interior ministers formally agreed yesterday (21 April) on a proposal for a new border and coastguard force that could intervene in under-pressure countries like Greece to slow the influx of migrants.

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On top of this come ad hoc expenses, like the money promised to Turkey and the African trust fund, which have forced the EU to empty its pockets while allowing no democratic oversight. The Parliament does not have the right to scrutinise these expenses and quibbling among member states has caused serious delays in their implementation.

Investment up in the air

Recent cutbacks to the EU budget have had unexpected consequences, including the abolition of funding for crucial youth unemployment or research programmes.

The two MEPs drew attention to the fact that the so-called Juncker Plan, setting up a European Fund for Strategic Investments (EFSI), had poached funding from other parts of the EU budget. The €8 billion provided by the EU to initiate the investment plan came from programmes like Connecting Europe, focused on high-speed telecommunication networks, and Horizon 2020, focused on research and innovation.

But it is the question of youth unemployment that most concerned the Parliament as a whole. The youth employment initiative funded by the EU in 2014 and 2015 does not feature in the budget for 2016, despite the continued high rate of unemployment among under 25s.

“We want to demonstrate that we reject this payments crisis that we see virtually every year,” said Thomas.

Recurrent payments crisis

Spending has outstripped the EU budget and delays in payments are increasingly common. As the EU is not allowed to acquire debt, overdue payments are simply transferred from one year’s budget to the next.

This leaves many programmes unfunded, with social projects hit hardest.

EP Budgets Committee Chair: 'EU debt goes against treaties'

As member states present their 2015 budgets to the European Commission for examination, serious questions are being raised over the alarming state of the EU budget. President of the European Parliamentary Committee on Budgets Jean Arthuis says the Union’s debts will reach €30 billion by the end of 2014.

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For the period 2014-2020, this delayed payment “debt” could reach €50 billion.

With this in mind, the Thomas/Olbrycht report revives the question of an own resources system for the EU, which was first raised by Mario Monti, Italy’s former European Commissioner, in 2014.

As the chart below illustrates, the EU is dependent on the decisions of member states for 83% of its budget (the share coming from national budgets is shown in yellow).

Capture d’écran 2016-07-04 à 17.53.17

This situation leads to endless negotiations and complicated accounting, with transparency not a priority. “Member states want to protect their national budgets, so we are at a dead end,” Thomas added.

“The only solution would be for the EU to have its own, incontestable resources, coming partly from a minimal business tax and partly from a financial transaction tax. Member states also need to understand that this will give them breathing room in their national budgets,” she noted.

Monti is expected to publish a new report on the subject by the end of this year.

But for the European Parliament, convincing the Commission to act on its suggestions may be the easy part. The member states may require more persuasion.

Expert group pessimistic on ‘own resources’ for EU budget

EU experts have presented a very cautious set of initial conclusions on the reform of the EU budget’s “own resources”, ruling away controversial plans to introduce an EU-wide tax. EurActiv France reports

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Background

The high-level group on own resources (HLGOR) was established in February 2014 to reflect on finding more transparent, simple, fair and democratically accountable ways to finance the EU, following difficult interinstitutional negotiations over the 2014-2020 EU budget.

The group is chaired by former Italian Prime Minister and EU Commissioner Mario Monti and is composed of members designated by the European Parliament, the European Commission and the Council, and will deliver its final recommendations to the European Commission in 2016.

Timeline

  • By end 2016: High-level group on own resources to present its conclusions to the European Commission.

Further Reading