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.
For Jean Arthuis, the President of the European Parliament’s Budgets Committee, the situation is clear: “European budget reform is indispensable, even if it is a ‘mission impossible'”.
Plans to increase the EU’s so-called “own-resources” were put forward by the European Commission in June 2011, when it tabled its budget proposal for 2014-2020.
Suggestions include a tax on financial transactions, an EU VAT, a charge related to air transport and a share of auctioning revenue derived from the bloc’s CO2 emissions trading scheme.
A high level group on the European Union’s own resources, containing representatives from the European Commission, Council and Parliament, was established last year to resolve the thorny issue.
After months of work, the President of the task-force, the former Italian Prime Minister Mario Monti, presented his very critical preliminary evaluation to MEPs from the Parliament’s Budgets Committee on 5 February.
One of the main weaknesses of the EU budget is its lack of autonomy. Under the current system, the vast majority of the European budget comes not from the EU’s own resources, but directly from the member states’ coffers. These contributions are based on each country’s economic strength, and are subject to numerous exceptions and individual arrangements, like the British rebate.
“Around 83% of the resources in the 2014 budget took the form of direct contributions from national budgets. This setup has made member states even more acrimonious during budget negotiations,” Monti said.
Alain Lamassoure, a senior French MEP and member of the high level group, did not mince his words over the system currently in force.
“The Council admits that there are problems with the financing. It is opaque. It is also anti-democratic because no parliaments are involved,” said Lamassoure, who was Europe minister for France in 1993-1995.
“It is ineffective, because there are payments shortages. It is unfair. The richer a country, the less it pays. It is also anti-European. At times it seems we have 28 Mrs Thatchers around the negotiating table,” he said.
This system is likely to endure, because the finance ministers of most of the member states “do not even understand the situation,” he added.
Sitting on the fence
The deep divisions between the member states over the issue will prove to be the biggest obstacle to change, predicted Monti, an economist who served two mandates as European Commissioner before becoming finance minister and Prime Minister of Italy in 2011-2013.
When the Commission tabled its proposal to increase the EU’s own resources in 2011, the idea was immediately rejected by Britain as “unrealistic”. Germany also opposed the plans, arguing instead for increasing the national contributions to the EU budget. Berlin said it would even go further and delete the existing VAT component of the own-resources regime, saying it is too complicated to calculate. France was among the few countries supporting the plans.
“We must look […] at the forces at work which explain why a reform can succeed or fail,” the former Italian Commissioner said. “Positions are varied within the group and we will not be able to avoid diverging interests,” Monti explained.
“We need a packet of measures so that each member state can take something positive and make the pill easier to swallow,” he said.
The group president also tried to manage the expectations of MEPs on the establishment of the European Financial Transaction Tax or an EU carbon tax, indicating that the measures would more likely consist of improvements to the existing system than comprehensive reform.
While this discussion is sure to be a delicate one, a successful outcome appears indispensable. “It is impossible to be politically successful on this subject, but we have to succeed. Left unanswered, it will mean the slow but inexorable death of the EU,” Alain Lamassoure said.
The problem is nothing new. The European Parliament has been pushing for financial reform of the budget since 2006, but it was the turbulent negotiations of the EU’s multiannual financial framework for 2014-2020 that led to the creation of the group. And the accumulation of unpaid bills from previous European budgets bears witness to the urgency of the situation.
The unanimity rule
The cautious nature of the expert group’s preliminary evaluation is also in part down to the difficult process involved in ratifying any fiscal reform. Any change to the rules concerning the financing of the European budget requires a unanimous vote in the Council, so reformers tend to seek broad consensus above radical change.
Europe’s national parliaments have an equal stake in this vast renegotiation process, as they also have to ratify any reforms to EU financial rules
"We must be creative and ambitious but also careful not to increase the tax burden on our citizens. Every euro taken at European level should equally diminish the strain on member states. We should try not to kill European competitivity by strangling production and salaries, and causing business delocalisation," said Jean Arthuis (ALDE, France), President of the Budgets Committee.
Alain Lamassoure, a French EPP group MEP and member of the high level group, said "The annual adoption of the budget is beyond parliamentary control but at European and member state level, and is negotiated between the civil servants of the finance ministries. This has been allowed to continue because the national parliaments, the media and the public are in the dark about it."
Guy Verhofstadt, the leader of the ALDE group and member of the high level group, said " The real work starts after the first assessment: we have to go back to the initial system of financing the Union with genuine own resources. In the second report we'll indicate which are our tools of choice for that. ".
"The discussion on own resources must not rely on a presumption that we have a consensus on the required size of the own resources. We will have to have a debate on that too," said Gérard Deprez, ALDE MEP and permanent rapporteur on own resources.
"The report reveals the true state of play and thus is not too enthusiastic. We are far from the 2011 [own resources reform] proposal, which would have meant a huge simplification," said Janusz Lewandowski, a Polish MEP from the EPP group.
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.
2016: high-level group on own resources to present its conclusions to the European Commission.